Corporate Year End Tax Planning for Canadian Businesses
What Business Owners Should Do Before and After Year End
For many Canadian corporations, the corporate year end is one of the most important financial milestones of the year. It is not just about filing a T2 corporate tax return, it is also a key opportunity to reduce taxes, improve cash flow, and make strategic decisions that support long term business goals.
Whether your corporation has a December 31 year end or an off calendar fiscal year, proper year end planning can make a significant difference. This article outlines what incorporated business owners should focus on before and after their corporate year end, and how working with a CPA can help avoid costly mistakes.
Why Corporate Year End Planning Matters
Corporate year end is when your company’s financial performance is finalized for tax purposes. Decisions made around this time can affect:
Corporate income tax payable
Personal tax for shareholders
CRA compliance and audit risk
Cash flow and retained earnings
Future tax planning opportunities
Without proactive planning, many business owners pay more tax than necessary or miss opportunities to improve their overall tax position.
Confirm Your Corporate Year End Date
In Canada, most corporations choose either December 31 or a fiscal year end that aligns with their business cycle. Once established, changing a corporate year end generally requires CRA approval.
Before planning begins, confirm:
Your corporation’s fiscal year end date
Whether this year will include a short tax year
Any changes in business activity that may affect reporting
This ensures deadlines are met and planning strategies are applied correctly.
Review Financial Statements Early
One of the most common year end mistakes is waiting too long to review financial results. Early review allows time to make adjustments before the year closes.
Key areas to review include:
Net income before tax
Revenue trends and unusual fluctuations
Expense categorization and completeness
Owner compensation paid or accrued
Retained earnings balance
If you operate a small or mid sized corporation in Kamloops or the Thompson Nicola region, this review is especially important due to seasonal income and cash flow patterns.
Owner Compensation Planning
How you pay yourself as a shareholder manager has a major impact on both corporate and personal taxes.
The two primary options are salary and dividends, and the right mix depends on your goals.
Salary Considerations
Deductible to the corporation
Creates RRSP contribution room
Subject to CPP contributions
Requires payroll filings and remittances
Dividend Considerations
Paid from after tax corporate income
No CPP contributions
More flexible timing
Requires sufficient retained earnings
Before year end, review whether additional salary or bonuses should be accrued, or whether dividends should be declared. Proper planning can balance corporate tax savings with personal cash flow needs.
Manage Corporate Taxable Income
If your corporation is approaching a higher tax threshold, especially the small business deduction limit, year end planning becomes even more valuable.
Common strategies include:
Accruing bonuses payable within 180 days
Prepaying certain expenses where appropriate
Writing off obsolete inventory
Reviewing allowance for doubtful accounts
Claiming capital cost allowance strategically
Not every deduction should be maximized automatically. In some cases, deferring deductions to a future year provides better long term results.
Capital Asset Purchases and CCA Planning
If your corporation plans to purchase equipment, vehicles, or technology, timing matters.
Capital assets are depreciated over time using capital cost allowance. Buying assets before year end may allow you to:
Access accelerated depreciation rules
Reduce taxable income in the current year
Invest in productivity improvements
However, the half year rule and class specific limitations apply, so purchases should be reviewed carefully before proceeding.
Review Shareholder Loan Balances
Shareholder loan accounts are a common CRA audit issue for owner managed corporations.
Before year end, confirm:
Whether the corporation owes you money
Whether you owe money to the corporation
That repayments and advances are properly documented
If a shareholder loan remains outstanding too long, it may be included in personal income, resulting in unexpected tax.
GST and Payroll Compliance Check
Corporate year end is an excellent time to review compliance areas that often get overlooked.
This includes:
GST or HST filings and reconciliations
Payroll remittances and T4 preparation
Source deduction balances
CRA account statements
Catching issues early can prevent penalties, interest, and stressful CRA correspondence later.
After Year End, What Happens Next
Once the fiscal year ends, your focus shifts to:
Finalizing financial statements
Preparing the T2 corporate tax return
Issuing T4s and T5s where required
Planning personal tax filings for shareholders
Corporate tax returns are generally due six months after year end, but any balance owing is usually due within two or three months. Filing on time and planning ahead helps avoid interest charges.
How a CPA Can Help With Corporate Year End
Working with a CPA who understands small business and owner managed corporations can add significant value beyond basic compliance.
A CPA can help you:
Identify tax saving opportunities
Avoid CRA penalties and audits
Align corporate and personal tax planning
Improve financial reporting and decision making
Plan for growth, succession, or sale
For incorporated businesses in Kamloops and surrounding areas, having a local advisor who understands your industry and region is especially valuable.
Final Thoughts
Corporate year end is more than an administrative requirement. It is a strategic opportunity to strengthen your business and improve your tax position.
If you own an incorporated business and want help with corporate year end planning, financial statements, or T2 corporate tax filings, working with an experienced CPA can provide clarity and peace of mind.
Reach out today for your free consultation