What type of tax reports may be required during a year?
During the year, there are a number of tax reports that must be filed, in order to maintain your company's good standing with the Ontario and Federal Governments.
First and foremost among these tax reports is your Federal Income Tax Return, also known as a T1. This is the standard tax package that every individual who has earnings in Canada, must file and earnings from your Small Business are also reported using this package. They are itemized on a schedule within the tax package entitled "Statement of Business Activities". A separate "Statement of Business Activities" must be completed and attached to your T1 for each business operated by the taxpayer.
The "Statement of Business Activities" is basically an income statement listing by category of all the revenues and expenses that occurred in relation to your business during the year. It also states the total value of the investments and withdrawals by the taxpayer during the year. It is highly advisable to seek assistance for the submission of your "Statement of Business Activities" and your T1 if you are a small business owner.
If you are a Sole Proprietor, your T1 is not due for submission until June 15th. Your payment, if any, is still due by April 30th. Depending on your income, you may also be required to make installment payments throughout the year rather than wait until you have completed your income tax return.
Another key tax report is your GST/HST submission. This form known as the Goods and Services Tax/Harmonized Sales Tax Return is usually submitted quarterly, although monthly and annual submission periods may also be requested. On this form you will list the total amount of sales completed worldwide during the reporting period. You will also list the total amount of GST/HST that was collected or became collectable during this period. From this total you will deduct all the GST/HST you paid or became payable during the reporting period (known as Input Tax Credits or ITC's). You will have an opportunity on this form to list any adjustments that occurred during the period. A common example of such an adjustment is a previously included accounts receivable amount that has became uncollectable.
If the calculated amount is positive you will be required to submit the amount shown to the Federal Government. If the amount calculated is negative, this indicates a refund and a cheque will be issued to you by the Federal Government.
Retail Sales Tax or RST is the provincial sales tax applied to the sale of most retail products sold to the end user. This tax, previously known as PST, is currently charged at a rate of 8%. Returns are due on or before the 23rd of the month following the end of your filing period. Regardless of your reporting period, all Ontario businesses must file their final RST return by July 23rd. Late filings will result in a penalty equal to 10% of the total tax collected during the period.
There are a number of tax submissions that will apply if you retain employees. The maintenance of payroll records will be an ongoing necessity for any business that hires employees. You will need to carefully record what is paid to, and deducted from, each employee each pay period. Amounts must be calculated for Employment Insurance (EI), Canada Pension Plan (CPP) and Income Tax, each payroll. Employer contributions must also be calculated for CPP and EI and added to the amounts submitted to the government. Currently, employers must submit an amount equal to 100% of the CPP collected from the employees and an amount equal to 140% of the EI collected from the employees. These amounts, in the case of most businesses, must be submitted monthly.
Before the fifteenth of each month, a form, either electronic or paper provided by the Canada Revenue Agency, will need to be completed and filed along with the amounts withheld from the employees as well as the employer contributions. These filings are completed under your Federal Payroll Number and failure to submit by the deadline will usually result in a fine equivalent to 10% of your total submission.
You will also, depending on your business, periodically receive Employee Health Tax (EHT) and Workers Safety Insurance Board (WSIB) forms to complete. These submissions are also based on the amounts paid out for payroll. In the case of WSIB, the total owing is also a factor of the industry and accident history of your company. The percentage of payroll payable as a WSIB premium can vary from less than 1% to more than 10% in high-risk industries. With EHT, the first $ 400,000.00 of payroll is exempt from payment. After this, the rate is typically 1.95% on the amount of payroll in excess of $ 400,000.00 and must be submitted annually by March 15th of the year following that in which the employees were paid the payroll amounts. As always, careful record keeping and timely submission is important to avoid unnecessary penalties.
Virtually all tax submissions feature significant penalties for late submissions. Obviously, this makes timely preparation of your forms critical. Business Development Centre can assist you with this by providing high quality accounting and bookkeeping services. We can help you ensure that you do not pay thousands of your hard earned dollars needlessly to the Government.