Budget-Friendly Year-End Working Paper Preparation for Canadian Businesses

Income tax is tax charged on the income you earn in a year, levied by both the federal government and your province or territory. Rates are graduated, so successive slices of taxable income are taxed at higher rates, and credits such as the basic personal amount reduce the tax calculated. Employment income is taxed through payroll withholding and settled on your T1 return. Quebec residents also file a separate provincial return with Revenu Quebec.

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.

A non-refundable credit reduces the tax you owe to zero but no further, so any unused part is lost, carried forward, or transferred to a spouse or parent where the rule allows it. A refundable credit is paid to you even when no tax is owed, which is how benefit-style payments reach people with little or no income. Most personal credits on the federal return, including the basic personal amount, are non-refundable.

Sign in to CRA My Account and check the uncashed cheques list, your balance, and whether any returns are still outstanding, since a refund is only issued once a return is assessed. Missing returns also stop benefit and credit payments. An old CRA cheque never expires; you ask for it to be reissued. Forgotten bank, insurance or pension balances sit with provincial unclaimed-property registries rather than the CRA, so check those separately.

Unbottled water is generally zero-rated as a basic grocery, so no GST/HST is charged on it while the supplier still claims input tax credits. Water sold as a beverage in single servings, such as a small bottle, is taxable at the ordinary rate for the province. Water supplied by a municipality falls under its own treatment. The line between these categories is narrow, so check the CRA's basic groceries memorandum for your exact product.

You do not file the return again. Once the original has been assessed, request a change: use Change my return in CRA My Account, use ReFILE through your tax software, or mail a completed T1-ADJ with copies of the supporting slips and receipts. Wait for the notice of assessment first, because a change sent earlier can collide with the original processing. CRA's Change my return page sets out how far back you may go and which years are eligible.

No. The fuel charge applies to fuels, not tobacco. Cigarettes carry federal excise duty, a provincial or territorial tobacco tax, and GST or HST on the shelf price, which is why tax makes up most of what you pay. Duty and tobacco tax rates move with budgets and some federal rates are adjusted annually, so check the CRA excise duty rates page and your province's tobacco tax page rather than an older figure.

Municipal property tax is levied for the calendar year, January to December, even though it is billed in instalments through the year. Most municipalities issue an interim bill early in the year based on the previous year's tax, then a final bill once council sets the current rate. Buyers and sellers normally apportion the year's tax between them on closing. Check your municipality's tax page for its own instalment dates, because they vary widely across the country.

Only for specific purposes. Fees paid to collect or establish a right to salary, wages, a pension, severance or support amounts, and fees to object to or appeal a CRA assessment, are claimed in the deductions section of the T1, on the line the CRA's guide names. Legal costs of earning business or rental income belong on the T2125 or the rental statement. Fees to acquire property are usually added to its cost instead of deducted.

Property tax is a municipal charge covering the calendar year, billed in instalments, often an interim bill early in the year and a final bill once council sets the rate. At closing, the statement of adjustments divides the year between seller and buyer, so you reimburse whatever the seller prepaid beyond your closing date. Buying does not itself reset your assessment, since assessed values come from the provincial assessment authority on its own cycle. Arrange your own bill or a lender-paid account right after closing.

Both, at different points in the statements. Income tax for the period is an expense on the statement of profit or loss, while the amount still owing at the reporting date sits on the balance sheet as a liability, usually shown as income taxes payable. Sales tax works differently again: GST/HST you collect is never revenue and never an expense, it is a liability owed to the CRA net of the input tax credits you claim.

The principal you repay is never deductible, so clearing the balance faster brings no tax saving of its own. Only the interest portion of payments on an eligible federal or provincial student loan counts, and it produces a non-refundable credit rather than a deduction. Ask your loan servicer for the annual interest statement, because a bank record of the payment does not show the split. Interest you cannot use this year carries forward.