T2, HST etc. - Very basic questions

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max88
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T2, HST etc. - Very basic questions

Post by max88 » 18 Feb 2017 15:28

Trying to prepare T2 for the first time, working at field code 8000. Is this the the gross sales including HST, or excluding? Say I charged clients fees of $10,000 + HST $1,300, totaling $11,300, what number to put in field 8000?
Last edited by max88 on 18 Feb 2017 21:57, edited 1 time in total.
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Jo Anne
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Re: T2, HST etc. - Very dumb questions

Post by Jo Anne » 18 Feb 2017 15:56

Gross sales does not include HST.

HST is a flow-through dollar amount - you collect it from your customer, then the next month you pay it to the Government. It is neither a revenue nor an expense.

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Re: T2, HST etc. - Very dumb questions

Post by adrian2 » 18 Feb 2017 16:21

Jo Anne wrote:HST is a flow-through dollar amount - you collect it from your customer, then the next month you pay it to the Government. It is neither a revenue nor an expense.
Except when using the quick method of accounting. The portion you're allowed to keep is revenue.
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Re: T2, HST etc. - Very dumb questions

Post by max88 » 18 Feb 2017 17:10

Thank you both.
I use the regular method for HST return, thus $10,000 it is.
Next for operating expenses, the business paid $1,000 + $130 HST totaling $1,130 for supplies (9130). By the same token, do I put $1,000 for T2? $130 is already included as Input Tax Credits (ITC's) in HST return. At the end the net income is $9,000 which makes sense to me.
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Re: T2, HST etc. - Very dumb questions

Post by adrian2 » 18 Feb 2017 19:38

max88 wrote:Next for operating expenses, the business paid $1,000 + $130 HST totaling $1,130 for supplies (9130). By the same token, do I put $1,000 for T2? $130 is already included as Input Tax Credits (ITC's) in HST return. At the end the net income is $9,000 which makes sense to me.
$1,000 for supplies.
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Re: T2, HST etc. - Very basic questions

Post by max88 » 19 Feb 2017 11:03

Subject was changed from "dumb" to "basic"

$9,000 = Line 9970 Net income before taxes and extraordinary items, page 3, Schedule 125-#1
$9,000 = Line 300 Taxable income, page 3, T2. This was calculated as Net income, page 2, schedule 1
$1,350 = Line 770 Total tax payable, page 8, T2. This is manually entered on Line 9990 Current income taxes, page 3, Schedule 125-#1
$7,650 = Line 9999 Net income after taxes and extraordinary items, page 3, Schedule 125-#1
$7,650 = Line 3620 Total shareholder equity, page 2, Schedule 100
$7,650 = Line 3849 Retained earnings/deficit - end, page 2 Schedule 100
All nice and dandy.

The business purchased a computer for $2,000 (to keep simplicity). It is not an operating expenses, cannot be used directly to reduce net income. It's an asset, falls under CCA class 50 (http://www.cra-arc.gc.ca/tx/bsnss/tpcs/ ... ml#class50). The first year CCA is half of purchase price times CCA rate 55% = 0.5 x $2,000 x 55% = $550 to be calculated in Schedule 8, to be included in Schedule 1 line 403, which reduces net income for income tax purposes on line 300 on page 3 of the T2 return. :? (@Q%#$#$@%#WTF@%#$^%@^@#%)

The new numbers:
$9,000 (no change) = Line 9970 Net income before taxes and extraordinary items, page 3, Schedule 125-#1
$8,450 = Line 300 Taxable income, page 3, T2. This was calculated as Net income, page 2, schedule 1
$1,267 = Line 770 Total tax payable, page 8, T2. This is manually entered on Line 9990 Current income taxes, page 3, Schedule 125-#1
$7,733 = Line 9999 Net income after taxes and extraordinary items, page 3, Schedule 125-#1
$7,733 = Line 3620 Total shareholder equity, page 2, Schedule 100
$7,733 = Line 3849 Retained earnings/deficit - end, page 2 Schedule 100

$7,000 = cash before taxes ($10,000 revenue - $1,000 supplies - $2,000 computer)
$5,733 = cash after taxes ($7,000 - $1,267 taxes)
-$5,733 = dividend out
Leaving the computer as only shareholder equity and non-cash retained earnings. This is all fine.

