A builder was paying tax on holdbacks not yet received. We restructured their work-in-progress and holdback recognition, deferring $31,000 of tax to when the cash actually arrived.
A residential builder recognised revenue on progress billings including holdbacks the customer had not yet released, paying tax on cash it did not have. We implemented proper work-in-progress accounting and holdback deferral in line with CRA rules, aligning taxable income with billings actually collectible. The change deferred roughly $31,000 of tax into the year the holdbacks were released.
Construction files carry subcontractor reporting, holdbacks and heavy equipment, and the CRA cross-checks the payment chain automatically.
The CRA requires business records to be kept for six years from the end of the tax year they relate to, in a form that allows the return to be verified.
Why it bites: Where records cannot support the return, the CRA is entitled to assess on its own estimate — and the burden of disproving that estimate falls on the taxpayer.
Planning has to be in place before the transaction. The salary-versus-dividend mix, the timing of a capital purchase and the choice of year-end all change the outcome, but only prospectively.
Why it bites: Almost every planning opportunity we see missed was available and simply not taken in time; very few are recoverable after year-end.
A CCPC files its T2 within six months of year-end, with the balance due two months after (three where the small business deduction is claimed). The 9% federal small business rate applies to the first $500,000 of active business income.
Why it bites: The filing and payment deadlines differ, and interest runs from the payment date. Filing on time while paying late still costs money.
The billed-basis election has been fully phased out, so professionals are taxed on work in progress as it is earned rather than when it is invoiced.
Why it bites: A practice that still values WIP at nil is understating income, and the correction usually arrives as several years assessed at once.
Every engagement above was priced as a fixed fee agreed before the work started, and paid only once the client had reviewed the result. If any of this looks like your situation, the first step is a free 15-minute call — we will tell you plainly whether there is anything worth doing.
Reviewed by Udit Gupta, Founder and Tax Accountant for the 2025 tax year. This case study is based on a real client engagement handled by Tax Filings Canada; the client's name and identifying details have been changed. Outcomes depend on your own facts.
Sources. CRA — Businesses · Income Tax Act (Justice Laws Website)
