Budget-Friendly Accounting Services for Sole Proprietors

A balance owing means the tax withheld or paid by instalments during the year came to less than the tax your return calculates. Common causes are two employers each withholding as though theirs was your only job, self-employment or gig income with nothing withheld, investment or rental income, an RRSP or RRIF withdrawal where only the base amount was held back, pension and OAS payments taken without deductions, or a benefit you have to repay.

A write-off is simply a deductible expense. You subtract it from the income it helped earn, so the saving equals the expense multiplied by your marginal tax rate, not the full amount spent. To qualify, the cost must be incurred to earn business or employment income, be reasonable in amount, and be backed by a receipt. Purely personal costs never qualify, and mixed-use items such as a vehicle or a home office are split by business-use proportion.

Every current and past federal form, plus the full income tax and benefit package for your province, sits on the CRA pages at canada.ca, free to download and print. Signed-in users can also see the slips filed under their SIN, such as T4 and T5 information, inside CRA My Account. The CRA will mail a printed package on request by phone. Certified tax software fills the forms for you, so most filers never open a blank one.

A business lets you deduct the real costs of earning income, such as supplies, subcontractors, software and a reasonable share of home office, phone and vehicle costs, so you are taxed on profit rather than revenue, and a loss can often offset other income. Incorporating adds the federal small business rate of 9% on the first $500,000 of active business income for 2026, plus control over when you take money out. Personal spending dressed up as a business expense is not deductible.

Payroll tax withheld from a Canadian salary depends on your gross pay, your province of employment and the credits you claim on the federal and provincial TD1 forms. Your employer also withholds CPP or QPP contributions and EI premiums, which sit outside income tax. Because the brackets are graduated, a raise increases the withholding rate only on the extra income. Run your own figures through the CRA payroll deductions online calculator for an exact amount.

Canada RIT stands for refund of income tax, so it is your assessed T1 refund or an adjustment paid after a reassessment. Canada FPT covers federal-provincial-territorial credits, most often the GST/HST credit and related provincial amounts, so it is not your income tax refund. Canada PRO is a provincial program payment, which in Ontario is the Ontario Trillium Benefit. Match the amount and date against your notice of assessment or the benefit payment dates in CRA My Account.

Yes. Anyone can pay a tax balance for someone else through online banking, CRA's payment services, a pre-authorised debit or a financial institution, as long as the payment is applied to that person's account number and the right tax year. Their account is credited, not yours, and the payment is not deductible for you; Canada has no gift tax. You can also deliberately overpay or make extra instalments, and CRA holds the credit and refunds it on assessment.

Premiums you pay for private health, dental or extended medical coverage count as an eligible medical expense on your T1, which gives a credit rather than a deduction. The employee share deducted from your pay qualifies; the employer's share does not. A self-employed person without an employee plan may instead be able to deduct private health services plan premiums against business income, subject to conditions on who else is covered.

If you run the business as a sole proprietor or partner, the profit flows straight onto your personal T1 through the T2125 statement, so it raises your personal taxable income and can trigger instalments. A corporation is a separate taxpayer that files its own T2, and you are taxed personally only on what you actually draw as salary or dividends. Either way, business income affects credits, benefit entitlements and the tax bracket your other income falls into.

Yes. Legal services are a taxable supply, so a registered lawyer or firm charges GST or HST at the rate for the client's province: 13% HST in Ontario, 14% HST in Nova Scotia from 1 April 2025, and 5% GST in Alberta. Disbursements can be treated differently depending on whether the lawyer incurred them as your agent. Where the fees relate to your commercial activity, the tax is generally recoverable as an input tax credit.

Fuel is deductible only for the income-earning share of your driving. A self-employed person keeps the receipts and claims the business-use percentage of total vehicle costs, backed by a kilometre log. Where a business reimburses an employee instead, the CRA per-kilometre allowance for 2026 is 73 cents for the first 5,000 kilometres and 67 cents after that, and for 2025 it was 72 cents and 66 cents, with 4 cents more in the territories. Commuting never qualifies.

Basic groceries are zero-rated for GST/HST, so milk, bread, vegetables, meat, eggs and similar staples carry no tax. Tax applies to food the rules treat as something other than a basic grocery: carbonated drinks, candy, snack foods, most prepared or heated meals, restaurant orders, single servings of many products, and food sold together with a service. The combined rate depends on the province of supply, so check the rate where the sale takes place.