Frequently asked questions
Frequently asked questions
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Do I need to file a tax return if my business didn’t make money?
Do I need to file a tax return if my business didn’t make money?
Yes. Even if your business had a loss or zero income, you still need to file. Losses can often be used to reduce other income.
What’s the difference between self-employed income and employment income?
What’s the difference between self-employed income and employment income?
Self-employed income has no tax deducted at source, so you’re responsible for income tax, CPP, and sometimes GST/HST.
What expenses can I deduct as a small business owner?
What expenses can I deduct as a small business owner?
Common deductions include rent, home office, phone, internet, vehicle expenses, supplies, advertising, insurance, and professional fees.
Can I deduct home office expenses?
Can I deduct home office expenses?
Yes, if you work from home regularly. Expenses are usually prorated based on the size of your workspace and business use.
How do vehicle expenses work for business use?
How do vehicle expenses work for business use?
You can deduct a percentage of fuel, insurance, repairs, and depreciation based on business kilometres vs total kilometres driven.
Do I need to register for GST/HST?
Do I need to register for GST/HST?
You must register if your worldwide taxable revenue exceeds $30,000 in any 12-month period (unless you voluntarily register earlier).
What happens if I forgot to charge GST/HST?
What happens if I forgot to charge GST/HST?
You may still owe it to CRA. Often, pricing or accounting adjustments can fix this—but act early to reduce penalties.
What records do I need to keep?
What records do I need to keep?
Invoices, receipts, bank statements, contracts, mileage logs, and payroll records. CRA generally requires records to be kept for 6 years.
Do I need a separate business bank account?
Do I need a separate business bank account?
Not legally required for sole proprietors, but highly recommended to keep clean records and avoid CRA issues.
What is capital cost allowance (CCA)?
What is capital cost allowance (CCA)?
CCA lets you deduct the cost of large assets (like equipment or vehicles) over time instead of all at once.
Should I incorporate my business?
Should I incorporate my business?
Incorporation may provide tax deferral and liability protection, but suitability depends on income level, growth plans, and personal circumstances.
What additional taxes do self-employed individuals pay?
What additional taxes do self-employed individuals pay?
Self-employed individuals pay both the employee and employer portions of CPP. EI is optional unless enrolled in special benefits.
What if I haven’t filed taxes for prior years?
What if I haven’t filed taxes for prior years?
Late filings are still possible. CRA’s Voluntary Disclosures Program may reduce penalties if you correct errors proactively.
Are meals and entertainment deductible?
Are meals and entertainment deductible?
Yes, but generally only 50% of eligible meal and entertainment expenses can be claimed.
How do I pay taxes if I owe CRA?
How do I pay taxes if I owe CRA?
Payments can be made online, through financial institutions, or via a CRA-approved payment arrangement if necessary.
What’s the difference between a sole proprietor and a corporation?
What’s the difference between a sole proprietor and a corporation?
A sole proprietor reports business income on their personal tax return. A corporation files a separate T2 corporate return.
Do I need to issue T4s or T4As?
Do I need to issue T4s or T4As?
T4s are required for employees. T4As may be required for certain contractors. Misclassification can result in CRA reassessments.
Are accounting and legal fees deductible?
Are accounting and legal fees deductible?
Yes. Professional fees related to earning business income are generally fully deductible.
How often must GST/HST returns be filed?
How often must GST/HST returns be filed?
Filing frequency—annual, quarterly, or monthly—is based on revenue and CRA assignment, with options to request changes.
Why work with a professional tax advisor?
Why work with a professional tax advisor?
Professional tax preparation helps ensure compliance, optimize deductions, reduce audit risk, and support long-term financial planning.
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