REF: https://solidtax.ca/wp-content/uploads/2022/09/t4012-21e-Corporation-Tax-Guide.pdf
I am a real estate agent and incorporated my business on Jan 31, 2021. What are the next steps I should take, and how do I prepare for my corporate taxes?
After you incorporate your business, you need to:
- Register your GST/HST with the CRA. You can call the CRA at 1-800-959-5525 or register online. After you get the GST/HST number, you should charge your clients GST/HST (13% in Ontario). For more details, you can read GST/HST for business on our knowledge base.
- If you want to pay yourself a salary or hire employees, you need to open a payroll account with the CRA. Please read Payroll Deduction.
- If you need bookkeeping services, we can recommend using QuickBooks. Please read Bookkeeping for more details.
You will need to choose your corporation’s year-end when filing your corporate tax return for the first time. You can pick any day within 365 days from your incorporated date.
In your case, you incorporated your business Jan 31, you can choose Feb 1, 2022 at the latest for your corporate year-end. Or you can choose Dec 31 to make it easy to remember.
After the year-end, we will help you prepare:
- Your corporation tax T2. If you do bookkeeping yourself, you will need to provide income and expenses as listed below. You can download the checklist. If we do your bookkeeping, we can get this info from QuickBooks.
- T4s if salaries were paid.
- T5s if dividends were paid.
- GST/HST filing. We will suggest that the HST quick method is better for you based on your business income and expenses.
How can I optimize my personal tax and corporate tax to pay a few taxes as possible?
To optimize your tax returns, we must consider your personal and corporate tax together. We will ask you:
- How much money you need to take from your corporation for your personal spending. The more you take from your company, the more dividend or salary you will have, and the more tax you will have to pay for your personal taxes.
- Are you considering contributing to an RRSP? By contributing to an RRSP, you can lower your personal taxable income and lower your taxes.
- Do you have dependents? You can get different credits if you have dependents. Your personal income will affect these credits.
- Would you like to contribute to the Canada Pension Plan (CPP) or would you prefer to pay less in taxes? If you pay yourself a salary, you must contribute to CPP. Normally, you may pay more to the CRA while paying salary vs. dividend because of the CPP contribution.
- Would you like to have some money saved in your business account and withdraw it when your personal income is lower? The more income you have, the higher your marginal tax rate will be. You can optimize your taxes by paying yourself less from your company when your other sources of personal income are high, and paying yourself more when you other personal income is lower.
My company has losses, how can I use this lose?
You can carry the loss back to the past three years if your company had profits in those years. You will get a refund after applying the loss against the past profits. You can also carry these losses for the future up to 10 years to offset profit in the future.
