CRA forms, explained

Elections

An election changes how a transaction is taxed, and dates are strict. A late, amended or revoked section 85 election costs the lesser of $8,000 and $100 per complete month; a late capital dividend election costs the lesser of 1% a year of the dividend and $500 a year, pro-rated by month.

Why the form number matters

Tax writing is usually organized by concept: rollovers, capital dividends, worker classification. Forms arrive differently: as a number with a deadline, often from someone who assumes you know it.

These pages are organized the other way round: by the number in your hand. If you are asking what is a CRA form for, each page below answers it for one form: what it does, who files it, and when it is due.

What being late actually costs

Most forms here are elections, which are not returns. A late return draws a penalty based on tax owing. Some elections cannot be filed late at all; the rest carry their own penalty and the CRA’s discretion.

So these deserve their own pages. A late T2 is expensive; a missed section 85 election can make a planned tax-deferred transfer fully taxable, on a gain never received in cash. The paperwork is trivial. Forgetting it is not.

Working out which one applies to you

If a transaction is planned, the form follows: assets into a corporation means T2057, an asset sale of a business GST44, the non-taxable half of a capital gain T2054. If someone has named a form, each page starts with what it does and who signs it, so you can tell quickly whether it is yours.

Unlisted forms are left out on purpose. This set covers what an owner-managed corporation meets; large-corporation and specialized-sector forms are not here.

Common questions about CRA forms

How to read a CRA form number

The prefix tells you which system the form belongs to, which is usually enough to work out who files it and when.

A four-digit number after a T2 prefix is very often an election rather than a return, and elections behave differently from everything else on this list.

Why elections are the ones that hurt

A late return is just late, penalized on tax owing. An election only changes how a transaction is taxed if filed on time in the prescribed form. Miss it and the transaction is taxed as if you intended nothing: a rollover becomes a sale at fair market value, a capital dividend an ordinary taxable one.

Hence the precise deadlines, several outside filing season. The capital dividend election is due by the day the dividend becomes payable under the directors’ resolution. The section 85 election is due with the earliest return of anyone party to the transfer, often an individual.

Almost every form here is filed as part of a larger engagement rather than on its own; the year-round accounting these forms belong to is what that looks like.

If the CRA accepts a late section 85 election, it charges the lesser of $8,000 and $100 per complete month from the original due date until it gets a satisfactory request, and usually will not process it until paid. A late capital dividend election has its own, usually smaller, penalty: the lesser of 1% a year of the dividend and $500 a year, pro-rated by month.

What we actually do with these

None of these is filed casually. Each follows a decision, such as incorporating a business, paying a capital dividend, selling a company or hiring a first employee, as its last step.

So the real question is rarely “how do I complete this box”, but whether the election is right, its conditions are met and the date has not passed. Check all three before filing.