Do I have to report the refund on loss carry back on last year T2 return to 2018? If so, how do I report it? Thank you.

Question

Do I have to report the refund on loss carry back on last year T2 return to 2018? If so, how do I report it? Thank you.

The corporation got a tax refund from loss carry back for tax year 2017. How should this refund be handled in the 2018 T2 return? Should it be income for 2018 or the retain earning has to be adjusted, or just put that in the bank? Thank you.

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Thank you for information. Based on your answer the refund had to be calculated and entered on 2017 return. If this is correct, could you please provide information how to calculate expected refund and where to enter it on T2: do i enter it on S125 as a negative amount in 9990 and in Assets as tax receivable ? or just one place ? Thank you in advance !

tchomebills

If you didn't calculate refund prior to filing 2017 T2 return, don't worry. Just enter everything on 2018 financial statements and tax return. No tax implications because it is neither taxable income nor a taxable deduction. In future, if you do want to calculate refund, and assuming refund is based on just one year carryback income - you multiply the tax rate for the year the loss is being carried back to against the amount of the loss and that will be your refund. Within a few dollars anyway. There may be interest earned.

s_gordon

Thank you , that great, but where do you enter the refund? on S125 in 9990 or in assets as taxes receivable or both?

tchomebills

You'll have to enter both places in order to balance the GIFI S100 and S125

s_gordon

Thank you !

tchomebills

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Answer 1

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Your journal entry would be to Debit Corporate Tax Receivable (Asset account) and credit to Previous Corporate Tax Expense (Expense Account). Then when refund is received, your entry will be to Debit Bank and Credit Corporate Tax Receivable. Not taxable income - it is a refund of a prior year tax expense.

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s_gordon

Answer 2

Do I have to report the refund on loss carry back on last year T2 return to 2018? If so, how do I report it? Thank you.

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