🚨 Common Mistakes in T2 Filing and How to Avoid Them
Filing a T2 corporate tax return can be complex, and even small errors can result in penalties, audits, or missed deductions. Here are some of the most common mistakes business owners make—and how to avoid them.
❌ 1. Missing the Filing Deadline
Deadline: Your T2 return is due 6 months after your fiscal year-end, but any taxes owed must be paid within 3 months (for most corporations). Late filing can lead to penalties & interest from the CRA. Learn more about important corporate tax deadlines on the CRA website.
✅ How to Avoid It: Mark your calendar, set reminders, or work with an accountant to file on time.
❌ 2. Incorrect Business Expenses & Deductions
Many small businesses overlook deductible expenses like home office costs, vehicle use, and business meals, while others claim personal expenses by mistake.
✅ How to Avoid It: Keep accurate records and separate business vs. personal expenses to avoid red flags. Check our deductible expenses guide for more details.
❌ 3. Failing to Report All Income
The CRA cross-checks T2 returns with bank deposits, sales records, and GST/HST filings. Missing income can trigger an audit.
✅ How to Avoid It: Double-check all revenue sources, including online sales, service fees, and rental income. For more on compliance, visit CRA’s business income guide.
❌ 4. Misclassifying Employees & Contractors
Businesses sometimes treat employees as independent contractors to avoid payroll deductions. However, the CRA has strict rules on worker classification.
✅ How to Avoid It: Consult an accountant before hiring to ensure proper classification and avoid penalties. Learn more about employee vs. contractor classification.
❌ 5. Forgetting to Claim Input Tax Credits (ITCs)
If your business is GST/HST registered, you can recover the GST/HST paid on business purchases through ITCs.
✅ How to Avoid It: Keep detailed receipts and ensure you’re claiming ITCs correctly. Our GST/HST filing services can help you maximize your tax credits.
📄 6. Not Keeping Proper Records
One of the biggest issues businesses face is poor record-keeping. Without proper documentation, it’s hard to justify expenses, claim deductions, or respond to CRA audits.
✅ How to Avoid It: Use accounting software like QuickBooks or work with a professional bookkeeper to keep accurate records.
📄 7. Ignoring CRA Correspondence
If the CRA sends a notice or request for information, ignoring it can lead to bigger problems like reassessments or penalties.
✅ How to Avoid It: Always respond to CRA inquiries promptly. If you’re unsure how to handle it, get help from a tax expert.
📄 8. Incorrectly Claiming Capital Cost Allowance (CCA)
Many businesses improperly claim depreciation expenses (CCA) for capital assets such as vehicles, machinery, and office equipment. Claiming too much or too little can result in tax issues.
✅ How to Avoid It: Ensure you’re using the correct CCA class and following the CRA’s depreciation rates. Our business tax planning services can guide you.
📄 9. Overlooking Loss Carryforwards
If your business operates at a loss, you may be able to carry those losses forward to reduce future taxable income.
✅ How to Avoid It: Keep track of any business losses and apply them correctly in your T2 return. Read more about loss carryforwards.
📄 10. Not Consulting a Professional
Many small business owners try to handle corporate tax filings themselves, leading to missed deductions and avoidable errors.
✅ How to Avoid It: Working with a certified accountant ensures your taxes are optimized, accurate, and compliant. Visit our corporate tax services to learn how we can help.
📄 Final Tip: Work with a Professional!
A T2 return isn’t just about compliance—it’s about tax optimization. Working with an accountant ensures you file accurately, maximize deductions, and stay CRA-compliant. For expert assistance, check out our corporate tax filing services.
📞 Need help with your T2 return? Contact Abraham Accounting Inc. today!
