Canadian Bookkeeping Resources
Basic Tax Articles for Bookkeepers in Canada

Even if you don't do "tax", you need to understand the basics.

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by L. Kenway BComm CPB Retired

Published October 2009 | Revised June 10, 2024

YOU don't have time to spend looking for basic Canadian bookkeeping and tax information that may affect your business so I go hunting to find it for you to ensure you have it at your finger tips ... when you need it.

Learning the various kinds of Canadian taxes small businesses face is very important, I might even be comfortable saying crucial, even if you aren't the one handling tax filings directly.

As a bookkeeper working remotely or a small business owner in Canada, you're likely aware that effective tax planning is not just an annual task—it's an ongoing daily process. Understanding the basics of tax compliance is essential to maintaining a CRA-compliant set of books so you, as a business owner, can think strategically to manage your business's financial affairs throughout the year.

What are some of the kinds of tax that directly impact your business operations making it imperative you have some tax knowledge:

  1. Sales Tax: Familiarize yourself with the Goods and Services Tax (GST), Harmonized Sales Tax (HST), and Provincial Sales Tax (PST) that apply to the products and services your business offers. Knowing how to accurately calculate, collect, and remit these taxes not only keeps you compliant with CRA but also prevents costly penalties.

    More >> How To File A Sales Tax Return

  2. Payroll Tax: If your business has employees, understanding your obligations around payroll taxes is a must. Employment taxes include deductions for the Canada Pension Plan (CPP), Employment Insurance (EI), and income tax from employees' paycheques. Timely and accurate filing of the PD7A Statement of Account for Current Source Deductions are essential to avoid fines and ensure that employee contributions are correctly handled.

    More >> PD7A Payroll Tax Filing Deadlines

  3. Income Tax Basics for Sole Proprietors: As a sole proprietor, your business income is taxed at your personal income rate. Keeping diligent records and understanding which expenses can be deducted can significantly reduce your taxable income. Regularly keeping up with  changes in tax laws that affect you and your business can help in maximizing these benefits. This website can help you with that.

    More >> Learn About Self-Employed Tax Deductions You Are Entitled To

  4. Excise Taxes and Duties: For goods imported into Canada, being aware of the Canada Border Services Agency (CBSA) duties and other applicable excise taxes is important. Proper documentation and compliance with these regulations ensure smooth operations and avoid disruptions due to seized shipments or audits.

    More >> How To Record CBSA Duties and CBSA GST

  5. Quarterly Tax Installments: There are two types of tax installments that need to be on your radar so you can determine if they apply to you and your business.

    Income Tax Instalments 
    Sole proprietors, freelancers, and self-employed individuals need to pay their income tax by instalments if their net income tax owing is more than $3,000 in the current year and either of the two previous years. CRA usually sends you a notice letting you know when this requirement kicks in. Don't ignore it. If applicable, the quarterly instalment payments are due on the 15th of March, June, September, and December.

    It's important to note that in Quebec, the threshold is $1,800 instead of $3,000.

    More >> Learn about all your tax filing obligations

    Annual GST Filers
    If you are an annual sales tax filer and your net sales tax (the amount of GST/HST you collected minus the amount you're eligible to claim as input tax credits) is more than $3,000, you will need to make quarterly instalment payments. These payments are also due on the same dates as the income tax instalments which is the 15th of March, June, September, and December.

    Each instalment payment is supposed to cover a quarter of the total tax owed from the previous year, which helps spread out the tax burden over the year, making it easier to manage financially.

    More >> Improve Your Cash Flow By Switching Your GST HST Reporting Period


By making a conscious decision to spend some time learning these basic tax rules, you will be giving yourself the gift that enables you to perform the necessary business paperwork tasks needed to legally minimize your net taxable income and keep your business financially healthy.

Remember, being proactive about tax planning and your compliance obligations aren't just about following laws—they are also the strategic elements of managing your business that can give you a competitive edge which helps you keep the doors open.

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Help getting all your ducks in a row

An index or table of contents ... for each series of basic Canadian bookkeeping articles focus on different aspects of tax compliance are outlined.

Clicking on any image below takes you to the Executive Summaries for each series.

