As a business owner, you have probably heard your bookkeeper and accountant talking about your “Fiscal Year” or year-end. This may have lead to your questions of “What is a fiscal year and when is it?”
Your fiscal year is the tax year or financial year of your business. Depending on the type of business you own (see previous posts) your fiscal year may vary.
If you are a sole proprietor, your fiscal year will be January 1st to December 31st. If you are a corporation, you may have a year ending date other than December.
If you have just incorporated your business, you have to decide on a year-end date within the first 12 months of incorporating. It doesn’t have to coincide with the anniversary of your incorporation date, nor does it need to coincide with the end of the calendar year. Your ideal year-end really has more to do with your business cycles, which vary from business to business. In my business, I have chosen November 30 to be my fiscal year end. Therefore, my fiscal year is December 1 to Nov 30 every year. My corporation files a corporate tax return every year for that time period.
Regardless of when your fiscal year end falls, the preparation for that time is relatively the same. Gather the following information and take it to your accountant or tax preparer at the end of your fiscal year so they can prepare your income tax for you:
- all bookkeeping records for the year – if you have been recording your business transactions in a software program, make a back-up of that data file onto a CD or USB that you can give to your tax preparer. If you have been recording those transactions in a manual ledger, take the ledger (and find someone to help you start using a software program). You may want to hire the services of a bookkeeper to help you enter your data into electronic form.
- Bank statements for the year as well as the month following the year end
- Credit card statements for the year
- Loan statements for the year
- all GST returns filed for the year
- a list of Accounts Receivable you had at year end (indicate if there are any receivables you believe to be noncollectable)
- a list of Accounts Payable you had at year end
- invoices/receipts of all large, capital items you purchased over the year (i.e. vehicles, large equipment, office equipment & furniture – generally anything you purchased that was $500 or more for a single item that you will continue to use in your business over a period of time)
- all correspondence you may have received from the Canada Revenue Agency over the year in regards to your business account for GST, payroll or corporate tax.
- All payroll records and remittances submitted to CRA
- Motor vehicle records – your log book with totals of personal vs. business kilometers
- Receipts for charitable donations made throughout the year