T2 Short Return services

In Canada, when a company produces revenue every year, it also reports the revenue to the Canada Revenue Agency (CRA ). However, when the company has no activity during the fiscal year, it still has to file a report to CRA, but it is a different tax filing. Instead of filing a regular T2 Corporation Income Tax Return, the company files a T2 Short Return (T2SHORT), which is also called a Nil Return.
The Nil Return means the company is active but has not produced any income in the previous fiscal year, so there is no taxable income, and CRA should not expect any tax payments from the company. The T2 Short Return also serves as a provincial or territorial income tax return in all provinces except for Quebec and Alberta.

In Canada, all resident corporations must file a return every tax year up to the date of dissolution, even if they are not active or have no tax payable unless they are a registered charity.

1. That is not only a legal requirement but also a common sense. You want to keep your corporation in good shape, be transparent, and have a good history with CRA, resulting in less attention and reduced audit risk.
2. In addition, when your company starts generating income, you can only file the corporate taxes if all your previous year’s taxes are filed; you can’t skip any year and must file nil returns first.
3. Finally, if you want to dissolve your corporation, you still have to file a “Final corporate tax return,” which will let CRA know your corporation is closed and not active anymore. Still, you can’t do that without filing taxes for all previous years, so if you did not have any income and activity, you still have to file nil returns for all previous years.

CRA does not know the real reason why you do not file your corporate tax return, but they assume that you have income and are supposed to pay taxes. First, they will try to contact you, and eventually, they may assess your corporation based on the information they have access to based on subsection 152(7) of the Income Tax Act. If they find that it was income and you owe taxes, that will result in charging you interest on taxes and a late-filing penalty starting the day after each return was due.

Situations when you need to file nil returns usually apply to small companies, such as startups, independent IT Contractors, construction companies, and many other industries.

For example, we have clients who have just opened a startup, and while the corporation is active, there is no financial activity because the owner may be looking for investors or clients. In such cases, we file a nil return until we see any income and are required to file a regular T2 Corporation income tax return.

We also have many independent IT Contractors who may temporarily work full-time but want to keep the corporation open because they may return to contract roles. For such clients, it is more convenient to pay a small fee for the T2 Short Return instead of closing corporations and opening a new one when needed.

There may be other reasons for your corporation not to generate an income, but you still have to file your T2 Short return with CRA.

At Taxory, you will find full support for your corporation. We can help you handle regular T2 Tax returns or T2 Short Nil Tax returns. In addition, our company provides bookkeeping, payroll and HST services. Our corporate accountant understands all the complexity and requirements of the corporate tax filing process and will gladly assist you.

We have provided tax filing services for a long time, so we already have a process that simplifies onboarding new clients and makes it straightforward for you as a business owner.

• When you work with Taxory, you can expect high-quality, premium services. We are aware of all significant deadlines and commitments to avoid penalties and late filing fees.
• We handle all communication with CRA and provide all required documents to the government.
• Considering your prior year’s income and expenses, we can provide personalized advice for your company, predict your best tax strategy and plan accordingly.

Below is the step-by-step guide on how our company handles your Nil Corporate tax return.

1. Introduction consultation: When you get onboard as a client of Taxory, we provide a quick overview of our services and what we can do for your company and review your requirements.
2. Eligibility assessment: We need to understand your eligibility for nil return filing. We had many cases where the client believed that he needed to file a nil return, but in reality, it may be an activity for a company, which makes it ineligible, and we have to file a regular tax return. If your company has an income but overall reports losses, we have to file a regular T2 Corporate tax return, but we provide a discount for companies that had losses during the fiscal year.
3. Price confirmation and documents request: once we know that you are eligible for a nil return, we will give you a quote to prepare and file your taxes and ask you to provide all the documents we need to file.
4. Authorization request: we only have access to your CRA account if you authorize our company; you can do the authorization in the CRA My Business account; the process is straightforward, and we will provide instructions.
5. Nil return preparation: Once we have all the documents, we will start working on your return; that may take some time, depending on whether we have any additional questions or the time of the year (we may respond slowly during the tax season, between February and May).
6. Once we complete the job, we send you a confirmation and the invoice. You review, confirm and pay.
7. Filing taxes: we file your taxes to CRA and provide you with the confirmation.

Typically, we need the following documents to file your taxes, so you can start working on preparing them in advance:

• Copy of the article of incorporation
• Business bank statements (checking/savings/credit cards).

If you want to file a T2 Short (Nil return) for your corporation but have your HST, Payroll or any other accounts open, you need to file a Nil return for those accounts as well. Please let your accountant know if you have not closed HST or Payroll accounts because CRA will expect you to file returns for that accounts as well.