Low-Cost Personal Services Business Tax Return for Canadian Businesses

As the rules stand for the 2025 tax year filed in 2026, the late-filing penalty is 5% of the balance owing plus 1% of that balance for each full month the return is late, to a maximum of 12 months, so 17% at worst. It rises to 10% plus 2% per month for up to 20 months, a 50% maximum, but only where the CRA formally demanded the return and had already charged a late-filing penalty for any of the three preceding tax years. Interest compounds daily.

Some are. Legal fees are deductible when they relate to earning income or defending a tax position, such as collecting salary or wages owed to you, objecting to or appealing an assessment, or running a business. Fees paid to obtain or enforce support are generally deductible for the recipient. Fees for the divorce itself, for custody, or for personal disputes are not, and fees to acquire property are usually added to that property's cost instead.

A small business corporation is a Canadian-controlled private corporation that uses substantially all of its assets in an active business carried on mainly in Canada. The label matters because it opens access to the small business deduction, which for 2026 applies the 9% federal rate to the first $500,000 of active business income, and to the lifetime capital gains exemption on a share sale. Holding companies and passive investment corporations usually fail the asset test.

On profit. Corporations and unincorporated businesses are taxed on net income, meaning revenue minus deductible expenses and capital cost allowance, not on gross sales. Revenue matters for other things: GST/HST registration once taxable revenue passes $30,000 over four consecutive calendar quarters or in a single quarter, and payroll and information reporting. Federal corporate tax is 9% on the first $500,000 of active business income for 2026, with a general net rate of 15%.

Yes, and it is usually worth doing. Filing with little or no income keeps benefits flowing, because the GST/HST credit, the Canada Child Benefit and provincial credits are all recalculated from a filed return. It also lets you carry forward tuition and other unused amounts. Report EI benefits, severance and any RRSP withdrawals: those slips are income even in a year you were not working. New RRSP room needs earned income.

Paper T1 returns go to the CRA tax centre that serves your province or territory, and the correct address is on the CRA page for mailing a paper return. Check it each filing season, because centres and addresses change. Write your social insurance number on the package and keep a copy of everything you send. Filing online is faster and easier to track: a refund on an online return usually takes about two weeks.

It can, though not automatically. Rent is taxable income, and against it you deduct mortgage interest (not principal), property tax, insurance, utilities you pay, repairs, condo fees, advertising and management costs. A genuine rental loss can reduce your other income. Improvements are capitalised and written off over time rather than deducted at once, and claiming that write-off usually increases the tax when you eventually sell.

Your EI slip comes from Service Canada, not from an employer, and it is a T4E rather than a T4. The quickest route is My Service Canada Account, where the slip is posted early in the year and can be viewed, printed or saved. It also flows into CRA My Account once processed, so Auto-fill my return pulls it into most tax software. A paper copy is mailed unless you chose online delivery only.

There is no single cut-off. The Canada Child Benefit starts from a maximum per child and is reduced once adjusted family net income passes a first threshold, at a reduction rate that depends on how many children you have, with a different rate applying above a second threshold. A family with several children can still receive something at a fairly high income, while a one-child family phases out sooner. The CRA's child benefit calculator gives your own figure.

Controlled tips do. Where the employer collects and redistributes tips, through a service charge or a pool the employer allocates, they are employment income subject to income tax, CPP and EI withholding and they appear on the T4. Direct tips a customer gives you are taxable income but generally carry no employer withholding, though CPP and EI can apply in limited cases. Either way the income is reported; only the deduction route differs.

You qualify if you live with an eligible child, are primarily responsible for their care, and are a resident of Canada for tax purposes. You or your spouse or common-law partner must be a citizen, permanent resident, protected person, registered Indian, or a temporary resident meeting the CRA's conditions. The payment is calculated from family net income, so both of you have to file a return every year, even with no income to report.

A genuine CRA call can show as blocked, private or an unfamiliar number, so the display proves nothing either way. Judge the call by its content. The CRA will not demand payment by gift card, cryptocurrency or e-transfer, will not threaten immediate arrest or deportation, and will not ask for a passport or banking password. Hang up, then call an enquiry line published on canada.ca or check My Account for a real balance.