Income tax return reporting for the sole proprietorTax reporting for the sole proprietor
Corporate tax issues for the owner managed businessIssues for the owner managed business
Improving your understanding and options with regards to tax auditsImproving your understanding of tax audits
Basic Canadian bookkeeping tax compliance information you really, really, really need to knowBasic Canadian bookkeeping stuff you really need to know
Payroll tax notes many small business owners need to know aboutStuff small business owners need to know about payroll tax
Sales Tax Rates In CanadaCharge the right sales tax rate!

Let's make this clear for all my visitors before I get started ... I am not a tax expert like a tax accountant or lawyer but I do have some formal tax education classes under my belt.

While doing bookkeeping, I learned a bit about small business taxes along the way. I did prepare tax returns for sole proprietors in Canada before I retired.

Welcome to Bookkeeping Essentials - The Tax Articles Index!

Jug of Lemon WaterRemember to sip on water throughout the day to keep your brain sharp.

This article is going to an executive summary index on all the Canadian related articles on tax compliance ... so fill up your water jug and let's get begin.

For your convenience and to help you deepen your tax knowledge, this section is all about basic Canadian bookkeeping and tax information relevant to doing your books.

That means you won’t find a lot about personal taxes here unless it relates to your business somehow.

More >> American small business tax information for my U.S. visitors

I do try to provide references to U.S. tax pages near the top of many pages.

Good to Know

Tax Filing Due Dates

Payroll

  • Quarterly PD7A - 15th following end of calendar quarter
  • T4 slips - Last day of February

GST HST

  • Annual Returns - June 15
  • Quarterly Returns - end of month following end of fiscal quarter

Income Tax

  • T1 Sole Proprietor - June 15 to file; balance due April 30
  • Installments - quarterly on 15th
  • T2 active - 6 months after yearend; balance due 3 months after yearend
  • T2 passive or PSB - 6 months after yearend; balance due 2 months after yearend

Independent Contractors

  • T4A - Last day of February
  • T5018 - Six Months After The End Of The Reporting Period You Have Chosen


More >> Looking for tax rates?

Executive Summaries For Each Series ...

Basic Tax Knowledge For Small Business Recordkeeping

Tax filing deadlines and due dates ... to Canadian sales taxes guide ... as well as tax planning opportunities you work at 365 days a year.

Series 1 - Six Basic Canadian Bookkeeping Articles on ...

Tax Primer for Sole Proprietors

Self-employed tax deductionsClick to go to the article

Home Business Taxes
Self Employment Tax Deductions

Canadian bookkeeping done properly assists in tax preparation. This article looks at basic tax savings and tax benefits for the self-employed work from home business owner.

Be ahead of the game this year, and find out what is legally deductible for income tax purposes. Then implement bookkeeping procedures so you capture what you need throughout the year.

Here are the basics discussed from a Canadian bookkeeping perspective:

  • General rules of deductibility
  • Reasonable expectation of profit
  • Lines 8521 through 9270 on Form T2125

A question was asked in The Bookkeeping Forum on capital cost allowance. It is an optional tax deduction that you should be aware of if you are doing Canadian bookkeeping.


Common audit issuesClick to go to the article

Home Business Taxes
Be Aware of What is Never Deductible & What has Limitations

A tax planning opportunity for the self-employed home based business owner so you are not caught with your pants down (so to speak) at tax time. Be aware of what is NOT tax deductible on Form T2125.

Also learn about these basics discussed from a Canadian bookkeeping perspective:


Oops! Tax Mistake!Click to go to the article

Home Business Taxes
These Are The Mistakes Auditors Look For

Another tax planning opportunity for the self-employed home based business owner so expenses are not disallowed during a tax audit. Read about 8 common tax mistakes self-employed workers make. Auditors look for theses mistakes during an audit.


Working in home officeClick to go to the article

Home Business Taxes
Claiming Your Home Office Expense Tax Deductions

How sole proprietors claim home office expenses as a tax deduction when preparing their Canadian tax return. This is part of a series on Home Business Taxes - A Tax Planning Opportunity.

There is a section on "things to consider" when doing your Canadian bookkeeping so you can claim your home office expenses properly.

You can find more information on home office expense in The Bookkeeping Forum.

  1. Will claiming this tax deduction create a capital gain when you sell your home? was discussed in Home Office Expense Deduction where change in use of principle residence was introduced.
  2. What portion of my utility and insurance bills can I deduct? is discussed in Home Office Deductions.
  3. Why won't the tax program let me claim home office expenses? was discussed in Home Office Expenses Cannot Create a Loss.


