What a Bookkeeper and Accountant Do in Canada: Monthly, Yearly

What should a bookkeeper do for my corporation each month in Canada?

A bookkeeper should keep the books current and reconciled every month, so each dated filing is built from numbers that match the bank. The CRA's records pages do not list a bookkeeper's monthly tasks. The CRA sets what a corporation must keep and when each return and payment is due, and the monthly cycle follows from those dates. The duty stays with the corporation whoever does the work.

A case is not simple when the corporation has any of these:

• You pay for this work and cannot tell which tasks are done, or a return or remittance may already be late.
• Employees, or salary paid to the owner.
• GST/HST returns every month or quarter.
• Money moving between the owner and the corporation.
• Books that are behind, or one account that mixes personal and business spending.
• Owners or income in a second country, or a Quebec or Alberta corporation return.

Gather first: CRA account access or a representative authorization, twelve months of bank and card statements, payroll registers, filed GST/HST and payroll returns, and the last T2 with its notice of assessment (the CRA's letter showing how it assessed the return).

If you cannot tell what is done, start with the CRA account check further down this page. It shows what is filed and owing without asking anyone.

For whether monthly work is needed at all, see year-end only or monthly bookkeeping. For fees, see bookkeeping cost per month.

What do bank and credit card reconciliations give me?

A reconciliation shows that the books match the bank, so the GST/HST return, the payroll check and the year-end statements start from numbers that were checked. A return built on an unreconciled account rests on figures nobody has confirmed against the bank.

Ask for these on every account, including each credit card and any account that receives sales payouts:

• The statement balance, the book balance and each reconciling item, such as a cheque not yet cleared. The unexplained difference after those items should be nil.
• A list of unmatched items, each with a reason.
• No item left unexplained from an earlier month.

A reconciliation also exposes payments with no receipt. The CRA requires documentary evidence before an input tax credit is claimed, so a payment with no invoice is one the corporation may be unable to claim. Personal spending found in a corporate account moves into the shareholder account, covered below.

Who prepares the GST/HST return, and when is it due?

The corporation is the registrant and is responsible for the return; the bookkeeper or accountant prepares it only if your agreement says so. Monthly and quarterly filers file and pay 1 month after the period ends. Annual filers file and make the final payment 3 months after the fiscal year-end (CRA), and may have to pay quarterly instalments if net tax for the previous fiscal year was $3,000 or more (CRA).

The CRA assigns the default, and a registrant may choose a more frequent period by election (Form GST20 or the CRA account), filed within two months after the day the election is to take effect (Excise Tax Act, s. 250). The same RC4022 page lists what counts toward the revenue. Your CRA account shows your period and due dates.

A corporation registered, or required to be registered, must file a return for every period, even with no sales. The CRA calls it a nil return (Excise Tax Act, s. 238). A corporation that is neither files only for a period in which net tax is remittable. See when to register for GST/HST. A late return with tax unpaid can draw a penalty that grows with each complete month late, and interest may apply; the ordinary late-filing penalty does not apply when nothing is owing or a refund is due (CRA). See late GST/HST filing penalty. For how the tax is recorded, see recording GST/HST in your books.

Who runs payroll remittances, and what are the due dates?

The corporation must remit what it deducts from pay, plus its own share of CPP and EI, to the CRA (CRA). A corporation that pays no salary or wages has no deductions to remit; if it keeps a payroll account with no employees or only seasonal workers, it reports a nil remittance by its due date (CRA). A bookkeeper, a payroll provider or the owner can run the payroll. Whoever does, the due date depends on how often the corporation must pay the CRA (its remitter type), which the CRA sets from the average monthly withholding in earlier years, not the current one.

Source: CRA, when to remit payroll deductions. A date on a weekend or CRA-recognized holiday moves to the next business day. A late remittance draws a penalty that rises with the days late, plus interest. The rates, the repeat-penalty rule and what to do are in late payroll remittance.

The T4 summary, filed after the year ends, compares total deductions reported with the remittances made (CRA), so a missed remittance shows up there as a balance due. Check monthly rather than wait for it. For the entries, see payroll journal entry.

What does the bookkeeper do about the shareholder loan account and owner pay?

Each month the bookkeeper should label every transfer between the owner and the corporation as salary, dividend, expense reimbursement or loan, because the label decides the tax. A transfer with no label sits in the shareholder account as money the owner owes the corporation, or the corporation owes the owner.

