Tax season can be a daunting task, but with proper preparation, you can streamline the process and file your taxes with confidence. Whether you're a sole proprietor, freelancer, or independent business owner in Canada, here’s how to get started.
There are three key steps. Click the anchor links below to be brought to each step.
Know your CRA requirements
The Canada Revenue Agency (CRA) has specific requirements for independent businesses:
GST/HST Filing:
If your business earns over $30,000 in the past 4 rolling quarters you must register, collect, and remit GST/HST
Consider using the Quick Method for simplified filing, which lets you remit a fixed percentage of collected GST/HST. This method works well for businesses with annual taxable sales under $400,000, though it may not suit businesses with high input costs.
Learn more about the Quick Method here
T4A and T2125 Forms:
If you’re self-employed, report your income using the T2125 Statement of Business Activities
If you received income from clients, you might also receive a T4A to declare
Gather essential documents
Having all the necessary records ready can save time:
Income records
Invoices or statements from clients
T4A forms issued to you
Expense documentation
Receipts for deductible expenses (e.g., office supplies, advertising, travel)
Proof of home office expenses (calculate the percentage of your home used for business)
Mileage log for vehicle-related business expenses (track dates, destinations, and purpose)
Financial summaries
A profit-and-loss report or detailed record of income and expenses.
Statements for RRSP contributions, which can reduce taxable income (contribute by March 1 for the tax year)
Maximize deductions and credits
Be aware of opportunities to reduce your taxable income. we've prepared a list of common deductions in Canada here.
Capital Cost Allowance (CCA)
Deduct depreciation of business assets like computers, furniture, or vehicles over time
Business Use of Home
Deduct a portion of expenses like rent, utilities, and insurance based on the space used for business
Professional Development and Membership Fees
Claim expenses for courses, certifications, or memberships that directly support your business
By understanding CRA requirements, organizing your documents, and leveraging available deductions, you’ll be well-prepared to tackle tax season. Don’t hesitate to consult a tax professional if you need additional guidance. Start early, stay organized, and file with confidence.
📚 Tip
Simplify next year: If you mixed personal and business finances this year, open a separate business bank account to make tracking income and expenses easier.
The information is to be used for estimation purposes only and is not a substitute for professional tax, financial, or legal advice. We recommend confirming any results by seeking the assistance of a licensed professional in your area.