Monthly Accountant or Year-End Only for a Small Corporation

Do I need to pay an accountant monthly for my corporation?

Not under the CRA's rules or the federal corporations act. The T2 guide requires every corporation to file a return for every tax year, even with no tax payable, and names no required preparer. The Income Tax Act, s. 230 requires a business to keep records that let its tax be determined, and the Canada Business Corporations Act, s. 20 requires a corporation to keep adequate accounting records; neither says an accountant must keep them. A federal corporation that does not offer its shares to the public must have an auditor appointed each year unless every shareholder, voting or not, consents to a resolution not to appoint one (CBCA, s. 163). A provincial statute, a loan agreement or a shareholder agreement may set its own requirements.

The real question is which filings fall due during the year, because no one needs to have updated the books for those dates to arrive. A corporation with payroll, a GST/HST account or tax instalments needs a plan for each of those dates. The table below also lists the T2 and the provincial and registry filings, which have dates of their own.

A case is not simple when the corporation has:

• GST/HST returns every month or quarter.
• Payroll, including a salary paid to the owner.
• Corporate tax instalments.
• Money moving between the owner and the corporation, so the shareholder loan changes.
• Books that are behind, or one bank account mixing personal and corporate spending.
• A Quebec or Alberta corporation return, or owners or income in another country.

Gather first: twelve months of bank and card statements, the last T2 and notice of assessment, the CRA statements for GST/HST and payroll, loan agreements and the minute book.

If you hold a monthly quote and a year-end-only quote, check that each one says who covers every item above that applies. Costs and how to compare quotes are in bookkeeping cost per month and corporate return cost and quotes.

Can I be my own accountant for my corporation and pay only for year-end?

An owner may keep the books if the records are accurate and every dated filing is made on time. The T2 guide names no required preparer, and Schedule 141 in the CRA's GIFI guide asks who did more than half the work on the financial information and whether that person holds an accounting designation, so the CRA does not assume a professional prepared it.

Two limits apply. Most corporations, Canadian-controlled private corporations (CCPCs) included, must file the T2 electronically (T2 guide lists the exceptions), so the corporation needs CRA-certified software or an electronic transmitter; a corporation that must e-file and does not is liable to a $1,000 penalty (Income Tax Act, s. 162(7.2)). And directors can be personally liable, together with the corporation, for unremitted payroll deductions (Income Tax Act, s. 227.1) and unremitted net GST/HST (Excise Tax Act, s. 323), once collection from the corporation fails or it is bankrupt or being wound up. A director who took the care a reasonably prudent person would have taken to prevent the failure is not liable, and the time limit is two years after the person last ceased to be a director.

For how to choose between a spreadsheet, software and a bookkeeper, see doing your own books or hiring a bookkeeper.

Which deadlines run during the year even if no one keeps monthly books?

Payroll, GST/HST, instalments and slips have their own dates, set by a pay run, a reporting period or last year's tax, not by the state of the books.

A corporate instalment does not need current-year books: a monthly instalment can be one twelfth of last year's tax (scaled up to a full year if last year was shorter, Income Tax Regulations, s. 5301), with the rest due on the balance-due day (CRA T7B-Corp). A GST/HST return is different: its figures come from the period's sales and purchases. The CRA generally assigns an annual GST/HST period when annual taxable supplies are $1,500,000 or less, and the registrant may choose a more frequent one, online or on Form GST20 (RC4022). Each monthly or quarterly period adds a total that someone has to produce.

When does monthly bookkeeping pay for itself?

Monthly work earns its place where a missed date carries a penalty or personal liability, or where someone outside the corporation relies on current numbers.

If none of these rows fits, year-end only is an arrangement some owners use; confirm the provincial filings first. If any row fits, see what a monthly service should deliver in what a bookkeeper should do each month.

What goes wrong with year-end only?

Five things can go wrong when nothing is checked between year-ends.

• Missed GST/HST. A return is required for each reporting period even with no business activity (CRA). A late return with an amount owing draws a penalty that starts at 1% of the amount owing and grows with each full month, and interest may be charged; the CRA charges no late-filing penalty when nothing is owing (CRA). See missed nil GST/HST returns.
• Late payroll remittances. The penalty is 3% for 1 to 3 days late, rising to 10% after 7 days, on the part of the amount due above $500 (all of it if the delay was knowing or grossly negligent), plus interest; a repeat knowing failure in the same calendar year draws 20% (Income Tax Act, s. 227). A late remittance or a late GST/HST return also breaks the perfect compliance record that quarterly remitting requires (CRA).
• Instalment interest. The CRA charges interest on late or insufficient instalments (T7B-Corp). See recording corporate tax instalments.
• Shareholder loan. Money taken out without a label still has to be sorted later into a loan, salary, dividend or taxable benefit. A shareholder may have to include a loan in income unless an exception applies, such as repayment within one year after the end of the corporation's tax year in which the loan was made; the folio sets the conditions (CRA folio S3-F1-C1). See the shareholder loan account.
• Lost receipts. The corporation must keep required records and supporting documents for six years. Save each receipt or invoice when the cost is paid. See CRA receipt requirements.

