Filing Your T2 Corporate Tax Return: Basics for First-Time Corporate Owners — CPA Firm Near You, Montreal

Introduction

For many Quebec entrepreneurs, incorporating the business is a major milestone—but filing the first T2 corporate tax return can feel overwhelming. Unlike personal taxes, corporate filings involve balance sheets, retained earnings, GST/QST integration, payroll accounts, financial statements, minute book documentation, and strict deadlines. A single mistake can trigger penalties, reassessments, or GST/QST mismatches. This guide explains the essentials of filing your first T2 return and how a CPA near you in Montreal can ensure your corporation stays compliant from day one.

Legal and Regulatory Framework

Under the Income Tax Act and the Quebec Taxation Act, every corporation must file a T2 federal return and a CO-17 Quebec return each year—even if the corporation had no income, no activity, or no profit. New corporations must also manage: GST/QST returns; payroll remittances; director and shareholder documentation; capital tax information; and financial statements prepared under ASPE or IFRS. The first fiscal year cannot exceed 53 weeks. CRA and Revenu Québec require corporations to maintain full books and records, including invoices, contracts, and bank statements.

Key Court Decisions

Courts have ruled that failing to file corporate returns—even in inactive years—results in penalties and interest. Judges confirmed that corporations must maintain proper accounting records from the date of incorporation, even if operations start later. Several decisions highlight that shareholder loans, undocumented dividends, or missing resolutions lead to reassessments. Courts emphasize that corporations must file accurately and keep complete minute books to support tax filings.

Why CRA and Revenu Québec Scrutinize First-Time Filers

New corporations often make mistakes such as mixing personal and corporate expenses, using old GST/QST numbers from the sole proprietorship, failing to reconcile bank accounts, or misunderstanding compensation rules. CRA and RQ look for red flags including shareholder loans, missing payroll filings, unfiled GST/QST returns, incorrect year-end dates, and bookkeeping gaps. First-year corporations face higher audit risk due to inexperience.

What You Need Before Filing Your First T2

Financial statements

Prepared under accepted standards (ASPE for small business).

Minute book documentation

Articles, share issuances, director resolutions, and bylaws.

GST/QST account setup

New corporate accounts must be registered (cannot use personal accounts).

Payroll registration

Required if paying salaries or management fees.

Corporate bank account

All corporate transactions must be separate from personal funds.

Bookkeeping records

Invoices, receipts, contracts, bank feeds, and reconciliations.

T2 Filing Basics

Year-end

The first fiscal period ends on any date within 53 weeks of incorporation.

Schedules

Corporations file dozens of schedules; common ones include: Schedule 1 (tax reconciliation), Schedule 50 (ownership), Schedule 100 (balance sheet), Schedule 125 (income statement), and Schedule 141 (corporate information).

CO-17

Quebec’s corporate tax return mirrors the T2 and must be filed separately.

Filing deadlines

Returns are due six months after year-end; taxes owing are due two or three months after year-end depending on size.

GST/QST integration

Amounts in T2 must match GST/QST filings.

Common First-Year Mistakes

Mixing personal and corporate expenses

Creates shareholder benefits and denied deductions.

No bookkeeping

Leads to inaccurate returns and penalties.

Incorrect GST/QST filings

Using personal numbers or missing returns.

Mismanaging shareholder loans

Balances not cleared within deadlines become taxable.

No resolutions or minute book updates

Invalidates dividends or compensation decisions.

Mackisen Strategy

At Mackisen CPA Montreal, we guide first-time corporate owners through the entire process: establishing year-end dates, setting up tax accounts, preparing minute books, doing bookkeeping, reconciling accounts, preparing financial statements, filing T2 and CO-17 returns, and ensuring GST/QST and payroll compliance. We build a clean foundation that prevents future audits and penalties.

Real Client Experience

A Montreal consultant incorporated and assumed no filing was required due to inactivity. CRA issued penalties for unfiled T2 returns. We reconstructed records, filed missing returns, and set up proper systems. Another client used a personal GST number for the corporation, triggering reassessments; we corrected accounts and restored compliance.

Common Questions

Do I need to file a T2 if my corporation made no money?

Yes, all corporations must file annually.

Can I do my corporate taxes myself?

It is risky; corporate filings are far more complex than personal taxes.

What happens if I use the wrong GST/QST number?

CRA/RQ can reassess and deny credits.

When are taxes due?

Generally within two or three months after year-end.

Why Mackisen

With more than 35 years of combined CPA experience, Mackisen CPA Montreal ensures your corporate return is accurate, compliant, and audit-ready. We help you avoid costly mistakes and build a long-term tax strategy for your corporation.