Year-End Tax Checklist for Small Businesses in Ontario

Year-End Tax Checklist for Small Businesses in Ontario

Year-end is when a small business’s books become the foundation for tax filings, financing conversations, and next year’s decisions. In Ontario, that usually means more than one return. A corporation files a T2. Most businesses registered for sales tax also have GST/HST filings. If you have staff or pay contractors, payroll slips and source deductions need to be wrapped up. Owner-managers should think about their personal T1 at the same time, because salary, dividends, and shareholder loans all show up there.

Use this as a working list, then confirm the dates and rules that apply to your year-end, business type, and Canada Revenue Agency (CRA) accounts. Deadlines are not the same for every business.

Confirm your year-end and what is due

Not every Ontario business closes its books on December 31. Corporations can choose a fiscal year-end, and that date drives when the T2 is due and when any balance owing is typically payable. Sole proprietors and most partnerships follow the calendar year for income tax.

Write down your fiscal year-end, which returns you file, whether you remit tax by instalments, and who will prepare and review each filing. Corporate tax balances are often due well before the T2 itself. If you wait until the return is finished to think about cash, you can be caught short. Review instalments at the same time, because falling behind can lead to interest even when the return is filed on time.

Close the books before you start the tax return

A clean year-end file saves more time than any last-minute tax trick. Reconcile every bank, credit card, and loan account to the statements. Follow up on outstanding receivables and take a realistic view of amounts that are unlikely to be collected. Review payables so costs that belong in this year are not left sitting in the next one. Check prepaid expenses, unearned revenue, inventory, unrecorded fees, and any personal amounts that ran through the business.

If you use accounting software, lock the period once the review is done. Late journal entries after the return has been prepared are a common reason for amended filings.

Review assets, payroll, and owner transactions

Asset additions and disposals affect capital cost allowance and, in some cases, recapture or a terminal loss. Keep invoices for purchases, and note the date each asset was available for use, not just the date you paid for it. Trade-ins, related-party transfers, and mixed-use assets need extra care. Check whether a purchase was really an asset or a repair, because the two are treated differently.

If you have employees, T4 and related slips generally need to be prepared, issued, and filed early in the following calendar year. Confirm that gross pay, taxable benefits, and source deductions match what was remitted. Many Ontario employers also have Employer Health Tax and Workplace Safety and Insurance Board reporting to close off. Review contractors as well. If someone you treated as self-employed should have been an employee, correcting that later is much more costly than getting the classification right now.

For a Canadian-controlled private corporation, salary, dividends, and loans to or from the company should be documented before the year is closed. Unclear shareholder loans can create unexpected income inclusions, and dividends need proper resolutions and, when required, the right information slips. This is one of the most useful conversations to have with accountants in Mississauga in time, because some planning only works if it is done before year-end.

Review GST/HST and keep the support

Reconcile the GST/HST account in your books to the returns you filed and to your CRA balance. Check that input tax credits are supported by proper invoices, that exempt or zero-rated sales were coded correctly, and that no reporting period was skipped or overlapped if your filing frequency changed.

Keep financial statements, bank reconciliations, payroll summaries, sales tax workings, and the invoices that support major claims. CRA generally expects records to be retained for several years after the relevant tax year. Notice-to-reader financial statements are often enough for tax filing and internal use, but they still need to be consistent with the books. Work through the list in order: confirm dates, close the books, then prepare the slips and returns.

For help with year-end accounting, T2 and T1 filings, GST/HST, payroll, or notice-to-reader statements, contact Bestax Accountants at 1470 Hurontario St #100, Mississauga, ON L5G 3H4, email [email protected], or call +1 416 991 0900.