How to reconcile the computer's worth after CCA, with shareholder equity/retained earnings?
Or does $2,000 stay, until computer's written off?
$2,000 = computer purchase price = shareholder equity/retained earnings.
$1,450 = computer's worth after CCA

EDIT: corrected number error
Last edited by max88 on 19 Feb 2017 17:40, edited 1 time in total.
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Re: T2, HST etc. - Very basic questions

Post by adrian2 » 19 Feb 2017 12:22

max88 wrote:How to reconcile the computer's worth after CCA, with shareholder equity/retained earnings?
Or does $2,000 stay, until computer's written off?
$2,000 = computer purchase price = shareholder equity/retained earnings.
$1,450 = computer's worth after CCA
Schedule 100, Assets on balance sheet:
[line 1740] Machinery, equipment, furniture and fixtures $2,000
[line 1741] Accumulated amortization of machinery, equipment, furniture and fixtures -$550
[line 2599] Total assets $1,450
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Re: T2, HST etc. - Very basic questions

Post by max88 » 19 Feb 2017 17:40

adrian2 wrote: Schedule 100, Assets on balance sheet:
[line 1740] Machinery, equipment, furniture and fixtures $2,000
[line 1741] Accumulated amortization of machinery, equipment, furniture and fixtures -$550
[line 2599] Total assets $1,450
This is it. Thanks a lot.
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Re: T2, HST etc. - Very basic questions

Post by max88 » 07 Mar 2017 20:04

T2 was filed on 2017-02-20
It was (re)assessed on 2017-02-24
Payment is due 2017-03-16 (assessment letter says "To avoid additional interest charges, please pay by March 16, 2017.")
Today 2017-03-07, I checked CRA business account, to my surprise, there is an Accrued arrears interest of $x.xx.

What should be payment due date? Assuming reporting period: 2016-01-01 to 2016-12-31

I paid couple days ago, should arrive by 2016-03-10. Will see what happens.
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Re: T2, HST etc. - Very basic questions

Post by max88 » 08 Mar 2017 22:17

Payment posted yesterday. "Accrued arrears interest" is no longer shown. Phew!
I am cautiously optimistic. When it goes up, I claim I have been optimistic; when it goes down, I claim I have been cautious.

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Re: T2, HST etc. - Very basic questions

Post by max88 » 17 Dec 2017 15:41

I am wondering if some experience FWF'ers would help answer some questions. Thank you.

My corp no longer runs, except paying bank fee every month ($50 total) and dividend out twice (say $1million cash total), in 2017. No income. Bank account closed. The only asset is a computer purchased at $2,000 (was worth $1,450 after CCA at the end of 2016).

Code: Select all

S100 Balance Sheet (2017)
$0.00 (Field Code 1000 - Cash and deposits)
$1,450.00  Computer (Field Code 1740 - Machinery, equipment, furniture and fixtures)
$797.50 CCA of computer (Field Code 1741 - Accumulated amortization of machinery, equipment, furniture and fixtures)
...
...
$652.50  Computer (Field Code 2599 - Total assets)
Since there is no income, are $50 bank fees and $797.50 CCA dead loss? Or is there any provision to get refund of income tax paid in 2016?

I want to keep the computer for personal use after dissolving the corp. Is this tax free, or do I include its fair value $652.50 as income (taxable benefit), or as dividend in addition to $1million cash dividend?
I am cautiously optimistic. When it goes up, I claim I have been optimistic; when it goes down, I claim I have been cautious.

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