Corporate tax accountant for Aldergrove corporations

A first T2 is mostly a set of decisions

A first corporate return is not a harder version of a personal return; it is where several choices get locked in. The fiscal year end is selected by the filing of that first return and can afterwards be changed only with permission. The opening balance sheet is established, including anything transferred in from a previous unincorporated business. The shareholder account is opened. Accounting policies are adopted that then have to be applied consistently. None of these produce a visible tax saving in year one, and all of them determine how much friction the corporation carries for the rest of its life. The just-incorporated checklist covers the sequence.

What came across from the sole proprietorship

Most Aldergrove corporations were a sole proprietorship first, and assets rarely arrive with paperwork. A truck, tools, a trailer or a stock of materials moved into the company at some point, often without a bill of sale or a recorded value. That transfer is a disposal by the individual and an acquisition by the corporation, and if it is not priced and recorded it leaves the asset schedule wrong from the first day — either understated, losing years of legitimate depreciation, or overstated with no support. Where a transfer would trigger tax personally, a section 85 election can defer it, but the election has a deadline and is not available retroactively at leisure.

Choosing the year end while it is still free

The default instinct is 31 December, and for a small Aldergrove business it is often the worst available choice: it puts the corporate close, the personal tax season and the quietest cash month of the year in the same eight weeks. A year end set at a natural trough gives a cleaner balance sheet, room to decide on a bonus or dividend before the deduction deadline passes, and a filing date that does not compete with everything else. The corporate return is generally due six months after the year end, with the balance owing due earlier than that. Choosing a fiscal year end works through it.

The shareholder account starts clean and rarely stays that way

In a small owner-operated corporation, money moves between the owner and the company constantly — a personal purchase on the business card, cash taken to cover something at home, a company expense paid personally. Each of those posts to the shareholder account, and if the account is never reviewed it drifts into a balance owed by the owner to the corporation. That has a hard consequence: under subsection 15(2) of the Income Tax Act a shareholder loan must generally be repaid within one year after the end of the corporation’s taxation year in which it was made, or the full unpaid balance is added to personal income. Shareholder loans explains the rule.

The accounts you now have to feed

Incorporating creates a business number with program accounts attached to it, and each one has its own filing rhythm independent of the corporate return. The RC account carries the T2. A GST account carries sales tax returns on a monthly, quarterly or annual cycle depending on the registration. An RP account appears the moment anyone is paid a wage, including the owner, and carries source deduction remittances on a schedule that does not wait for year end. Missing a remittance is a penalty event separate from anything to do with the T2. Business number program accounts sets out what each one does.

What the rates actually are

An Aldergrove corporation is taxed in British Columbia at 11% combined on active business income eligible for the small business deduction — 9% federal plus 2% provincial — on a $500,000 business limit, and at 27% on income above it or income that does not qualify. For a business earning well inside the limit the rate is not the interesting number; the interesting number is what it costs to get the money out personally, because corporate tax is only the first of two layers. That is why the compensation decision and the corporate return belong in the same conversation rather than in sequence.

How the work is done

EverStone is a sole practitioner CPA firm operating from a single office at 32615 South Fraser Way in Abbotsford, a short distance east along Fraser Highway. There is no Aldergrove office and no local staff. Records arrive by secure upload, the return is reviewed on a video call and e-signed, and filing is electronic. For a newly incorporated business the useful part of a sole-practitioner engagement is that the questions in year one — what to do with the truck, when the year end should fall, whether to run payroll — go to the person who will still be on the file in year five.