📄Checklist to IRS/CRA
Proof your Corporate Tax Return

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📃Income Statement Checklist

👉Step #1 – Review Your Tax Filings from Last Year

Including:

1. Your prior year T2

2. Your prior year payroll summary

3. Your prior year GST return.

You must get these things and review them for recurring issues like:

i. Your Book-to-tax adjustments

ii. Your Interest expense limitations

iii.Your Financing fees

iv. Your Stock-based compensation

v. Your Intercompany charges

vi. Any transactions that create notional interest expense like capital leases

vii. Any other large income or expense items

So, look for these issues and be sure to deal with them this year too. If it was a headache last year—it’ll be a migraine this year if you ignore it

👉Step #2 -- “Source Documents”

Make sure you have organized easy access to your:

1. Invoices

2. Payroll.

3. Cancelled cheques

4. Bank transfers

5. Anything that backs-up your income statement.

👉Step 3 – Build Your Income Statement Legal File

Pull together all the legal work that connects to your Income Statement.

I mean:

1. Your Intercompany agreements

2. Your Independent contractor contracts

3. Your Lease Agreements

4. Your Loan agreements- Especially when it is non-bank financing

5. Your Employment agreements

6. Your customer and supplier contracts

7. Your Stock option plans

Here is a link to a more comprehensive list of income statement legal work​

Any legal work that ties to a number on your Income Statement —get it now.

Usually, your company stores these records all over the place.

Take the Mactax approach where you make copies and you keep all the copies in your “Audit File”

👉Step # 4 – Tie It All Together

Reconcile your legal file to:

  • Your Income statement
  • Your payroll records
  • Your GST/customs filings

Step # 3 and Step #4 —is what saves your skin when the CRA comes knocking.

👉Step # 5 –Review Tax Law Changes

Now mind you, tax laws shift all the time.

If you don’t know what changed—you could be filing wrong.

If you don’t know what has changed Call Me!

👉Step # 6 Confirm Grey Area Deductions

You know the ones I mean:

Not the deductions backed by your invoices —

I mean your deductions that exist between the Twilight Zone and reality Your grey-area deductions


Your deductions based on CRA policy, not law.

Your deductions that involve estimates and judgement —

Your deductions that involve a little bit of guesswork because the info was not available by the deadline

Keep a log of these deductions how you dealt with them!

👉Step # 7 Claim Your Credits

Don’t leave your hard-earned money on the table because You may be entitled to:

1. R&D credits

2. Accelerated depreciation

3. Green incentives

4. Industry-specific programs

Make sure you’ve got everything you’re eligible for! Losing credits is tantamount to burning your own cash.

👉Step # 8 Use Professional Help

If you have done steps 1 to 7 – this step should not be expensive

Book a Pre-Filing Review with your Accountant

Ideally, do these 3-4 weeks or longer before the deadline

If you wait until two weeks before—your accountant may be too busy and distracted

📃Balance Sheet Checklist

👉Step #1 Go Grab:

1. Your 2023 T2 Corporate Tax Return

2. Your 2023 Balance sheet

Review them for recurring balance sheet issues like:

1. Your Fixed and intangible asset purchase

2. Your Intercompany balances

3. Your Capital leases

Any other significant Balance Sheet tax items

👉Step #2 - Is what I call “Weaponizing your Balance Sheet’

Begin by making a list of all the “Hot” Items on your balance sheets

Your Hot Items are the large dollar items and the items that cause tax controversy

Here is a partial list of those “HOT” items:

  • Your Intercompany balances
  • Your Accounts receivable
  • Your Capital leases
  • Your Depreciable assets
  • Your Deferred Assets
  • Your non-bank financing vehicles
  • Your Deferred Liabilities
  • All Your categories of Shareholder equity
Here is a link to a more comprehensive list of hot items

Make sure your continuity schedules are up-to-date for all the hot items

If they’re not up-to-date go hire another bookkeeper – you’re asking for trouble otherwise

If you are not preparing continuity schedules for your HOT items –

Start doing them – by you not maintaining continuity schedules, you are likely posting transactions to these accounts incorrectly–

Moreover, make sure your continuity schedules for the following HOT items all agree to your cash-flow statement:

1. Your Fixed asset purchases

2. Your debt financing

3. Your Shareholder’s equity

👉Step 3 – Build Your Legal File

My friend – This is where the rubber hits the road!

Pull together all the legal paperwork that connects to your Balance Sheet

I mean:

1. Your Directors’ resolutions (like dividend declarations)

2. Your Intercompany agreements

3. Your Independent contractor contracts

4. Your Employment agreements

5. Your Purchase and sale agreements

6. Your Customer and supplier contracts

7. Your Loan agreements

8. Your Stock option plans

9. Your Stock subscription agreements

Any legal agreement that affects your balance sheet, get it.

Here is a link to a more comprehensive list of balance sheet legal work

Usually, your company stores these records all over the place

So do it the Mactax way where you make copies and you keep item in your “CRA Audit File”

👉Step #4 – Tie It All Together

Reconcile that legal file to:

  • Your financials
  • Your continuity schedules

I am telling you until you put someone on this task and get this done — the legals and the financials are probably not agreeing!

And this is where audit problems begin!

Step #4 and Step #5—will save you when CRA starts examining this stuff

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