Against 99% of the business advice I have ever received, I filed my own T2 business tax return last week. It was mailed to the PEI CRA Tax Center in a white envelope with a regular stamp. Although I had to tape around the envelope to make sure nothing felt out, it was the best business learning I experienced this year!
Why I Filed My Own Business Tax
If you ever start a business, whether it’s a side project or a full time pursuit, everyone will tell you to “get a professional to do your tax”! In fact, you should hire an accountant ASAP to save yourself the headache of “doing it wrong”. This way you can spend time on your core business and “focus on what you are good at”. While this can be true, I think everyone misses an important opportunity to have an in-depth understanding of their business and develop their core business competency.
What I found in my previous business is that everything accounting and tax related quickly became a black box. At the end of the year we would get a bill of how much tax to pay and that it. Only at my insistence did we finally get some monthly rough reporting 7 years into the business to monitor its financial health. Now, this might not be the case if you have a big budget to hire the best. But, a story from fame tech entrepreneur turned VC Mark Suster echoed similar sentiments. After everything went south for his first business, he decided to do everything himself at the beginning of his second business.
I learned so much! I found out how record keeping and bookkeeping affects financial reporting, which then have tax implications. Now I have a much in-depth understanding of my business’ financial statements. And this skill is a core business competency. Something every entrepreneur should have.
The average advice is the safe advice and it is advising against learning.
The Best Opportunity To File Your Own Business Tax
While I highly recommend filing your own business tax at least once, please don’t randomly do it – there are tax consequences when you do it wrong! I find that the best opportunity to try is at the start of a new business when the complexity and the stakes are still low.
In fact, CRA even has the T2SHORT. It’s a simplified filing if you have a nil return (no business activity) or no profit (startup/development stage). I highly recommend finding out if you qualify.
Resources To File Your Own T2
It is impossible to attempt to file your own tax without some background knowledge. These are the resources I used to prepare my own tax filing.
True North Accounting has the best Canadian small business tax and bookkeeping online resource (in my opinion). They have the most comperhensive article on Record Keeping. And even have an article on How to Get Through a CRA Audit.
Once again, True North Accounting have an article has a great overview of the bookkeeping process.
Wave Accounting also have a series of YouTube videos that walks you through the bookkeeping process. I found How to Reconcile particularly helpful.
The tricky part is setting up your chart of accounts in a meaningful way. This is where it would help to get an accountant or seasoned bookkeeper to set it up. If you have friends that studied accounting or work as accountants, time to give them a call. Covid is a great time to connect with people virtually 😉
How to File T2
Lastly, the most important resource of them all. Filling out the paperwork. The wonderful people at Birdi CPA made a detailed step by step video.
- Links to Birdi CPA and True North Accounting are NOT affiliate links. I came across their resource after filtering through countless online resources. But both are great companies that I’m personally consider hiring down the road.
- Do this at your own risk. If you are not sure what you are doing and still want to attempt it, you could hire an accountant to ask questions and check your work along the way. Maybe someone just starting out that has more time.
Happy Filing & Learning!