A late T2 draws a penalty of 5% of the tax unpaid at the filing deadline plus 1% of it for each complete month, up to 12 months (T2 guide). The T2 is due six months after year-end, so the accountant's start date matters.

What does a year-end-only accountant need from my books?

Reconciled books: records that agree with the bank, the CRA accounts and the lenders. The T2 requires financial statement information (GIFI guide), so the accountant builds it from these.

If these do not agree, the first job is a catch-up, not a year-end. See catching up on overdue books and the year-end close checklist. For the statements themselves, see year-end financial statements for a corporation.

What middle options exist: quarterly check-ins, hourly access or a bookkeeper plus a year-end accountant?

Several arrangements put help where the dated filings are. These are agreements with a provider, not CRA categories, so the scope matters more than the label.

Put in writing which filings are covered, which months, and who answers a CRA letter. For hourly access, confirm the CPA designation and whether a filing review is billed separately. For what to ask, see choosing an accountant in Canada, and for T2 quotes, corporate return cost and quotes.

How do I give an accountant access to check in without handing over everything?

A CRA representative authorization covers the CRA accounts, and a periodic export or a separate user with limited rights covers the books, so no one needs your own logins. The CRA offers a business three levels of representative access: level 1 allows access to information only, level 2 also allows certain account changes, and level 3 also lets the representative authorize others (CRA). A useful export is bank statements, a trial balance, and the GST/HST and payroll reports.

How long must I keep the records I make myself, and where?

Keep required records and supporting documents for six years from the end of the last tax year they relate to, at your place of business or residence in Canada (CRA). The duty is the corporation's, whoever made the records.

Records kept outside Canada and accessed from Canada are not treated as kept in Canada, although the CRA may give permission for electronic records. If the accounting data sits on servers abroad, check this rule first. For share records and what changes when a corporation closes, see how long to keep business records.

Does my province change this?

The federal rules above apply across Canada; provincial filings and the exceptions below add to them.

• Alberta. The T2 covers provincial and territorial corporation tax everywhere except Quebec and Alberta (CRA). A corporation with a permanent establishment in Alberta files an Alberta return, unless it is exempt, within six months of year-end, and Alberta has its own instalment and balance-due rules (Alberta).
• Quebec. Quebec administers its own corporation tax, so year-end work includes a second return. Revenu Québec also generally administers the GST/HST for a business located there, so its GST/HST and Quebec sales tax (QST) returns go to Revenu Québec, on its forms (RC4022). Quebec payroll deductions, returns and dates are in Quebec corporation accounting cost.
• Where you incorporated. The Canada Business Corporations Act sets the records duty in s. 20 and has the directors place annual financial statements before the shareholders (s. 155). The audit waiver in s. 163 lasts only until the next annual meeting. A provincial corporation follows its own statute for the records and audit rules; see year-end financial statements for a corporation.
• Several provinces. See operating in more than one province.

Example

These examples use illustrative Canadian dollars.

A one-person consulting corporation with quarterly GST/HST

An IT consultant in Toronto bills C$180,000 a year, has no employees and chose quarterly GST/HST. He is comparing a monthly quote with a year-end-only quote. For a calendar-year corporation the first quarter ends March 31, so that return is due April 30. The books must produce a total of sales and GST/HST for each quarter before its due date. Year-end only leaves those totals to someone; a quarterly check-in puts the review before each return.

A design corporation paying a salary

A Vancouver design corporation pays its owner a C$4,000 monthly salary. As a regular remitter, its March payroll deductions of C$1,200 are due April 15. Books done once a year do not change that date. Paid six days late through oversight, the remittance draws a 7% penalty on the C$700 above C$500, or C$49, plus interest (7% of the full C$1,200, C$84, if the delay were knowing). Last year's corporate tax, for a full 12-month year, was C$12,000, so monthly instalments of C$1,000 need no current-year books. In this case, year-end only would still need someone to remit on time and an accountant to reconcile wages and remittances once a year.

A Montreal corporation

Quebec administers the corporation's income tax, so its year-end work includes a Quebec return as well as the T2. A year-end-only quote should say whether that second return is included.

Different for you?

• You have a monthly quote and a year-end-only quote, and you also collect GST/HST, run payroll or owe instalments: which level fits depends on those dates, which books you can keep, and whether your books are clean enough for year-end work or need a catch-up first. Bring both quotes, the last T2 and your CRA statements to bookkeeping help.
• Your books are months behind or do not reconcile: start with catching up on overdue books and bookkeeping help.
• A payroll, GST/HST or T2 date was missed: see late payroll remittance, late GST/HST filing penalty or catching up on unfiled corporate returns.
• You often move money between yourself and the corporation: the shareholder loan account is the first balance to reconcile.
• A lender or investor wants current numbers: see proving income to a lender.
• The corporation is new or has had no activity: see books for a new CCPC or a nil return for a dormant corporation.
• An owner lives abroad, or income comes from two countries: see non-resident owners of a Canadian corporation and cross-border tax help.