Corporate records and payments: 10 tax questions
Answers on corporate profit adjustments, bonuses, donations, payroll, vehicle benefits, contractor slips and T2 corrections. Prepare clear records before filing.
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The books, payroll reports and tax return should tell a consistent story. Separate payment and reporting obligations can arise long before the annual T2 is prepared.
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71. Why is the profit in my books different from taxable corporate income?
Financial statements and tax rules do not treat every item identically. Schedule 1 reconciles accounting income to income for tax purposes. Non-deductible costs, depreciation versus tax capital cost allowance, and other adjustments can change the figure. A profitable company’s cash balance is another separate number; debt repayments and asset purchases also affect cash.
First step: Provide the detailed ledger behind the financial statements so adjustments can be explained rather than guessed.
Official guidance: T2 Corporation – Income Tax Guide – Chapter 3: Page 3 of the T2 return
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72. Can my corporation deduct a year-end bonus paid later?
An accrued employment-remuneration expense needs to meet the ordinary deduction conditions, and the payment timing matters. If it remains unpaid 180 days after the tax year-end, the statutory rule generally shifts the deduction to the year of payment. Recording a journal entry is not the same as making payment. Payroll reporting and remittances also need to be considered.
First step: Document the bonus obligation and actual payment date and diarize the 180-day limit.
Official guidance: Income Tax Act
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73. Can I claim my corporation’s charitable gift on my personal return?
A donation made by the corporation belongs in the corporation’s tax calculation, not automatically on the shareholder’s T1. Corporate charitable deductions use Schedule 2 and are subject to their own limits and carryforward rules. The receipt and actual donor should agree. Sponsorship or advertising purchases need separate classification rather than being treated as gifts by default.
First step: Keep the official receipt and evidence showing which taxpayer made the contribution.
Official guidance: T2 Corporation – Income Tax Guide – Chapter 3: Page 3 of the T2 return
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74. Can I wait until the T2 is prepared to remit payroll deductions?
No. Payroll remittances follow the employer’s assigned remitter type and due dates, independently of the corporate return. The schedule can be monthly, quarterly where eligible, or more frequent. A year-end tax engagement does not replace payroll compliance during the year. Even a period with no pay can require the appropriate nil reporting.
First step: Check the CRA remitter classification and reconcile wages, deductions and payments each period.
Official guidance: When to remit (pay)
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75. Is personal use of a company car a taxable benefit?
It can be. When an employer-provided automobile is available and used personally, the employee’s taxable benefit needs to be calculated under the applicable rules. Commuting is generally personal driving. The company paying the invoices does not make the personal benefit disappear, and payroll reporting may be needed. Keep availability, mileage and employee repayments clear.
First step: Maintain business and personal kilometres and record when the vehicle was available to the employee.
Official guidance: Automobile provided by the employer · Taxable and non-taxable automobile benefits, allowances or reimbursement
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76. Can my corporation pay me a tax-free mileage allowance?
A reasonable allowance based only on employment-related kilometres may be non-taxable when the conditions are met. Flat monthly payments or an allowance combined with reimbursement for the same vehicle use can have different treatment. An owner-employee needs the same clear business records as other employees; an unexplained transfer is not enough.
First step: Submit dated kilometre claims, use the applicable rate and check that costs are not reimbursed twice.
Official guidance: Automobile or motor vehicle benefits – Allowances or reimbursements provided to an employee for the use of their own vehicle
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77. When does a construction business need T5018 slips?
The reporting rules can apply when construction is the business’s primary income-earning activity and it pays Canadian-resident subcontractors for construction services. CRA specifies the conditions and payment threshold; it is not limited to incorporated subcontractors. Employment wages are reported differently, so worker classification must come first.
First step: Keep each subcontractor’s legal details and totals separate from employee payroll and materials-only purchases.
Official guidance: T5018 slip - Statement of contract payments
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78. Do payments to independent contractors need information slips?
Fees for services can require T4A reporting, including payments between businesses. Depending on the recipient and activity, another slip such as T5018 or T4A-NR may be required instead. Receiving an invoice does not remove the payer’s reporting responsibilities, and employee wages cannot be converted into contractor fees just by issuing a different slip.
First step: Review recipient residency, the service supplied and annual payment totals before the information-return deadline.
Official guidance: Payments of fees for services - Calculate payroll deductions and contributions
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79. Does filing the corporation’s T2 also file its GST/HST return?
No. Corporate income tax and GST/HST have separate returns, accounts and reporting periods. The sales and tax balances should reconcile, but submitting one return does not satisfy the other obligation. A company may also have payroll and information returns. Confirm what an engagement includes so that a separate filing is not overlooked.
First step: Create a list of CRA program accounts and the latest completed period for each one.
Official guidance: Corporation income tax return · Reporting requirements and deadlines - File your GST/HST return
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80. How do I correct an already-filed T2?
Use CRA’s reassessment process with revised schedules and an explanation of the changes. A corrected bookkeeping file by itself does not amend the tax return. CRA accepts requests through specified electronic or written methods, depending on the situation. Review the affected year, available time limits and any related filings before submitting changes.
First step: Keep the original return, assessment, revised figures and a clear before-and-after reconciliation.
Official guidance: Requesting a reassessment of your T2 return · Reassessments – Adjustments to your T2 return
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General information, not an individual tax or legal opinion. Eligibility, elections and deadlines depend on the facts and tax year. Annual CRA forms may describe a specific year; use the form and limits for your return. No particular deduction, refund or tax saving is guaranteed.
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