December 9, 2016
By Darren Salmond
Now that your medicine professional corporation is operating you must understand when certain tax filings are due. If you don’t, you may incur unnecessary non-deductible interest and penalties. When you were self-employed, you only had to worry about paying your taxes by April 30 and filing your tax return by June 15. A medicine professional corporation has multiple filing deadlines.
A medicine professional corporation can select any year-end, therefore each corporation may have different filing deadlines. The corporate tax returns must be filed six months after the year-end and taxes must be paid three months after the year-end (this deadline is reduced to two months if the corporation has taxable income over $500,000). The tax returns must therefore be completed or substantially completed within the three month timeframe in order to determine the taxes owing. If you fail to file the tax return on time the company will incur a penalty of 5% of the taxes owing plus 1% for each month the return is late. If the corporation files a tax return late in two of the last three years, the penalties will double.
The corporation is also required to make monthly corporate tax instalments based on the previous years’ taxes owing. The corporation may choose a quarterly instalment option if certain criteria are met. All tax payments are due at the end of the month. In the first year of operations a corporation is not required to make instalments, however it is a good idea to either make estimated monthly instalments or put the taxes in a separate account to avoid a large tax bill at the end of the year-end.
If the corporation has employees including yourself or other shareholders there are additional filing and remitting deadlines. When the corporation has payroll, it must withhold the proper source deductions and remit to the government by the 15th of the following month. This due date can be extended to quarterly remittances or accelerated to pay within the same month depending on certain criteria. The penalty for late filing the monthly remittances may be as much as 10% of the withholdings due. The preparation of the T4’s must be submitted to the government by the last day of February of the following year.
If your corporation pays dividends during the year, you must be aware of another filing requirement. The preparation of the T5’s must be submitted to the government by the last day of February of the following year, similar to the T4’s.
Another filing deadline that may apply to your corporation is HST. The HST return must typically be filed on an annual basis (The corporation can elect to file monthly or quarterly if they choose). The HST return must be filed three months after the fiscal year-end. Even though the corporation files the return annually you are required to make quarterly instalments based on the previous years’ net tax owing. If you fail to file the return on time and the corporation owes taxes, a penalty of up to 4% of the balance owing will apply.
Some additional tax filings that may be relevant to your corporation are Employer Health Tax, Workplace Safety and Insurance Board and Scientific Research and Experimental Development Tax Return.
In additional to the above penalties the company will incur interest at 5% compounded annually.
As you can see it is extremely important to know what tax filings are relevant to your corporation and to co-ordinate the payment and filing of the different returns with your accountant.
In my next blog I will review the tax savings you can receive by utilizing compensation strategies available to your professional medicine corporation.