Table of Contents

‍

You’ll Receive a Notice of Assessment (NOA)

The first thing to expect after filing is your Notice of Assessment (NOA) from the Canada Revenue Agency (CRA). If you’re in Quebec, you’ll also receive one from Revenu Québec.

The NOA confirms whether your return has been accepted as filed, whether you’re receiving a refund, owe a balance, or have a zero balance. It may also include adjustments or a request for more information.

For electronically filed returns, CRA typically issues an NOA within two weeks and often immediately. Paper-filed returns can take several months. You can access your NOA anytime through CRA My Account.

Your NOA also includes your updated RRSP contribution room for the following year, which is worth noting for tax planning purposes.

Related: Understanding Your Notice of Assessment‍ ‍

If You’re Getting a Refund

If you’re owed a refund, the timeline depends on how you set up your account. With direct deposit through CRA My Account, refunds typically arrive within 5 to 10 business days of your NOA. Without direct deposit, CRA will mail you a cheque, which takes considerably longer.

If you haven’t already, setting up direct deposit through CRA My Account is strongly recommended — it’s faster, more secure, and eliminates the risk of a lost cheque.

If You Owe Taxes

If your return shows a balance owing and you haven’t paid yet, interest begins accruing after April 30, regardless of your filing deadline. For self-employed individuals whose filing deadline is June 15, this is an important distinction: the filing deadline is extended, but the payment deadline is not.

CRA may send a Statement of Account showing your updated balance including any interest charges. You can pay online through your bank, through CRA My Account, or by setting up a pre-authorized debit.

If you’re unable to pay the full amount, it’s worth contacting CRA directly. In some cases, payment arrangements can be made, and acting promptly helps minimize additional interest and penalties.

Tax Installments: What They Are and Who Needs to Pay Them

If you owed more than $3,000 in net taxes in the current year and either of the two previous years, CRA may require you to make quarterly installment payments going forward. These are prepayments toward your next year’s tax bill, due in March, June, September, and December.

CRA will send installment reminders if they believe you meet the threshold. You can use CRA’s suggested amounts, base them on your prior year’s taxes, or estimate based on your expected current-year income. If your installments fall short of what you ultimately owe, CRA may charge interest.

For self-employed individuals and small business owners with variable income, installments can feel challenging. The key is set up a system and reminders to ensure instalments are paid to avoid unnecessary interest charges.

Related: Small Businesses and Tax Installments‍ ‍

What Self-Employed Canadians Need to Watch For Specifically‍ ‍

If you’re self-employed or run a small business, there are a few additional post-filing considerations beyond what most employees face.‍ ‍

The June 15 filing deadline does not extend your payment deadline‍ ‍

Self-employed individuals have until June 15 to file their T1 return, but any taxes owing must still be paid by April 30 to avoid interest charges. If you’re expecting to owe, it’s worth estimating your balance and making a payment before April 30 even if you haven’t finalized your return.‍ ‍

HST/GST and QST remittances are separate from your income tax return‍ ‍

Filing your T1 does not mean your sales tax obligations are settled. If you’re registered for GST/HST or QST, make sure your remittance deadlines are on your radar. For self-employed individuals who file annually, the GST/HST return is due June 15 with payment due April 30.‍ ‍

Review your NOA carefully for T4A adjustments‍ ‍

CRA cross-references T4A slips (fees for services) with self-employment income reported on your T2125. If a T4A was not reflected correctly on your return, CRA may assess additional income. Check your NOA against what you filed and address any discrepancies promptly.‍ ‍

Start setting aside taxes for next year now‍ ‍

One of the most effective habits for self-employed Canadians is to treat a portion of every payment received as money that is already owed to CRA. Setting aside more than you estimate you’ll need (and keeping it in a separate account ) means next year’s tax bill will feel much more manageable.‍ ‍

How to Amend Your Return If You Made a Mistake‍ ‍

If you realize after filing that you missed a deduction, forgot to report income, or made an error, you can request a change using the T1 Adjustment (T1-ADJ). Important: wait until you have received your Notice of Assessment before submitting an amendment.‍ ‍

