Entrepreneurship & Small Business

Question: Paid penalty to CRA, where do I report the amount in T2?

  • Last Updated:
  • May 1st, 2018 3:12 pm
[OP]
Newbie
Jan 20, 2007
75 posts
12 upvotes
Mississauga

Question: Paid penalty to CRA, where do I report the amount in T2?

I know the penalty is not tax deductible, but it's still business expense, right? Or the employee (me) need to pay it personally because I was not doing things right? Where should I record it in accounting purpose?
7 replies
Deal Addict
Feb 5, 2009
2696 posts
806 upvotes
Newmarket
In your books create an account called Non Deductible Interest Expense, on your T2 add it back on schedule 1.
[OP]
Newbie
Jan 20, 2007
75 posts
12 upvotes
Mississauga
Homerhomer wrote:
Apr 28th, 2018 3:32 pm
In your books create an account called Non Deductible Interest Expense, on your T2 add it back on schedule 1.
Thank you Homerhomer, what do you mean add it back to schedule 1? what GIFI number should I use?
[OP]
Newbie
Jan 20, 2007
75 posts
12 upvotes
Mississauga
Homerhomer wrote:
Apr 28th, 2018 7:07 pm
here is a link to what schedule one looks like, item 103 is for your add back of penalties.
https://www.canada.ca/content/dam/cra-a ... h1-17e.pdf
I don't believe there is a gifi code for non deductilbe interest.
Thank you Homerhomer, I didn't notice 103 before. Further question, like meal expense, I put it in to business expense with GIFI, so it will deduct my income, then half of the amount will add back to 121, I think Penalty should be the same with full amount added back to 103, then it will balance. If not reported in business expense, it will look like extra income?
Deal Addict
Feb 5, 2009
2696 posts
806 upvotes
Newmarket
Accounting income and taxable income usually are not the same because of different add backs, credits and so on, to have both done properly you should follow what I said.
[OP]
Newbie
Jan 20, 2007
75 posts
12 upvotes
Mississauga
Sorry I still don't understand. If I have zero penalty, the form is balanced, but if I have $50 penalty, and put in 103, I will pay tax on this $50, sames not right?
[OP]
Newbie
Jan 20, 2007
75 posts
12 upvotes
Mississauga
Got the answer by searching the web, "You could include them at GIFI code 8713 Other expenses on the S125 but remember that they must be deducted at Line 103 on Schedule 1.  They are included for accounting purposes but not for tax purposes."

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