My Client opened a corporation on Dec 11, 2019 & want to select Dec 31 as Financial year end. As per CRA rules A fiscal period cannot be longer than 53 weeks (371 days). A new corporation can choose any tax year-end as long as its first tax year is not more than 53 weeks from the date the corporation was incorporated.
My Client informed me (I didnt see any document) that CRA indicated in some correspondence to file his first return by choosing Dec 31, 2020 year end for filing his first tax return.
My Question is, can we select Dec 11, 2019 (Date of Incorporation) to Dec 31, 2020 as his first return which is more than 371 days. If not what would bwe the best option to keep Dec 31 as ending date for all future tax returns.
Thanks
I would have filed the first T2 return for the period December 11, 2019 to December 31, 2019. If there was no activity during that time an inactive T2 return would be appropriate. From then on, December 31 in each successive year.
It would be interesting to see that correspondence the client received from the CRA advising him to select December 31, 2020 for his first year end. I would be surprised if the document received from CRA actually said that.
1 Like
Thanks for your quick response & logical answer.
Hi IMA, your client can choose Dec 31, 2019, Nov 30, 2020 or month end between these two day as fiscal year. I will choose Dec 31, 2019 as corporate fiscal year aligning with personal income tax year end. Some retail business may choose non busy month as fiscal year end to avoid heavy work load for the business owner. It is all about the personal preference and no right or wrong answer.
David
Thanks David for your valuable advice.
This is not true. It can also depend on when you incorporated and when you are filing your taxes. If you incorporated in Dec you should use Nov 30 date usually, but if you have several months of no activity, you may want to file a return at the end of the no activity period and then go a year from then for your year end, and file 2 returns.
Hi Poynterdeb, can you point out which part of my answer to this topic is not true?
According to CRA “Determining your corporation’s tax year”, CRA states the corporation’s tax year is its fiscal period, which cannot be longer than 53 weeks (371 days); Any other new corporation except professional corporation may choose any tax year-end as long as its first tax year is not longer than 53 weeks from the date it was either incorporated or formed as a result of an amalgamation.
Therefore, IMA’s client is free to choose any day between Dec 11, 2019 and Dec 10, 2020 as Corporate fiscal year end. Dec 31, 2019, Nov 30, 2020 and any date during non busy season are personal preference based on client’s need.
David
1 Like
I would chose a year end date to stagger my processing of year ends and tax returns.
2 Likes
You would select a year end for your client that best suits YOUR needs?
Think what is being suggested is talking to client to see when there busy times are. We do not need to be trying to gather info in the few months after the year end which is a busy time for the client or in the case of a seasonal business… when they have chosen to take a holiday and will not be around ( thinking pre covid here).
The bonus on the preparer end is that it spreads the workload out as it is virtually impossible for all your clients non busy times to coincide.
I may seem cruel butI would if it meant giving better and more timely service to the client. There’s something to be said about quality of life and protecting one’s health.
That’s not how I took what was written. To me it was written as “I’d suggest what works best for ME”.
Timely service is great. I’m sure we all strive for that, but the clients needs should come first.
The year end should be based solely on the clients needs. What happens when the client moves on to another CPA? What if the year end doesn’t match up with that accountants slower time?
I’ve obviously hit an easily debatable nerve with all kinds of possibilities for arguments. Basically if moving one or two months one way or the other doesen"t perturbe the client and helps you give better service, where’s the problem? As for a future accountant, that would be his problem for which I have no control or responsibility.
I agree that you have to take your schedule into consideration as well as the clients. Over the years I had inherited quite a number of December 31 Year Ends - I have changed most of them to ensure that I can give the client good service. I do chat with the client about the timing and have always been able to come to an amicable arrangement.
Initially, you didn’t mention discussions with the client, only that YOU would choose a date that worked for YOU. That was the reason for my comment/post. Nowhere did you reference what best worked for the client. As for the “next CPA”, while it’s not your responsibility, the date still may not be what’s best for the client. That was my only concern.
I didn’t intent to drag this out, just to make reference to your post about you choosing the date, as well as when you doubled down on doing it if it meant that you could better serve them. I’d suggest they would be best served by you discussing options based on THEIR business needs.
Not to distract from the ongoing argument but gaymwise I was under the impression that it was fairly difficult to change a corporate yearend. Need very good reason, permissions etc etc. Is it really not too hard?
Thanks
I have never had one denied. I always have a reason, and that’s the reason I use. One time I even used the reason that the year end required preparation and tax filing during the Personal Tax Season. Though usually I quote the clients business cycle. Though I have done a fair number, it has been over the last 22 years.
I would echo snoplowguy’s post word for word.
(With possibly the addition of having a full analysis and discussion with the client corporation’s legal representative/Director as to the specific business and tax needs of the (new) business that this new corporation is engaged in, as it might affect a fiscal-year-end date decision).
4 Likes