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How To File Small Business Taxes Canada: Step-By-Step Guide

Updated: Feb 23



As a self-employed or incorporated consultant, or simply as a small business owner in Canada, filing your taxes accurately and on time is a crucial responsibility. Proper tax preparation ensures compliance with the Canadian tax laws and helps you maximize deductions, ultimately reducing your tax burden. In this step-by-step guide, we will walk you through the process of filing your small business taxes in Canada, making the task less daunting and more manageable.


Organize Your Documents, Income, Receipts, and Financial Statements


Before you start preparing your small business taxes, it's essential to have all your financial records and documents organized. This includes:


  • Income Records: Gather all sources of income, including invoices, sales receipts, and any other income earned during the tax year.

  • Expense Receipts: Keep track of all business-related expenses, such as office supplies, travel expenses, utilities, and any other costs relevant to your business.

  • Financial Statements: Prepare your financial statements if you are incorporated. This includes the profit and loss statement and balance sheet, as they provide an overview of your business's financial health.



Check on the Required Tax Forms You’ll Need to Fill Out

The next step is to determine which tax forms are applicable to your small business. The forms you need to fill out depend on your business structure. Common forms include:


  • Sole Proprietorship: If you are a sole proprietor, you will need to complete the T1 (TP1 in Quebec) income tax form and the Statement of Business or Professional Activities (Form T2125).

  • Partnerships: Partnerships should file a T1 (TP1 in Quebec) income tax return for information purposes and complete the T5013 Partnership Information Return.

  • Incorporated Businesses: Corporations need to file a T2 (CO-17 in Quebec) Corporation Income Tax Return.

  • Goods and Services Tax (GST)/Harmonized Sales Tax (HST): Depending on your business's revenue, you may need to register for and collect GST/HST (or QST in Quebec). The GST/HST returns (Form GST34-2 or form GST34-3)  should be filed according to your reporting period.



Where Can I Get Form GST34-2 or GST34-3

Form GST34-2 is a physical form that should be mailed to you by the CRA, typically within 15 days of your reporting period ending.


If you file electronically, you will receive Form GST34-3 instead. If you have not received one of these forms, or an access code, you can contact the CRA to get a replacement at 1-800-959-5525.


How to file a sales tax return online through ReInvestWealth?


You can quickly and easily file your GST, HST, QST and PST return online using ReInvestWealth’s free accounting software. In a few clicks, you can link your business bank accounts, import your transactions, add your sales tax account number and file your outstanding tax return. Create your free ReInvestWealth profile to get started.   


Determine Deductions and Credits to Claim

Identifying eligible deductions and credits is crucial to optimizing your tax return. Some common deductions and credits for small businesses in Canada include:


  • Business Expenses: Deduct eligible business expenses, such as rent, utilities, office supplies, marketing expenses, and travel costs.

  • Capital Cost Allowance (CCA): Claim CCA on depreciable assets used in your business, such as machinery and equipment.

  • Home Office Expenses: If you operate your business from home, you may claim a portion of your home-related expenses as business deductions.


ReInvestWealth is a free business accounting software leveraging AI that can help you maximize your deductions


Sign up for the free plan today in less than 3 minutes.


Conclusion


In conclusion, filing your small business taxes in Canada can be made more manageable by following these step-by-step guidelines. Organizing your documents, understanding the required tax forms, and identifying deductions and credits to claim are essential aspects of the process. As a consultant or small business owner, efficient tax filing not only ensures compliance but also contributes to your financial success. 


Leveraging accounting solutions like ReInvestWealth's Accounting Software can streamline your bookkeeping, tax preparation and even tax filing, making the process even smoother. By taking the time to properly file your taxes, you can focus on growing your business and achieving your financial goals.

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