Your First Corporate Year-End: A Checklist for New Canadian Corporations
- Targeted Accounting
- Business
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Table of Contents
What Happens Between Your Year-End and Your First T2
Your first fiscal year as a corporation ends and, for most founders, nothing visible happens. The bank account keeps working, customers keep paying, and the deadlines are months away. That quiet period is when the work should be done, because the deadlines that follow are fixed, the penalties are automatic, and the first year sets patterns that are expensive to change later.
This checklist covers what to do, in order, from the day after your year-end to the day your T2 is filed. It assumes a Canadian-controlled private corporation with a single owner or a small group of shareholders. The rules behind each step are explained in our founder’s guide to T2 corporate tax.
Key Takeaways
- Your first fiscal year can end on any date within 53 weeks of incorporation. The date you file on is the date you are stuck with.
- Three deadlines follow year-end: tax balance due at two months (three for most small CCPCs), the T2 return at six months, and the annual GST/HST return at three months.
- Your accountant needs reconciled books, every statement, and a clear record of money that moved between you and the company.
- The salary versus dividend decision for the year is made now, and it drives T4 or T5 slips due by the end of February.
- Corporations also file an annual return with their incorporating jurisdiction. It is separate from the T2 and easy to forget.
Confirm Your Year-End Date
A new corporation chooses its first fiscal year-end simply by filing its first T2 with that date. The only constraint is that the first year cannot be longer than 53 weeks. Many founders default to 31 December because it matches the calendar; others pick a quieter month so that year-end work does not land during their busy season.
The choice has real consequences. It sets when your tax is due, when your accountant’s busy period is, and how the first year’s income lines up against the small business deduction limit. A short first year, say four months, means a small first bill and an early start on the annual rhythm. A long first year defers everything but concentrates it. Decide deliberately, then write the date into your calendar with the three deadlines below.
Know the Three Deadlines
| Obligation | Due | Notes |
|---|---|---|
| Corporate tax balance | 2 months after year-end | 3 months if you are a CCPC claiming the small business deduction with prior-year taxable income under $500,000. Most new small corporations qualify. |
| T2 return | 6 months after year-end | Late filing: 5% of unpaid tax plus 1% per month, up to 12 months. |
| GST/HST annual return | 3 months after year-end | If you are an annual filer. Quarterly filers are already on a schedule. |
| T4 and T5 slips | Last day of February | For any salary or dividends paid in the calendar year. |
| Corporate annual return | Varies by jurisdiction | Ontario corporations file within six months of year-end through the Ontario Business Registry. Federal corporations file within 60 days of the incorporation anniversary. |
The trap in that table is the first row. Interest starts on the balance-due date even though the return is not late until six months. If you do not know your number by month two, pay an estimate. The full list of dates for the year is in our Canadian business tax calendar.
Gather What Your Accountant Needs
Year-end work goes fastest when everything arrives at once. Before you send anything, make sure the books are reconciled to every bank and credit card statement for the year. Then assemble:
- Bank and credit card statements for every account, including the last statement that crosses year-end.
- Sales records: invoices, a list of amounts customers still owe, and any deposits received for work not yet done.
- Purchase records: supplier bills, a list of what you still owe, and receipts for anything over the GST/HST documentation thresholds.
- Asset purchases over a few hundred dollars: computers, equipment, vehicles, furniture, with invoices and dates.
- Loans and leases: agreements, statements and the year-end balance.
- Everything that moved between you and the corporation: money you put in, money you took out, personal expenses paid on the company card and company expenses paid personally.
- Payroll records if you paid anyone, including yourself.
- GST/HST returns filed during the year.
- Incorporation documents, the share register and any shareholder agreement, for the first year only.
If we do your bookkeeping most of this already exists in your file and the list shrinks to the last three items.
Expect These Adjustments
Year-end accounting turns a set of reconciled bank transactions into financial statements. Several adjustments are routine and each one changes your tax bill.
Accruals. Income earned but not invoiced, and expenses incurred but not yet billed to you, are brought into the year they belong to.
Capital cost allowance. Equipment and vehicles are not expensed when bought; a percentage is deducted each year. The first year usually gets an enhanced allowance, and the choice of how much to claim is a planning decision.
Shareholder transactions. Every dollar between you and the corporation is classified as salary, dividend, loan repayment, expense reimbursement or shareholder loan. A loan from the corporation to you that is not repaid by the end of the following year becomes taxable income, so this is worth getting right.
The salary or dividend decision. If you took money out during the year without running payroll, the year-end is where it gets characterised. Dividends can be declared after the fact; salary needs payroll remittances that were due months ago. Our tax planning guide for owner-managers covers the trade-offs, and the payroll mechanics are in the payroll handbook.
What Gets Filed
Your accountant produces financial statements, usually under a compilation engagement, and the T2 return with its schedules. The ones every small corporation sees are the GIFI balance sheet and income statement (schedules 100 and 125), the shareholder information schedule (50), capital cost allowance (8) and the net income reconciliation (1). Ontario corporations include the provincial calculation inside the T2; Quebec and Alberta corporations file a separate provincial return.
After filing you will receive a notice of assessment. Keep it; it confirms your balance, and it is the document lenders and the CRA will refer to. If tax payable was over $3,000, instalments for year two start shortly after, which is a subject on its own.
First-Year Mistakes We See Most
Mixing personal and corporate spending. One card for each. It is the cheapest year-end saving available.
No minute book. Director resolutions for dividends and the share register are legal requirements, and lenders ask for them.
Missing the balance-due date. Six months feels like the deadline. Interest says otherwise.
Ignoring the annual corporate return. It is a filing with the registry, not the CRA, and a missed one can eventually dissolve the corporation.
Paying yourself with no plan. Random withdrawals become a shareholder loan problem in year two.
First Year-End Coming Up?
We take a new corporation from reconciled books to a filed T2, with the salary and dividend decision made deliberately and every deadline in the calendar. Ask us before the year-end, not after, and the whole process is shorter.