The rule that matters most: a loan a corporation makes to a shareholder is generally included in the shareholder's income for the year the loan was made, unless it is repaid within one year after the end of the corporation's tax year in which the loan was made and the repayment is not part of a series of loans and repayments. Whether a loan exists depends on the substance of the transaction, not on the accounting entry. A loan that stays out of income can still give rise to an interest benefit the shareholder may have to report, if it carries little or no interest. A repayment made after the loan was included in income may be deductible in the year it is repaid, again unless it is part of a series (CRA folio S3-F1-C1; Income Tax Act, s. 15(2) and para. 20(1)(j)).

The monthly check is simple: the balance, its direction, and the date by which a balance owed to the corporation must be cleared. Salary needs payroll deductions, remittances and a T4. A dividend is declared; a taxable dividend paid to a Canadian-resident shareholder is generally reported on a T5 slip, due the last day of February after the dividend year. Capital dividends and payments to non-residents follow different rules, so confirm the reporting and any withholding before paying. See the shareholder loan account and recording dividends in the books.

What reports should I receive each month?

Ask for seven reports each month: reconciliations, profit and loss, balance sheet, a GST/HST summary, a payroll summary with proof of payment, a shareholder account listing and the unpaid customer and supplier lists. The CRA's records rules do not set a monthly package, so it is whatever you agree with the provider. Skip a line that does not apply.

Agree on the date each month by which the package arrives, and note when it is late or incomplete.

What should I expect from my accountant each year, and what is due when for the T2?

The accountant turns the year's books into the year-end financial statements and the T2, and calculates the tax. A corporation files a T2 for every tax year, even with no tax payable, apart from a few exceptions such as registered charities. The balance of tax is due before the return is (CRA T2 guide). Most corporations, including every Canadian-controlled private corporation (CCPC), must file the T2 electronically; the CRA lists the exceptions.

A late T2 draws a penalty of 5% of the tax unpaid at the filing deadline plus 1% of it for each complete month late, up to 12 months. A larger penalty applies when the CRA demanded the return and charged a late-filing penalty in any of the three previous years (CRA T2 guide).

Who closes the year and who prepares the statements varies between providers. Confirm it in writing. The steps before the T2 are in the year-end close checklist, and the statements in year-end financial statements for a corporation.

What should my bookkeeper and accountant each hand to the other?

The bookkeeper hands over a reconciled set of books and the accountant hands back the year-end adjustments, so next year's opening balances match this year's close. The CRA does not prescribe the split; this is a checklist to agree on.

Confirm in writing who does each of these, and who gets a copy of each filing confirmation:

• Who prepares and files the GST/HST return.
• Who calculates and remits payroll.
• Who issues T4 and T5 slips.
• Who calculates and pays instalments.
• Who answers a CRA letter.
• Who holds CRA account authorization.

How do I check what the CRA says is filed and owing?

Sign in to My Business Account and look at each program account. Business owners, including partners, directors and officers, can use it, and authorized representatives reach the same services through Represent a Client (CRA). The steps below cover what the CRA administers. For GST/HST that Revenu Québec administers, the CRA sends you to Revenu Québec's site, and the CRA does not administer Quebec payroll deductions or Quebec and Alberta corporation tax either (see the province section).

Source: CRA, services in My Business Account. Menu names can change, so confirm them in your account.

Compare each CRA balance to the matching account in the books. A nil payroll balance does not show a month was remitted: find the payment itself in the CRA account and match it to the payroll register. If balances differ, see reconciling GST/HST payable to the CRA. Check after every due date, not once a year.

A business can authorize a bookkeeper or accountant as its representative in My Business Account (CRA). Level 1 allows access to information only; level 2 also allows certain account changes (CRA).

Which signs show something may be missed?

Seven signs show that a filing, payment or record may have been missed. Each has a rule and a cost behind it.

