15736 100 Ave N.W. Edmonton, Alberta Canada T5P 0L1
Fax (780)486-4393 ----------- Phone (780)484-1133
The Income Tax Act requires that a business pay tax on its income for a particular period. Once this is determined a tax return must be filed to notify the tax department of how the incomewas calculated. This reporting can be through the owners personal tax return in the case of aproprietor or a partner or in a special corporate tax return for Corporations. They are referred toas a T1 Personal Tax Return or T2 Corporate Tax Return. When a tax return is prepared it issigned by the owner or director, who becomes liable for its accuracy regardless of who preparedthe return. Due to the complexity of the tax system it is advisable to seek professional advice inthis area.Business income for tax purposes is based on generally accepted accounting principles. Thisincludes the concept of matching income and expenses into the same time frame. This isaccomplished through the use of accrual accounting. As an illustration of this an invoice issuedon January 28, 2006 would be included in the January 31, 2006 year end even though it is notcollected until two months later. Also, purchases on January 28, 2006 would be included in theJanuary 31, 2006 year end even though they are not paid for until February 15, 2006. Afterthe calculation of the accounting profit/loss tax adjustments are made to arrive at taxableincome.There are a number of items which can be adjusted at this point. For example Amortization(Depreciation) claimed on the accounting records must be added back and Capital Cost Allowancededucted for tax purposes. Also, some expenditures and 50 pct of the cost of meals and entertainment must be added back on the tax return.
Personal Tax Returns must be filed by April 30 of the following year. They include all of thesources of income of the individual and their deductions for the prior calendar year. A proprietoror partner in a small business includes in this return the profit or loss for the period of businessthat ended in the calendar year of their return. Special provisions exist where a business is discontinued.
In some cases Installments are required to be paid as advances
towards taxes which will be due at the end of the subsequent fiscal period
CLICK HERE if you want to know more about personal Tax Installments .
G.S.T.
A business that shows gross income in excess of $30,000 will be contacted by GST as theygenerally should have already been registered.
TAX - GENERAL
Special tax forms and booklets are available from RevenueCanada (Employment expenses) to assist a business owner in reporting his income. Also, another booklet entitled Business and Professional Income>is not part of the regular tax return package but contains a lot ofinformation pertinent to someone considering going into various specific business. But remember the informationpresented is general in nature and you may prefer to get professional advice that is specific to yourunique situation. Also, tax terms can tend to be confusing so a meeting with a tax professionalmay save you a lot of headaches.
Limited companies tax returns are filed throughout the year and most (Some are due sooner) are due to be filed with CRA six months after the yearend. So if a Company's year end is January 31, 2006 its tax return is due on July 31, 2006. Bythe way if any taxes were owing at the year end these would have to be paid by April 30, 2006 (90days) after the year end. In some cases Installments are required to be paid as advances towards taxes which will be due at the end of the subsequent fiscal period
Department of Finance CLICKHERE