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What is a Schedule 1?

July 14, 2015

Tax Question:

What is a schedule 1 as part of a T2 corporate tax return?


There are many schedules in a corporate tax return and they vary from company to company. Some schedules are required for some companies and optional or prohibited for others. Schedule 1 appears in almost all corporate tax returns.


Schedule 1 is considered the heart of the corporate tax return. Its important function is to summarize and reconcile the differences between profit for accounting purposes and profit for tax purposes (taxable income). It allows business owners to calculate their profits in a variety of different accounting policies and systems that make sense for their business and then translate those results to the standardized accounting policies used in the tax system. For example, if your calculation of profit had automobile depreciation at 50% for the year, you would find that was higher than the rate allowed per Canadian tax rules. So on schedule 1, you would show your depreciation being added back to your profit and the allowed 30% a year for tax being calculated deducted instead. Schedule 1 would refer to schedule 8 for the details of this calculation.

Think about schedule 1 and the fact that it adjusts all companies’ profits from what they report to a standardized system of taxable income. Which number would you find more consistent year on year as a report of income? This schedule 1 is an important element in keeping the tax playing field even in Canada. People cannot pay more or less tax based on their accounting choices. The tax system is in place to standardize accounting for tax purposes.

If you would like more information on this topic, please contact a member of the Empire CPA team by filling out the contact form below.

Canadian and foreign tax laws are complex and have a tendency to change on a frequent basis. As such, the content published above is believed to be accurate as of the date of this post. Before implementing any tax planning, please seek professional advice from a qualified tax professional. Empire, Chartered Professional Accountants will not accept any liability for any tax ramifications that may result from acting based on the information contained above.

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