• No reconciliation, or reports that do not match the bank. Returns may rest on unchecked figures.
• A GST/HST return you expected missing from the CRA's filed list after the due date, or a nil return in a period with sales. See the penalty above.
• Payroll deducted from pay with no matching CRA payment. An employer holds deducted amounts in trust for the Receiver General, the federal government (CRA). A director can be personally liable with the corporation for unremitted deductions and net GST/HST, subject to limits and a due-diligence defence, and a claim against a former director must start within two years after the person last ceased to be a director (Income Tax Act, s. 227.1; Excise Tax Act, s. 323).
• A shareholder account that shows the owner owing the corporation and keeps growing, or transfers with no label.
• T4 slips (if wages were paid) or T5 slips (if taxable dividends were paid to Canadian residents) not filed by the last day of February. When that day falls on a weekend or CRA-recognized holiday, the due date moves to the next business day.
• Records held only in someone else's login or email. The CRA can ask to see the records, and the corporation must keep them six years from the end of the last tax year they relate to (six years from the filing date for a return filed late), at its place of business or residence in Canada unless the CRA gives written permission otherwise (CRA). Share registry and property records can need keeping longer, and an objection or appeal extends the period; see how long to keep business records.
• No filing confirmation after a due date, or questions that go unanswered. See an accountant who missed filings or stopped responding.

Does my province change this?

The federal dates above apply across Canada, with these differences.

• Quebec. Revenu Québec generally administers the GST/HST in Quebec (CRA). Quebec employers send QPP, QPIP and Quebec income tax deductions to Revenu Québec, and federal amounts to the CRA (CRA). Confirm Quebec dates with Revenu Québec.
• Quebec and Alberta corporations. The CRA administers provincial corporation tax everywhere except Quebec and Alberta (CRA). Ask which provincial return your accountant files.
• HST provinces. New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario and Prince Edward Island use one GST/HST return, so an Ontario corporation has no second sales tax return (CRA).
• British Columbia, Manitoba and Saskatchewan. Each charges its own provincial sales tax (PST), separate from the GST/HST; the CRA sends you to the province's website for it (CRA). Ask who files that return. See provincial sales tax.

Example

These examples are illustrative; all amounts are in Canadian dollars.

An Ontario consulting corporation with quarterly HST

One owner bills C$150,000 a year and chose to file HST quarterly. Each month the bookkeeper reconciles the bank and card accounts and totals the HST. The quarter ends March 31, so the return and any payment are due April 30. The owner opens the CRA account on May 1 to confirm the return shows as filed. At year end the bookkeeper hands the accountant reconciled books for the T2.

An Alberta corporation with three employees

Deductions plus the employer share of CPP and EI come to C$4,000 each month, which falls in the regular range of the table above. For a regular remitter, March payroll is due April 15. The bookkeeper sends the payment confirmation with the monthly package. The owner checks that the C$4,000 payment appears in the CRA payroll account for the right period and matches it to the payroll register.

A December year-end corporation and a C$30,000 withdrawal

The owner, a Canadian-resident shareholder, takes C$30,000 out in March of Year 1 with no paperwork, and no employment-loan exception applies. The monthly review in April finds it and asks whether it was salary, a dividend, an expense repayment or a loan. If it is a loan, it sits in the shareholder account. The tax year ends December 31 of Year 1, so under the CRA's one-year rule, repayment by December 31 of Year 2 may keep it out of income, unless it is part of a series of loans and repayments. If it is not repaid in time and no other exception applies, the C$30,000 is included in the owner's Year 1 income. A Year 1 return that left it out must then be amended, and interest may apply. Whether it is a loan depends on the facts. If it was meant as salary or a dividend, it needs the payroll or T5 steps instead.

Different for you?

• You pay for bookkeeping and cannot see which of these tasks is done, or a remittance, GST/HST return or T2 has already slipped: start with the CRA account check above, then bring the CRA balances, bank statements and last T2 to bookkeeping help. Which filings are done, who owns each task and what to fix before year end depend on those records.
• Your books are months behind: see catching up on overdue books and bookkeeping help.
• You just incorporated and have no bookkeeper yet: see books for a new CCPC and after you incorporate.
• A payroll remittance was missed: see late payroll remittance.
• A GST/HST return is late: see late GST/HST filing penalty.
• Your accountant missed filings and stopped replying: see accountant missed filings or stopped responding, then switching accountants.
• You are unsure whether you need a bookkeeper, an accountant or a CPA: see bookkeeper vs accountant vs CPA.
• The owner and corporation move money often: the shareholder loan account is the first balance to reconcile.
• You are a sole proprietor, not a corporation: this page does not apply; see what to give your accountant as a sole proprietor.
• Control of the corporation changed, or it stopped being a CCPC: the tax year is deemed to end at that time, which moves the T2 dates (Income Tax Act, s. 249). See deemed year-end on acquisition of control.
• An owner lives abroad, dividends go to a non-resident, or income comes from two countries: see non-resident owners of a Canadian corporation and cross-border tax help.