How to Select Your Corporate Fiscal Year-End in Canada? 2022 Useful Guide

by | Jun 2, 2022

Your company’s 12-month business cycle is crucial for corporate tax filings, shareholder reports, and external audits, regardless of whether you prefer the terms financial, tax, or fiscal year.

If your small business recently incorporated in Mississauga, you must know the exact date of its official year-end. In this article, we’ll go over a few things to think about when selecting your company’s fiscal year-end.

Also, working with a qualified bookkeeping expert can benefit you in collecting your corporate tax information. Fortunately, Mississauga’s small businesses can get excellent bookkeeping services from Yogi & Associates.

1. What is Fiscal Year-End?

The completion of a company’s 12-month business cycle is called its fiscal year-end. Fiscal years differ from the calendar year. The fiscal years of the majority of businesses end on dates other than December 31.

2. How To Choose Your Fiscal Year-End Dates?

According to CRA, corporations’ fiscal years can span any 12 months with a few exceptions. But, the completion of their first tax year must occur within 53 weeks of the creation date.

However, the majority of businesses either:

  • Use December 31 as their year’s end and follow the calendar year OR
  • Can use the month’s final day closest to the 53-week mark.

For instance, if your company was established on June 13, you may select May 31 of the following year as your corporate fiscal year-end.

Tip!

To keep your records in order, you should choose the last day of the month for your year-end. And coincide that date with your GST/HST reporting period).

Check an interesting article by Yogi & Associates on GST/HST: When Should You Charge GST/HST? 2022 Free Guide

Announcing Your Corporate Fiscal Year-End

You don’t need to declare your financial year until you submit your first T2 corporate tax return. The following must occur to avoid interest or penalties:

  • Suppose you owe tax within three months of the end of the fiscal year. (e.g., if your fiscal year ends June 30, your tax balance will be due before September 30).
  • If you don’t owe taxes within six months of your year-end.

“Setting your year-end date when you incorporate your Canadian firm is the best practice.”

3. 3 Factors To Consider When Selecting Year-End Date

Here are three important factors to think about when selecting your corporate fiscal year-end:

Tax Filing Fees

There are some expected tax filing costs. Such as getting help updating your books, hiring an accountant to file your return and disbursing income tax funds. So it is better to postpone filing your first tax return. Because you have to spend a lot of other expenses during your first business year.

For Example: If your company was created on September 1, 2021, you could choose the fiscal year finish on August 31. Rather than using the default year-end date of December 31. And remit any taxes due before March 31 of the following year.

Doing this would delay filing your first return until November 30, 2022 (if you owe tax) or February 28, 2023 (if you don’t).

Strategies For Tax Planning

Accounting-related bonusing of corporate profits is an important ta strategy. So, you must pay bonuses within 180 days after completing corporate fiscal year-end. However, by selecting a later year-end, your business can:

  • Deduct bonuses as an expense in the year they are received.
  • Postpone paying bonuses until after December 31.

Seasonal Work Periods

Businesses that operate seasonally, such as food trucks, tutoring services, or roofing firms, often make the majority of their revenue in a few months each year.

Choosing a fiscal period that finishes after your busy months is a great idea if you have a peak earning season. It will offer you more time to update your records before filing your business income tax return. In addition, you can analyze your annual performance before creating goals for the following year.

4. How to Change Your Fiscal Year-End Date?

Once you establish your financial year, changing it might take work. Doing so would affect other reporting requirements. Such as the deadlines for GST/HST filing and remittance.

If you want to change your fiscal year-end, you must get permission in writing from the CRA. And justify the change. But you won’t need CRA approval if your corporation has made your year-end change:

  • Leaving Canada or being bought.
  • Losing its exemption from paying taxes.
  • Submitting its last company return for a short tax year.

Additional Information!

Small business owners frequently choose a December 31 year-end date to meet with their personal tax filing year. You can select a different year-end to make completing filing deadlines simpler and less expensive.

5. Do You Need Help For Maintaining Your Books?

Whether you are a small business owner or just starting one, choose the year-end date wisely. Also, delaying your initial tax costs gives you more time to enjoy the small business deduction.

Once you have decided on your fiscal year, the next step is managing your monthly books. And create your financial statements around tax time. For this purpose, you can trust Yogi & Associates. As we provide effective bookkeeping services to small business owners in MississaugaBrampton, and surrounding areas.

If you require assistance managing your daily bookkeeping, Yogi & Associates is here to help! Contact us today for further information.

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