Remember how every individual needs to file their income tax? Well, the same goes for corporations. Enter: the T2.
What is a T2 Form?
A T2 form is a taxpayer form for all Canadian corporations to file their income tax. Corporations must submit their T2 forms within six months of the end of a fiscal year or calendar year. There are three main methods for completing T2 forms, including CRA's Corporation Internet Filling services and through the My Business Account. Businesses can also print the T2 Bar Code Return, fill the relevant financial information, and mail/deliver it to the CRA.
Who Should Fill Out a T2?
The T2 form must be filled out by all resident corporations, including non-profits, inactive and tax-exempt corporations with annual gross revenues above $1 million. The T2 is filed every year, regardless of whether a corporation has taxable income. However, there are a few exceptions from the rule, which you can find here.
How Do I Get a T2 Online?
The T2 form is available online as a PDF file you can complete online or print for mailing/delivery to the CRA. You can find the form through CRA’s online Corporation Internet Filling service. You can also use third-party tax prepares to help you find and complete T2 income statement submissions.
How to Calculate Corporate Income?
Calculating corporate taxable income requires establishing the gross revenue, which includes the gross sales, allowances from discounts and returns, and revenue from interest and sale of taxable property. You can use the CRA-backed tax calculators available online.
Once you have the gross revenue, subtract the cost of goods sold (if your corporation sells goods), which is the amount you spend on the inventory. The difference is considered your taxable income.
However, there's a final step to subtract allowable expenses, such as rent, utility bills, repairs, interest on borrowed money, and service fees. CRA will tax what's left (gross revenue minus cost of goods and allowable expenses) using standard tax rates for the specific year.
How to Report T5013 on T2?
The T5013 form, also known as the Statement of Partnership Income, is another taxpayer slip for individuals, partnerships, corporations, and trusts. Taxpayers expected to file a T5013 form must also include that information in their T2 forms. Simply complete the T5013 first and then use the information to complete the sections in your T2 corporation income tax form. Most T5013 slips have been adapted from T2.
T2 Breakdown
The easiest way to complete a T2 corporation income tax is through a certified tax preparation software approved by the Canada Revenue Agency, or through an accountant. Here's a look at the different sections within a T2 form:
Section | Meaning |
|---|---|
| Identification, attachments, and additional information | This is where corporations will put down their net income for tax purposes.The attachments section features a series of questions that prompt additional tax return schedules if you answer with a "yes." Most corporations will need at least three schedules, including Schedule 100 for the Balance Sheet, 125 for the Income Statement, and 50 for Stakeholder Information. The questions merely ask about tax credits corporations are claiming during the tax year. |
| Taxable income, deductions, and tax deduction | Taxable income features information from the initial schedules and is intended to calculate the corporate income CRA will tax. The amount you calculate from the corporation's net income after the cost of goods and allowable expenses is removed. Private corporations considered small businesses can claim deductions in the Small Business Deductions and General Tax Reduction sections. |
| Refundables and dividends | Some corporations claim portions of their paid tax in this section. You can also claim refundable dividend tax on hand, which covers income earned from the corporation's passive investments. This is different from a dividend refund, which allows you to claim dividend refunds if the corporation paid stakeholders. |
| Summary of tax credits and certification | The tax credit section sums up of the rest of the T2 form. Here you can review all details to make sure they are correct. |
Where Do I Send My T2?
Corporations are required to file their T2 return online, using CRA approved commercial software.
When to Submit T2
There's no specific month or deadline for T2 form submissions because corporations have varying fiscal years. However, regardless of when yours starts, you must submit the T2 form within six months after the fiscal year that you’re reporting has ended.
