Low-Cost New Corporation Accounting Setup for Canadian Businesses

Most tax saving comes from a short list of levers: contributing to an RRSP or a spousal RRSP, holding investments inside a TFSA, FHSA or RESP so growth is sheltered, claiming every deduction and credit you actually qualify for, and splitting income where the rules allow, such as pension income splitting. Business owners add expense timing and salary versus dividend planning. Order matters, so decide before year end rather than at filing time.

For the 2026 tax year, federal rates are 14% on the first $58,523 of taxable income, 20.5% from there to $117,045, 26% to $181,440, 29% to $258,482, and 33% above that. Each rate applies only to the income inside its own band, so moving into a higher bracket does not raise the tax on the income below it. Provincial or territorial tax is added on top.

Report the amount shown on the slip from the school or granting body, then claim the scholarship exemption. For a student enrolled in a program that qualifies for the full-time education amount, scholarships, fellowships and bursaries connected to that program are usually fully exempt, so nothing remains in taxable income. Part-time students get a narrower exemption, and research grants are handled separately, net of eligible expenses. Check the CRA's page on scholarships, fellowships and bursaries for the year involved.

Call the CRA's individual enquiries line and ask to have the account unlocked; the number is on the Contact the Canada Revenue Agency page. Accounts lock after repeated failed sign-ins, and the CRA also revokes access itself when it suspects credentials were compromised. The agent verifies you with your social insurance number, date of birth, address and a figure from a recently filed return, so have a copy of it in front of you.

A tax hike is an increase in a tax: a higher rate, a new levy, or a credit or threshold frozen or trimmed so more of your income is taxed. Hikes can be federal, provincial or municipal, and the effect on you depends entirely on which tax moved and when it takes effect. Announcements come through budgets and are confirmed in legislation. Check the CRA rate pages, or your province's, for what actually applies to a given tax year.

You add up income from all sources, subtract allowed deductions such as RRSP contributions to reach taxable income, then apply the graduated rates. Federal rates for 2026 start at 14% and rise through 20.5%, 26% and 29% to 33%, and your province applies its own brackets on top. Non-refundable credits then reduce the tax, including the federal basic personal amount of $16,452 for 2026, which tapers at higher incomes. Tax withheld at source and instalments are credited last.

The CRA charges compound daily interest on any balance still unpaid after the payment deadline, and it keeps accruing until the balance is cleared. Where the return itself was filed on time there is no separate late-payment penalty, only interest. For the 2025 personal tax year the payment deadline was 30 April 2026, including for self-employed filers who had until 15 June 2026 to file. Municipal property tax is a different system, with charges set by your municipality.

For an individual it is the social insurance number, which the CRA uses to identify you on your return and your benefit accounts. A business gets a business number, extended by a program account for each purpose, such as corporate income tax, payroll and GST/HST. Anyone who must file but cannot obtain a social insurance number, a non-resident for example, applies to the CRA for an individual tax number instead.

A taxable entity is a person taxed in its own right: an individual, a corporation, and a trust or estate. Each files its own return, a T1, a T2 or a T3, and pays tax on its own income at its own rates. A partnership or sole proprietorship is not a taxable entity, so its income flows through to the partners or the owner and is taxed on their personal returns. A registered charity files but is generally exempt from tax.

An Ontario corporation files its initial return with the province, not the CRA. You report the registered office address and the directors and officers through the Ontario Business Registry, signing in with your company key, and there is no fee. It is separate from your federal T2 and from the annual return. The filing is due soon after incorporation and a late filing carries a penalty, so confirm the current deadline on the Ontario Business Registry before you start.

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.

Taxable income is what remains after deductions. A personal return moves through stages: total income from all sources, then net income after deductions such as registered retirement savings plan contributions, child care costs and union dues, then taxable income after any further deductions. Tax is calculated on that taxable income using the federal and provincial brackets, and non-refundable credits are applied afterwards, which is why a credit and a deduction are not worth the same amount.