Self-employed car expensesClick to go to the article

Home Business Taxes
Business Use of Your Personal Vehicle

Canadian bookkeeping and tax for business use of your personal vehicle is different than the U.S. ... so don't confuse U.S. rules with Canadian rules.

This article explains how to claim your business vehicle expenses on your personal income tax return using form T2125.

The rules are complicated and inflexible. Advance tax planning is necessary to take advantage of these potential tax benefits.


Manual Bookkeeping SystemsClick to go to the article

Home Business Taxes
Question and Answers Forum

Canadian bookkeeping basics is closely tied to home business taxes. Sometimes you need help ... I've put together some frequently asked questions and answers for the home based business owner who does their own bookkeeping in Canada ...

Here's a sampling of the basic Canadian bookkeeping questions you'll find that relate to tax:

Automobile Expense Related Questions

  • Does the $.52/km employee mileage allowance include GST? Can we claim GST tax credits on this expense when paid to us personally?
  • Can I claim auto expenses if I do not have business coverage?

GST/HST Questions

  • Do you have to charge GST/HST on internet sales in Canada?
  • Do you charge GST/HST on the sale of a business asset such as office equipment?
  • Don't I pay more income tax if I voluntarily register for GST/HST?

Home Office Questions

  • What are the rules for business use of my home phone in Canada?

Sole Proprietor Questions

  • How do you input/report owner's draws on your personal tax return?

Business Tax Deduction Questions

  • Are bookkeeping service fees tax deductible in Canada?
  • Are life insurance payments a tax deduction in Canada?
  • Are tax penalties a deductible expense in Canada?


Series 2 - Three Basic Canadian Bookkeeping Articles on ...

Owner Managed Corporations

Click to go to the article

Canadian Controlled Private Corporations
CCPC Part 1

Use the information in The Bookkeeper's Notes on CCPC as talking points with your accountant ... so you have a better feel for what kind of information you are seeking. Some of the talking points are:

Another article around this topic that should be on your radar:


Company Owned Vehicles In CanadaBeware of Conferred Shareholder Benefits

Loan To Shareholders
CCPC Part 2

This chat reviews some of the very specific rules that apply when a corporation loans money to its shareholders and owner-manager remunerations.


Organizing Yearend RecordsClick to go to the article

Corporate Minute Book
CCPC Part 3

You will find information on maintaining your corporate minute book as well as your annual registration requirements.

  • What is it
  • What Should It Contain
  • Do You Need A Lawyer
  • CCPC Annual Registration Requirements
  • The Consequences of Not Maintaining Your Minute Book


Series 3 - Four Basic Canadian Bookkeeping Articles on ...

Tax Compliance Audits

Understanding Tax Audits in CanadaClick to go to the article

Canadian Bookkeeper's Reference Page
Understanding Tax Audits in Canada

Reduce your fear of tax audits by understanding the process.

It is your responsibility to have knowledge of and apply the tax laws correctly, whether your return was prepared by a professional or not.

In Canada, we have a self assessing tax system. If you are caught evading tax, it is a criminal offense. Under tax law (unlike criminal law), you are guilty until proven innocent.

Your best defense is due diligence through accurate record keeping.

Included in this article is a sidebar chat on Amending Your Tax Return to Avoid Penalties if you received some additional tax slips after you filed your return.


Taxpayers Rights 2024

More Tax Audit Articles

Three additional articles that may be of interest to are:

(1) What to do when you receive a notice saying you are going to be audited.

(2) Your rights as a taxpayer in Canada. Under taxpayer relief, you will find information on forms:

  • RC4288 Request for Taxpayer Relief
  • T1213 Request to Reduce Tax Deductions at Source
  • ISP3520 Request for Income Tax Deductions.

(3) If you haven't filed past tax returns ... or you filed an inaccurate return, learn about CRA's Voluntary Disclosure Program which grants taxpayer relief to those who satisfy the conditions.

There is information for bookkeepers on how to protect themselves against third party civil penalties ... need to know when doing Canadian bookkeeping.


I thought you might find this information interesting and informative. Check out these links!

  • How to run into trouble with Revenue Canada?
  • The five types of audit Revenue Canada performs each year.
  • Watch out for those lifestyle audits! The cash myth and your lifestyle.
  • There are only five ways to pay no tax.
  • Get information on the CRA website by typing "what's new" in their search box.




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