Catch-up
Shareholder loans and years of unfiled T2s. What does section 15(2) do?
2026-10-10 · 7 min read · Tax Everyday, Vaughan
Section 15(2) of the Income Tax Act includes a shareholder loan in the shareholder’s personal income when the loan is not repaid within one year after the end of the corporation’s tax year in which the loan was made. The exception people rely on has conditions. Some loans to shareholder-employees for a dwelling, and certain other arrangements, are treated differently. “I planned to pay it back someday” is not the exception. A series of loans and repayments that are really a way to keep the money out can also be challenged.
Unfiled T2s make this worse because the loan balance is never put on a statement anyone signs. Meanwhile the shareholder has spent the money and filed personal returns, or filed nothing, with no inclusion. When the T2s are finally prepared, four years of “shareholder loan” can become four personal tax problems, with the one-year repayment window already closed.
What to reconstruct before the T2 is signed
Every dollar that moved between the shareholder and the company needs a name: wage, dividend, expense reimbursement, loan, or repayment.
- Loans made and the date. The one-year clock is counted from the company’s year-end, not from the day you noticed.
- Repayments that actually restored the money, not a paper journal entry with no cash.
- Dividends that were declared. A dividend needs the proper corporate steps and a T5. It is not a quieter kind of wage.
- Personal expenses on the company card. They are usually a loan or a benefit, not a business deduction.
- The shareholder’s T1 for that year. An inclusion under 15(2) belongs there, and it may mean amending or filing a late personal return.
Fix the classification before you file a stack of nil T2s
Tax Everyday will not file a corporate catch-up that pretends the shareholder account is zero when the bank account says otherwise. A ready corporate year is $2,000 plus HST. A year dominated by an unclassified shareholder account is quoted, and the personal T1 is a separate return: $90 plus HST if it is otherwise straightforward, or more if the inclusion and other income make it a bigger file.
Bring the bank statements and be ready to say what the withdrawals were for. That conversation is the work.
Short answers
Can I repay the old loans now and avoid the inclusion?+
Repayment has to happen inside the statutory window to prevent the inclusion. Repaying years later does not rewind section 15(2). A later repayment can create a deduction in the year of repayment in some cases. Do not move money until the years are mapped.
Is a dividend better than a loan?+
Sometimes, and only when it is properly declared and the company has the retained earnings to support the story. A dividend declared on paper to disguise a loan is not a plan. We will show both tax results before anything is filed.
Want this applied to your file?
These notes are general. A return is prepared only after we see your slips.