Affordable Small Business Corporate Tax Return 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.

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.

Call the individual or business enquiries line published on the CRA contact page at canada.ca. Have your social insurance number or business number, your date of birth and a figure from a recent return ready, because the agent verifies your identity before discussing anything. Lines are busiest just after filing season opens and near deadlines, so early morning usually connects faster. You can also send a secure message from My Account, or authorise a representative to call on your behalf.

Corporate tax is income tax a corporation pays on its own profits, reported on a T2 return that is separate from the owner's personal return. Both federal and provincial tax apply. For 2026 the federal small business rate is 9% on the first $500,000 of active business income and the federal general net rate is 15%, with the province adding its own rate on top. An unincorporated business pays no corporate tax; its profit is taxed in the owner's hands.

For individuals the tax year is the calendar year, 1 January to 31 December, and the return covering it is filed the following spring. The 2025 return was due 30 April 2026, or 15 June 2026 where you or your spouse were self-employed, though any balance owing was still payable by 30 April 2026. Corporations work differently: a corporation chooses its own fiscal year end and files a T2 six months after it.

Start from gross pay, take off federal and provincial income tax on your taxable income, then take off CPP and EI. For 2026, employee CPP is 5.95% on earnings between the $3,500 exemption and the $74,600 ceiling, with CPP2 at 4% up to $85,000, and EI is $1.63 per $100 of insurable earnings up to $68,900. Federal rates for 2026 run from 14% to 33%. The CRA's payroll deductions online calculator does the arithmetic.

Most basic groceries are zero-rated, which means GST/HST applies at 0% and the seller can still claim input tax credits on related costs. Prepared and restaurant meals, snack foods, carbonated drinks and catering are normally taxable at the regular rate: 5% GST, or the HST rate in your province. Very little food is exempt rather than zero-rated. Check the CRA's guidance on basic groceries before deciding how to charge on a specific product.

No. A passport application or renewal fee is a personal cost, and personal costs are not deductible even when the trip is for work. There is no credit for it either. A self-employed person cannot put it on the T2125, and an employee cannot claim it as an employment expense. Airfare, accommodation and a portion of meals on a genuine business trip are deductible, and those are the costs to track instead.

Close the books for the fiscal year, prepare financial statements, then file a T2 return with the CRA for that year end within six months of it. For tax years beginning after 2023 — which covers every 2025 and 2026 year end — electronic filing is mandatory for essentially all corporations, with no gross-revenue threshold, and paper-filing a return that had to go in electronically draws a $1,000 penalty. Alberta and Quebec require their own provincial corporate return as well. A corporation with no activity still has to file. Keep the supporting records six years from the end of the last tax year they relate to.

Unreported income costs far more than the tax alone. The CRA adds interest, and where you omit income in one year and also omitted income in any of the three preceding years, a repeated-failure penalty applies to the unreported amount. If the omission looks deliberate, a gross negligence penalty is much heavier, and evasion can be prosecuted. Fixing it yourself with a T1-ADJ or the Voluntary Disclosures Program is cheaper.

Several common receipts are not taxable: most lottery and gambling winnings, gifts and inheritances, TFSA withdrawals and growth, GST/HST credit and Canada child benefit payments, most life insurance proceeds, and the gain on a home that qualifies as your principal residence. Loans, and repayments of your own capital, are not income either. Some amounts are received but fully offset elsewhere on the return. Check the CRA's page on amounts that are not taxed before leaving anything off.

Yes. EI benefits stack on top of any other income for the year, so they can shrink a refund or create a balance owing, because the tax Service Canada withholds is usually less than the rate that applies once the benefits sit above your employment income. Benefits also count in the net income that income-tested credits and benefits are based on. Where the T4E shows a benefit repayment rate, part of the regular benefits must be paid back.