Looking to change your fiscal year’s end date to another time of the year? Choosing your year-end date can have strategic tax advantages, as well as operational advantages. And technically, you can change it to any date on the calendar, as long as it meets the Canada Revenue Agency’s (CRA) requirements. To learn more about why you might and how you could change your fiscal year’s end date, check out our short guide on the advantages and the process of doing so.
Benefits
Businesses with high inventory counts may prefer a year-end date to match with their offseason since a quieter time makes it easier to organize taxes and complete year-end tasks. A change may also help you to align your dates with your accounting firm’s slow period, getting you more attention, better rates, and a quicker turnaround when you need it most.
Sole-Proprietorship
When you open a sole-proprietorship, your fiscal year’s end date is automatically set for December 31 of the year you apply. However, you might want to have a date that makes filing taxes easier for you (as mentioned above). To request a change, you need to send a request to the CRA. To do this, you just need to fill out a form called the T1139 – Reconciliation of Business Income for Tax Purposes. The CRA will then review the application and determine if your reasoning is relevant enough for a change to occur. If your reasons are just, it is not likely you will be denied.
Corporation
For a corporation, the fiscal year’s end is established when you submit your first corporate tax return (T2). Technically, you don’t have to file it on December 31st. You could file it any other month, as long as the date you do so is within 53 weeks of your incorporation date. In the event that your corporation is already established, you’ll need to send a letter to the director of your local tax service office requesting a change.
Requirements for Approval
Not all applications will be approved by the CRA. They will only approve those that have sound business reasons and are not applying to attempt to minimize their taxes. An example is if your corporation is changing the fiscal year end date to match that of the date used by the parent corporation – such a reason makes sense for a multitude of reasons for both the umbrella company and for the company applying.
Special Circumstances
In some cases, you may be able to adjust your fiscal year-end date without the written approval of the CRA. For instance, let’s say your corporation is being acquired by another business and that company would like the fiscal year-end dates to match – you could just make a straight change. Other cases where this is acceptable include: when the corporation has wound-up, where a business has to end its tax year at a certain time because it’s moving abroad, or when a business has become exempt from tax.
Changing your fiscal year end is not right for every business – it also has the potential to introduce more tax reporting complexities. So, it’s always wise to talk to an advisor first before making a decision. We recommend getting in contact with us at The Beacon Group of Assante Financial Management Ltd. before you make any decisions regarding your fiscal planning.
