What tax filings should I review before buying?

Tax filings are worth reviewing for two separate reasons. They corroborate the financial story the seller is telling you, and in an asset or share purchase they can point to liabilities that follow the business rather than staying with the seller.

Corporate income tax returns and notices of assessment

The T2 return and its notice of assessment show what income was actually declared to the Canada Revenue Agency, which is the figure with the least room for a seller to be optimistic. Request these alongside the financial statements for the same years and reconcile any difference. Ask specifically whether any year is currently under audit or has an open reassessment, since that can affect timing as much as numbers.

HST or GST returns

HST or GST filings show revenue reported for sales tax purposes on a cycle more frequent than the annual tax return, which makes them useful for checking consistency month to month rather than just year to year. A pattern that matches the sales figures you have been shown supports them; a pattern that does not is worth raising before you rely on either number.

Payroll remittances and source deductions

• Confirm remittances have been made on schedule, since arrears here can attach to a successor business
• Check that source deductions match the payroll records the seller has shown you
• Ask whether any Records of Employment or severance obligations are outstanding
• Confirm WSIB premiums, where applicable, have been kept current

What a clean or messy filing history tells you

A business with a consistent, on-time tax filing history is easier to trust on its numbers generally. A history with gaps, late filings or open disputes does not necessarily mean the underlying business is unsound, but it means the numbers deserve more scrutiny, not less, and it may affect how the deal is structured.