T2 return cost: what drives the fee and how to judge a quote

How much does a T2 cost, and why is there no standard price?

There is no standard price. Neither the CRA nor the Income Tax Act sets what an accountant charges, so a T2 fee reflects the work your corporation's facts create. The T2 return is the same form for every corporation, but its yes/no questions decide how many schedules go with it, and the books decide how much work comes before the return.

What moves the fee most:

• The books you hand over: finished statements, a trial balance, a general ledger, or bank statements only.
• Statements: whether the accountant also prepares year-end financial statements.
• Schedules: investments, dividends, losses, assets, related companies, foreign property or more than one province.
• Other filings: T5 slips, GST/HST and payroll returns, the registry's annual return, CRA letters.

A case is not simple when the corporation holds investments, pays the owner dividends, owns foreign property, operates in more than one province, has missed years, or is filing its first return. Gather last year's T2 and statements, the year's bank and card statements, and any slips before asking for a quote.

What should a T2 quote include, and what is billed separately?

A T2 quote should say exactly which filings it covers. Almost every resident corporation files a T2 every tax year, even with no tax payable, with its financial information in GIFI form (the CRA's standard list of codes for financial statement items). Other filings follow their own rules and are often quoted separately, so ask about each one.

Why does a T2 for a corporation with almost no income still cost something?

A corporation with no income files the same return as an active one. Section 150(1)(a) requires a resident corporation to file within six months after its year-end, and the CRA says inactive corporations file too.

The core work stays: the balance sheet and income statement in GIFI form and Schedule 141. Only a corporation inactive all year with no balance sheet or income statement information to report may leave those schedules out. A private corporation also completes Schedule 50, listing each shareholder holding 10% or more of its common or preferred shares. Most corporations must file electronically, and the CRA charges a $1,000 penalty when a required e-filer does not (T4012).

Cleaner records usually mean less work before the T2: a balance sheet that ties to last year's return and a bank account used only for the business. Doing it yourself is covered in filing your corporate return.

Which answers on the T2 add schedules, and so add work?

Each "yes" on the T2's Attachments page adds a schedule. The T2 lists dozens of such questions; these are the ones small corporations meet most.

Research claims (Form T661), a foreign affiliate (Form T1134) or over $1,000,000 of reportable transactions with related non-residents (Form T106) add further forms; see foreign property and affiliate reporting.

Why does an investment account inside the corporation raise the T2 fee?

An investment account adds schedules and balances that must carry from year to year. Dividends received go on Schedule 3, sales of securities on Schedule 6, and a Canadian-controlled private corporation's investment income on Schedule 7.

The T2 then tracks refundable tax balances that start from last year's return, so the accountant needs that return. Foreign securities can add Form T1135. Each needs the year's investment statements reconciled to the books, including cost, sales and foreign currency. How that income is taxed is covered in holding and investment corporations.

How do the books I hand over change the price, including year-end statements?

The less finished the books, the more work comes before the return. Schedule 141 asks who did more than half of the work on the financial information and what that work was: an audit, a review, a compilation, accounting services or bookkeeping. When a different, designated accountant prepares the return, it also records what the client provided: financial statements, a trial balance (each account's year-end balance) or a general ledger (every entry behind those balances). Bank statements alone mean the accountant builds the books first.

Business costs paid from a personal account are covered in business expenses paid personally. Which statements a corporation needs is covered in year-end financial statements. Books months behind belong in catching up on overdue books, and doing them yourself in own books or a bookkeeper.

Does the first T2, a short year or a new accountant cost more?

It can, because each adds set-up work. The T2 asks whether this is the first year of filing after incorporation (line 070); a "yes" adds Schedule 24 and the books-and-records location lines. A first year also has no prior return to start from: share capital, opening balances and any assets moved into the corporation must be set up.

For a Canadian-controlled private corporation, a tax year shorter than 51 weeks adds a step: the small business limit is prorated by days (section 125(5)(b)). An acquisition of control also ends the tax year early, so one calendar year can need two T2s (section 249(4); T2 line 063). A new accountant must pick up last year's closing figures, such as refundable tax balances, loss balances and capital cost allowance pools, and get CRA access. See switching accountants.

Is my accountant charging too much for a T2? Compare quotes line by line

The total alone cannot tell you. A lower quote may cover the T2 alone; a higher one may add statements, T5 slips and the GST/HST return.

1. List every filing your corporation needs this year, using the table in the section on what a quote includes.
2. Mark which ones each quote includes, and at what assumed state of the books.
3. Check which schedules each quote assumes: investments, dividends, foreign property, more than one province.
4. Ask whether the fee is fixed for a written list of filings or charged by the hour, and how extra work is charged: catch-up bookkeeping, CRA letters, late documents.
5. Ask what changed if a fee rose: new schedules, an investment account, a dividend, a missed deadline, messier books.

A fee rise with no change in the work is a fair thing to ask about. Choosing and checking an accountant is covered in choosing an accountant in Canada.

What should I send to get an accurate T2 quote?

Send what lets the accountant answer the T2's questions before quoting.

• Last year's T2, notice of assessment and financial statements
• The year's trial balance or general ledger, or say the books are not done
• Bank, card and loan statements, with year-end balances
• Investment account statements, including foreign holdings
• Dividends, salary or loans paid to the owner or family, and money the owner put in or spent personally for the business
• Related or associated corporations and their year-ends
• Provinces where the corporation has an office or staff
• GST/HST and payroll accounts, and any CRA letters
• Assets bought or sold during the year

Example

These scenarios use Canadian dollars. The quotes are illustrative, not market rates.

Two quotes for the same consulting corporation

A one-owner consulting corporation has C$150,000 of revenue and reconciled books. Quote A, C$1,500, covers the T2 and GIFI only. Quote B, C$2,800, adds a compilation engagement, the owner's T5 slip and the annual GST/HST return. Compared line by line, B covers three filings A leaves out, so the totals alone do not show which quote costs more for the work you need.

A holding corporation with an investment account

A Canadian-controlled private holding corporation holds a C$500,000 investment account that earns dividends, interest and capital gains. Its T2 brings Schedules 3, 6 and 7 and the refundable tax balances from last year's return. If its foreign shares and other specified foreign property cost more than C$100,000 in total at any time in the year, Form T1135 is added. An extra charge for the account may reflect those schedules and the reconciliation behind them.

A new corporation with almost no activity

In its first year, a new corporation earns C$1,500 and spends C$700. It still files a T2 with GIFI within six months of year-end and, as a first return, attaches Schedule 24. The owner hands over a spreadsheet trial balance instead of finished statements, so the accountant checks it and builds the statements first. The core schedules and first-year set-up remain, so there is still work to price.

Different for you?

• Your books are months behind: start with catching up on overdue books and get corporate tax help.
• The corporation missed T2 years: see catching up on unfiled corporate returns and corporate tax help.
• A late-filing penalty arrived: see penalties, interest and relief.
• The corporation holds investments and pays the owner dividends: see holding and investment corporations and get corporate tax help.
• It operates in more than one province: see operating in more than one province and get corporate tax help.
• It owns foreign property or a foreign company: see foreign property and affiliate reporting.
• It has US sales, a US company or US returns: see when a Canadian business needs a cross-border accountant.
• You are deciding whether to incorporate at all: compare yearly costs in sole proprietorship or corporation.
• You want a quote for a personal or sole-proprietor return: see choosing an accountant in Canada.