Streamlining Corporate Tax Filing: Key T2 Schedules for 2023
Filing corporate taxes involves more than simply completing a T2 form and submitting it to the Canada Revenue Agency (CRA). In addition to the T2, various tax obligation schedules are required to provide supplementary information about your corporation’s filings and returns. Here are some commonly used T2 schedules for corporations in 2023:
- Schedule 1 T2
- T2 Schedule 100
- T2 Schedule 50
- T2 Schedule 125
- T2 Schedule 4
- T2 Schedule 8
- T2 Schedule 3
- T2 Schedule 7
- T2 Schedule 6
- T2 Schedule 141
- T2 Schedule 5
- T2 Schedule 10
These CRA T2 can be categorized into two types:
- Calculation schedules: These schedules help calculate net income, deductions, taxable income, and credits.
- Information schedules: They contain general information related to transactions.
In addition to these schedules, corporations need to organize their financial statement information using the General Index of Financial Information (GIFI) alongside their T2 filing.
If you require more detailed information about these schedules or any other aspects of corporate tax filing, please feel free to reach out to our team. We are here to assist you.
Understanding Key T2 Schedules for Corporate Tax Filing in 2023
T2 Schedule 100:
Balance Sheet Information T2 Schedule 100 is a crucial schedule that accompanies the T2 filing and provides detailed balance sheet information for corporations. It utilizes the General Index of Financial Information (GIFI) to organize assets, liabilities, shareholder equity, and retained earnings. Corporations should ensure the accuracy of their balance sheets, attaching additional schedules if needed to accommodate larger balance sheets. Errors in the balance sheet can harm the company’s reputation, potentially leading to audits and fines.
T2 Schedule 125:
Income Statement Information T2 Schedule 125, also known as Income Statement Information, is a mandatory schedule to be filed with the T2. It pertains to expenses and revenue associated with the corporation, categorized into farming and non-farming expenses and revenue, depending on the industry.
T2 Schedule 141:
Financial Statement Preparation Schedule 141 includes questions designed to determine the preparation of financial statements and the level of involvement of the accountant. It aids in identifying the type of information contained in the financial statement notes, ensuring the qualification and subjective engagement of the accountant with the corporation.
Schedule 1 T2:
Calculation of Taxable Profit In most cases, Schedule 1 is a required form when filing the T2. It utilizes the net income for income tax purposes and reconciles the tax profit with the accounting profit. Schedule 1 helps determine expenses, deductions, and exceptions to calculate the taxable profit and find the applicable corporation tax rate.
T2 Schedule 50:
Shareholder Information T2 Schedule 50 focuses on shareholder information for private corporations where any shareholder holds 10% or more of preferred or common shares. It is mandatory if such conditions apply to your corporation.
T2 Schedule 3:
Dividends Paid and Received Schedule 3 is filed by corporations that have paid dividends to shareholders or received dividends from other companies. Corporations not meeting these conditions are not required to file Schedule 3.
T2 Schedule 4:
Calculation of Losses Schedule 4 is relevant for corporations with a history of losses, applicable to farm, restricted farm, capital, and non-capital losses.
T2 Schedule 5:
Revenue Allocation in Provinces Schedule 5 is used to allocate revenue in provinces where the corporation operates. It must be filed in specific conditions such as having a permanent establishment in multiple jurisdictions, claiming provincial or territorial credits, or paying taxes for Newfoundland and Labrador.
T2 Schedule 6:
Disposition of Assets Schedule 6 applies to corporations that have disposed of or sold their assets. It requires a summary and details of capital property dispositions, including property, bonds, equity, and other relevant assets.
T2 Schedule 7:
Active Business and Investment Income Schedule 7 pertains to active business income and aggregate investment income. Corporations without investment income are not obligated to file Schedule 7.
T2 Schedule 8:
Capital Cost Allowance (CCA) Schedule 8 focuses on the capital cost allowance, calculating the depreciation of a corporation’s physical assets. The tax depreciation rate is determined based on the previous depreciation rate, as outlined in tax laws.
Understanding and completing these key T2 schedules is essential for effective corporate tax filing. For further information or assistance, please don’t hesitate to contact our team.
Canada Revenue Tax (CRA) Mileage Logbook
Using a Corporate Automobile for Work and Personal Travel: Claiming Car Expenditure Deductions on Your CRA Tax Return and Maintaining a Mileage Logbook
Many self-employed individuals and regular employees use a corporate automobile for business purposes such as client meetings, financial transactions, or travel to the airport. While car expenses can be claimed as deductions on your CRA tax return, the vehicle is often used for personal use as well.
It’s important to note that taxes must be paid on this benefit, similar to regular income, for self-employed individuals, business owners, and employees who have access to corporate vehicles. Keeping an accurate mileage log of all work-related travel is essential to support your claims.
In this blog, you’ll find important information about maintaining a mileage logbook for claiming car expenditure deductions.
What a mileage logbook is?
A mileage logbook, also referred to as a log, is a comprehensive record of the trips taken in a car for both personal and business purposes. In order to claim mileage as a tax deduction, it’s essential to keep track of both types of trips and demonstrate that the distance claimed is solely for business purposes.
The logbook should include specific details for each entry, such as the date, purpose of the journey, location, and distance covered. Additionally, it’s necessary to record the odometer readings at the start and end of each year. Depending on individual circumstances, the format of the logbook may vary.
Canada Revenue Agency (CRA) Requirements for Maintaining a Mileage Logbook
When using the logbook method to support your claims for reimbursement, it’s necessary to maintain a record of all your driving in a mileage log.
To utilize the complete logbook method, you need to document the distance of both personal and business-related driving. This requires keeping a detailed record of every mile traveled and classifying it as either a personal or work journey.
According to the CRA, you can only claim costs that are reasonable and supported by receipts. The following information must be recorded in your logbook every time the vehicle is used for business purposes:
- Date
- Destination
- Purpose of the trip
- Vehicle starting mileage.
- Vehicle ending mileage.
- Total miles driven.
- Vehicle expenses such as gas, oil, tolls, etc., along with their amounts.
Also read: The Role of Professional Accountants in Cloud Accounting for Canadian Businesses
How Long Should You Keep Your Mileage Logbook?
It’s advisable to maintain records and supporting documents, such as receipts, for at least six years. This way, if you face an audit, you will have the necessary documentation to support your claims. Additionally, keep a copy of your entire logbook for six years after you stop using it, as well as for the period you are still using it.
For example, if you established your entire logbook in 2009 and used it to calculate your yearly driving percentage up until 2015, you must maintain a copy of it until recent years. If you use your car for work 80% of the time, you can deduct 80% of your overall vehicle expenses from your taxes.
If you have more than one car used for business purposes, you must maintain a unique logbook for each vehicle. When claiming a vehicle expenditure deduction for multiple cars, you must calculate the expenses for each vehicle separately.
To sum up,
We have covered the importance of maintaining a mileage logbook as a record of all the journeys made in your car, especially when using the same vehicle for both personal and work-related purposes. It is crucial to maintain an accurate logbook to demonstrate that the claimed distance is solely for business purposes. Additionally, we discussed that you can claim 80% of your vehicle expenses on your taxes if you use your car for work purposes 80% or more of the time. The Canada Revenue Agency (CRA) requires receipts and reasonable costs to support any claims for reimbursement.