You can amend your return online through CRA My Account or by submitting the T1-ADJ form by mail. In most cases, you can adjust returns going back up to 10 years. CRA will reassess your return and issue an updated NOA.‍ ‍

Related: How to Amend Your Tax Return After Filing‍ ‍

How Long to Keep Your Tax Records‍ ‍

Even after CRA accepts your return, they can request supporting documents for up to six years from the end of the tax year in question. For small business owners, this means keeping receipts, invoices, bank statements, and a copy of your filed return for at least six years and ideally seven to be safe.‍ ‍

Organized, accessible records make responding to any CRA requests significantly less stressful. Digital backups are strongly recommended.

‍Related: How Long to Keep Your Business Documents According to CRA

The Bottom Line‍ ‍

For the majority of Canadians, the post-filing period is straightforward. You’ll receive your NOA, confirm your refund or pay your balance, and move on. The most important thing is to respond promptly to any correspondence from CRA or Revenu Québec, and to use this time of year to put better habits in place for the year ahead.‍ ‍

Want to Simplify Your Taxes?

📝 Stay Organized

Get your free Small Business Tax Return Checklist to help you gather the key documents and information needed to prepare your return.

📘 Learn the Essentials

Check out my Small-Business-Tax-Resources for clear, practical guidance on Canadian small business taxes written specifically for self-employed individuals and small business owners in Canada.

🎥 Looking for Personalized Guidance

Book a consultation to get your tax questions answered and receive advice customized to your unique situation.

‍ ‍

Access to a car can be crucial to running a small business effectively.  Costs of ownership, however, can be high relative to your revenues, especially in the early stages when your business is not hugely profitable.  Luckily, Revenue Canada (CRA) and Revenue Quebec (RQ) allow both unincorporated/self employed individuals and owners/employees of corporations, who use their cars to generate income, to deduct the relevant expenses. Both CRA and RQ provide detailed guidance and have specific rules relating to the write off of car expenses.  I discuss some of the main provisions that impact small business owners in this article and provide guidance on the differences between unincorporated (self employed/small business) owners and corporations.

General Rules for Deductibility of Car Expenses (Both Incorporated and Unincorporated Businesses)

What is the Maximum Cost Of Car That is Eligible for Tax Deduction

If you purchase your car, the maximum amount eligible for capital cost allowance (CCA) is $39,000 + sales taxes for vehicles acquired on or after January 1, 2026. This ceiling was $38,000 for 2025, $37,000 for 2024, and $36,000 for 2023. CRA has been increasing this limit annually .

What is the Portion of The Car That You Can Expense (Capital Cost Allowance)

While you may not write off the full amount of the car purchase price as an expense in the year that you buy it, you are allowed to claim the capital cost allowance on an annual basis. Capital cost allowance is essentially the term that CRA uses for depreciation rates. The CCA rate for passenger vehicles is 30%, applied annually to the declining balance. A car costing $39,000 or less (before tax) in 2026 falls into Class 10, while a car costing more than $39,000 falls into Class 10.1. In the first year of purchase, the half-year rule applies, meaning you can only claim 50% of the normal CCA amount.For subsequent years the deduction is 30% of the remaining balance after deducting CCA already taken and is referred to as the undepreciated capital cost or UCC.

Example of Car Purchase tax Deduction (calculation of CCA):

Example of Car Purchase Tax Deduction (2026 figures):

If you purchase a car for $35,000 (which falls under the $39,000 ceiling):

Year 1: $35,000 × 30% × 50% (half-year rule) = $5,250

UCC at end of Year 1: $35,000 − $5,250 = $29,750

Year 2: $29,750 × 30% = $8,925

UCC at end of Year 2: $29,750 − $8,925 = $20,825

Note that Year 2 CCA is higher than Year 1 since the half-year rule no longer applies.

