Incorporated businesses are separate legal entities and therefore a separate return called a T2 is required for each corporation. The T2 should be prepared by a professional for the chosen year-end date of the company. The deadline for filing with CRA is six months after the company’s year-end date and the deadline for topping up or finalizing paying the corporation’s income taxes is two months after the year-end (three months for Canadian Controlled Private Corporations).

Generally, corporate income taxes are due during the year as installments. However, the first year that a corporation owes taxes there is an exception and the full payment for the year can be made without penalty within the two-month window after the year-end. The T2 reflects the company’s total financial picture. Financial statements are typically prepared to aid in the preparation of the corporate tax return. In all T2s a special schedule called The General Index of Financial Information (GIFI) is required. This GIFI contains information that is almost identical to a traditional accounting income statement and balance sheet. The company’s assets, liabilities, income and expenses are all listed in detail in the return on this GIFI.

The T2 income tax return uses as its starting point the accounting financial statements of the company. There is a central (schedule 1) in the T2 return that reconciles income for tax purposes with income for accounting purposes. This means that accounting profit can have a direct link to the tax paid and any differences between accounting profit and taxable income are clearly reconciled.