All businesses, whether a self-employed sole proprietorship or a corporation, follow a 12-month fiscal period. This is done to manage tax fillings and for general bookkeeping purposes. However, when this 12-month period begins, and ends is less apparent to first-time business owners.
If you are in this position, this article will attempt to provide an answer for when your fiscal year – or “business tax year” – ends.
When does the Fiscal Tax Year Usually End?
A “standard” tax year for a business in Canada is most often the 12 months of the calendar year. This means that the business tax year will, by default, start on January 1st, and end on December 31st.
However, there are exceptions. The Canadian government, for instance, has a tax year that begins on April 1st and concludes on March 31st the following year. Individual businesses can apply for a non-calendar fiscal tax year like this, subject to proper justification and approval.
Alternative Fiscal Tax Years
A business that is a sole proprietorship will most often need to use the calendar year fiscal structure. If you have registered as a self-employed business, your tax year likely ends on the 31st of December every year. The only exception to this will be businesses that fill out Form T1139 to justify a change to a different fiscal year period, subject to acceptance by the government.
A corporation has a little more freedom when it comes to changing the dates for their fiscal period, especially if it is in their first year of operation. To change the fiscal year period, representatives of a corporation must write a letter to the Canadian Tax Service Office to provide justification for acceptance of an alternative tax year period.
In summary, unless you have applied and have been approved for an alternative 12-month fiscal period, your business tax year will end on the 31st of December and begin again the next day. If you have any concerns with your taxes, Naicker & Associates are experts in providing year-end tax preparation.
If you have any questions about this article or business taxes, in general, or you want to make an appointment with an accounting professional at Naicker & Associates, please contact us at (604) 469-9369. We are based in Port Moody, BC.