Starting a business is exciting. Doing your taxes? Not so much. But ignoring the tax side of things can cost you thousands — or worse, trigger a CRA audit.
Here are the five most common tax mistakes we see from new Canadian businesses, and how to avoid each one.
1. Not registering for GST/HST when required
Once your business revenue exceeds $30,000 in a 12-month period, you’re legally required to register for and collect GST/HST. Many new founders don’t realize they’ve crossed this threshold until it’s too late.
How to avoid it: Track your revenue monthly. Register proactively when you’re approaching the $30K mark. Some founders register from day one to claim input tax credits on business expenses.
2. Mixing personal and business finances
Using your personal bank account for business transactions is a recipe for headaches. It makes bookkeeping a nightmare, creates audit risk, and can undermine the liability protection of your corporation.
How to avoid it: Open a dedicated business bank account on day one. Use it exclusively for business income and expenses. Period.
3. Missing filing deadlines
Different business structures have different deadlines:
| Filing | Deadline |
|---|---|
| T1 (sole props) | June 15 (tax owing by April 30) |
| T2 (corporations) | 6 months after fiscal year-end |
| GST/HST returns | Quarterly, annually, or monthly |
| Payroll remittances | 15th of the following month |
Missing any of these results in automatic penalties and interest.
4. Not claiming eligible deductions
Many new business owners leave money on the table by not claiming legitimate business expenses:
- Home office — If you work from home, you can deduct a proportional share of rent, utilities, and internet
- Vehicle expenses — Keep a mileage log for business driving
- Professional development — Courses, books, and conferences related to your business
- Software and subscriptions — Tools you use to run your business
- Professional fees — Accounting, legal, and incorporation costs
Small businesses that work with a professional accountant claim an average of 20% more in deductions than those who file on their own.
5. Ignoring corporate year-end planning
If you’re incorporated, your fiscal year-end is a powerful planning tool. Before your year-end:
- Defer income or accelerate expenses to manage taxable income
- Pay out bonuses to yourself or employees to reduce corporate profit
- Purchase assets to claim capital cost allowance
- Contribute to an RRSP (if paying yourself a salary)
Doing nothing means you’re probably paying more tax than necessary.
The bottom line
Tax mistakes are expensive, but they’re also preventable. The key is to:
- Stay organized from day one
- Know your deadlines
- Work with professionals who understand small business
- Use tools that keep you on track
Preferway includes compliance reminders and connects you with professionals who can help. Start your business right.