We were at a course this week and 62% of the crowd (of hundreds) don’t file the Sch 11 on the T2.
Does your firm? Why? Why not?
Probably because it very rarely applies in my case – most are treated as regular back and forth and cleared out by year end and in the rare cases that it does apply I probably don’t think of it. I don’t think I have ever filled out a sch 11 on the T2. I had to go look it up to see what it was. It would probably help if there was a diagnostic if the due to shareholder GIFI accounts were debits at year end or the section 85.1 election form was filled out. I should add I only do about 10-15 notice to readers for primarily self employed contractors or investment holding companies per year.
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I was possibly at the same course. We have never completed Sched 11, we were unaware of it. We will in future when it applies.
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I agree there should be a diagnostic for it
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None of the firms I have worked at ever had me fill out a SCH 11. Managers/partners may have added some detail (without my knowledge) in cases where there was a Section 85 applicable. But otherwise it is just a big, red flag to CRA saying, “Come and investigate me!”
If a client has some major issue (like a huge debit balance in a shareholder loan account), it would be typical to insist that the company fix it first (i.e. declare dividends to clear out the shareholder loan balance), or, in extreme cases, tell the client, “No - sorry. If you want to do that, I won’t file your T2 for you.”
I think, in most cases, SCH 11 would not be applicable because you (or your client) would have already dealt with everything that needs to be reported on it (other than low risk, immaterial items).
You could also apply some “professional judgement” to the phrase “in the normal course of business”…
https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/t4012/t2-corporation-income-tax-guide-chapter-2-page-2-t2-return.html#P918_78391
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It’s funny, I will complete a Schedule 11 in cases where there are business transactions between the company and its shareholders, normally where there was a purchase or sale of assets, generally where a promissory note or mortgage was taken back. I complete the schedule in all section 85 rollovers.
I expect the CRA are not terribly strict on the completion of this schedule, considering their lack of enforcement over more important schedules. For instance, I always complete in full the RSI Schedule 100 and 125 such that they essentially mirror the corporation’s financial statements. I still see Schedule 100’s and 125’s from large accounting firms that only complete the bare essentials (Schedule 100 - Fields 2599, 3499, 3620, 3640, and 3849). Total Assets, Total Liabilities, Total Shareholder Equity, Total Liabilities & Equity, and Retained Earnings. Schedule 125’s with only Total Revenue (8299), and Total Expenses (9368) and Net Income/Loss (9999) completed. Considering the Schedule 100 and 125 is all the CRA receives in the way of Financial Statements, I would have thought it would be important to have the RSI Schedules completed accurately and completely, but the CRA don’t seem to bother much about that. I suppose my point is, if they don’t care about the Financial Schedules being completed, why should they care about the Schedule 11… 
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Apparently 38% of practitioners in the Edmonton area do complete it - it’s not a small percentage. Most only when there is a debit balance, but some even when there is a credit balance!
There was some discussion about if the schedule wasn’t filled out and should have been is that enough for CRA to claim the entire return should be open to audit in perpetuity? Given that over 60% never file it I would argue no, but you could see some keener at CRA saying yes.
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Yes, snoplowguy, always in a S85, and that is horrifying about the F/S. That too was discussed at the course and there was much feeling that it put clients at risk because CRA has specifically asked for more detail than that. I’d hate to be the CPA that opened my client to audit outside the normal timeframe because I couldn’t be bothered to spend 20 minutes in the first year of the engagement to get the GIFI coding right.
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So what are the triggers for TaxCycle to suggest that we fill in the S11 form? It is suggesting that I do it for one small corp, but I can’t think of a good reason why.
Thanks.
Schedule 11 generally applies when the company is publicly traded.
Most of us will never use about 90% of our T2 software’s capabilities. Software’s (such as taxprep) are generally designed to accompany large frameworks such as IFRS or ASPE, where specific accounting standards apply (current & temporal rate method translations, equity method accounting, revaluation methods, consolidation, etc). This is why when you go cruising through all the schedules (especially schedule 1), you see things that are beyond the scope of our everyday compilation accounting.
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While I realize this topic is nearly 6 years old… re-reading the replies this morning made me think a bit about what @jglass mentioned in her last post.
While one might assume T2 returns submitted with limited financial information would be more likely to be reviewed by the CRA, it seems the opposite is true. These T2 returns don’t have an entry for Vehicle Expenses on line 9281… so it seems they completely miss out on all the fun associated with the “Post Assessing Vehicle Expense Review” letter.
I have completed at least 18 submissions for T2 vehicle expense reviews since the summer of 2019 (with a 3 year break for what seems to be the Covid intermission). Some clients have been reviewed twice already (in 2019 and 2023). Even though every single review has come back clean without a single change, they are aggravating as hell to complete, and they seem to keep coming. I have received 2 in the last month.
For this reason alone it would be less painful (costly) for the client if there was no entry on line 9281 of their T2-S125 for vehicle expenses.
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I have always completed it thinking it was mandatory.