Did you know that for corporate income taxes, the deadline to pay is months before the deadline to file? This may not affect the medium and large businesses with their teams of accountants, but for the 98 per cent of small businesses with one to 99 employees, we’re playing “guess those taxes” annually.
For personal income taxes, our filing and payment dates are the same. Once we complete our taxes, we know how much we have to pay and we pay it. There is one deadline that we have to meet to file and pay, and we do so, unless we want to face penalties. This makes sense.
Most years, I have to pay my corporate taxes by March 31, but the date to file them is June 30. There may be differences with COVID extensions, but regardless, I still can’t wrap my mind around this. How am I supposed to know how much to pay in taxes unless I’ve already completed/filed my return?
I called Revenue Canada this year to ask them about this, and the gentleman with whom I spoke told me that: A) They get that question a lot, and B) The only reason he’s been told in training sessions for this date differential is that corporations need more time to file their return. When I asked: “If they need more time to file their return, shouldn’t they also have more time to pay?” I was met with, “I hear what you’re saying, and I wish that I had an answer for you.”
As corporations are persons under the law, why can’t they also be expected to file and pay at the same time, like for personal taxes? Simply make the deadline a sufficient length of time after the fiscal year end to complete the required accounting. For individuals, it is four months after year end. Given the complexity of completing a corporate tax return, the deadline for filing AND paying should then be six months after year end.
Sadly, before I submit my information to my accountant and they tell me what my taxes owing are for my corporation, I have to pay my corporate taxes. Some years, there is no issue, because I get all my info into my accountant soon enough and I have filed my taxes before the payable date.
In the years that I am not so well prepared, I find myself having to guess at my payable number. Suffice it to say that my guesstimates have never been very close. (I’d never win both prize packages on the showcase showdown on the Price is Right by not guessing over and being within one hundred dollars of the actual amount.)
In past years, I have overpaid, and in others I have underpaid. For the years that I underpay, I am levied the interest charges accruing from the payment date until I pay the correct amount, which is after the filing date. Yet, on years I overpay, I do not get that same interest accrued to me on my overpayment.
This annual stress test has the perfectionist in me cringing every year and I know that I’m not alone. Until some government in power makes the relatively easy fix of synching up the payment and filing dates for corporations to six months after fiscal year-end, to all of my fellow small business corporations, all 1.2 million of us, I wish you the accuracy of a professional dart player as you pin the tail on your corporate tax donkey this year.