See also my article on how to do the accounting for car expenses and reflect personal use.

Accelerated Investment Incentive Property (AIIP) — Note for 2026

If you purchased your car after November 20, 2018 and it is available for use before 2028, it may qualify as Accelerated Investment Incentive Property (AIIP). This applies to both sole proprietors (reported on Form T2125) and corporations.

For cars purchased in 2026, AIIP suspends the half-year rule, meaning you can claim the full 30% CCA rate in Year 1 rather than the usual 15% (30% × 50%). Using the example above, a $35,000 car purchased in 2026 would have a Year 1 CCA of $10,500 ($35,000 × 30%) rather than $5,250 — doubling the first-year deduction.

Note that AIIP is in a phase-out period and will no longer be available for property acquired after 2027. The calculation method has also changed since 2023, so confirm the current rules with your accountant before filing.

What is the Maximum Deductible Lease Cost

Lease costs are generally deductible up to a maximum of $1,100 per month + sales taxes for new leases entered into on or after January 1, 2025 and 2026. This was $1,050/month for leases entered into in 2024, $950 for 2023, and $900 for 2022. Note that the limit that applies is based on the year the lease was entered into, not the year payments are made so if you signed your lease in 2024, your deduction limit is still $1,050/month even in 2026. CRA's full calculation method can be found here.

Should You Lease or Buy your Car

There are a variety of factors to consider when deciding whether to lease or buy a car that you should review. Significantly, a lease generally lasts for a shorter period and the car does not belong to you at the end of the lease period (although there is often a purchase clause) whereas with a purchased car (with or without financing), you usually own the car at the end of the financing period or outright if you pay for it upfront. The choice you make is often a lifestyle one and dependent on whether you prefer to replace your car regularly or are happy with the same car for a longer period. Also, the value of the car at the end of the financing term might contribute to your decision.

What Types of Costs Relating to your Car are Deductible

Cost relating your car that can be written off as expenses include:

• lease payments

• interest on financing

• gas or fuel costs,

• insurance

• repairs and maintenance,

• license and registration fees

• drivers license

• parking

• CCA on purchased/financed cars

What is An Automobile Log and What Should Be Included

The business owner should keep an automobile log of kilometres driven for business that includes:

• name of customer, supplier or other business purpose, For example, if you drive to meet your accountant it would be considered to be deductible.

• odometer readings at the begining of the year and at the end of the year

• # of kms driven for each trip relating to business,

• date of travel.

It should be noted that when computing kilometres used for business purposes, travel from the home to your regular place of employment is not considered to be deductible. If a business owner works out of their home office then any travel from the home office would be included in the number of kms driven and counted as business travel. If, as a business owner, you have a separate office that is not your home, then the same restriction applies regarding travel from your home to your business office not being deductible travel.

Electric and Zero-Emission Vehicles (2026)

If you are considering purchasing an electric vehicle (EV) or plug-in hybrid with a battery capacity of at least 7 kWh for your business, these fall into CCA Class 54 with a higher ceiling of $61,000 (before tax) for 2026 — significantly more generous than the $39,000 cap for regular passenger vehicles.

Additionally, the federal Electric Vehicle Affordability Program (EVAP), launched February 2026, replaced the previous iZEV incentive and provides purchase incentives for eligible zero-emission vehicles. If you are purchasing a vehicle in 2026, it is worth checking the current EVAP criteria at canada.ca before making your decision.

Note: proposed legislation may allow 100% immediate expensing for zero-emission vehicles acquired between 2025 and 2029 — confirm the status of this with your accountant before filing, as it had not yet been fully enacted at the time of writing.

Car expenses for unincorporated owners (self employed and sole proprietorships)

Advice on how to deduct car expenses for sole proprietors/unincorporated businesses

• Expenses relating to your car are reflected on a specific section of the T2125 schedule of your personal tax return called “motor vehicle expenses”

• ALL costs must be reduced, on a pro rata basis, by the percentage that the car is used for personal purposes. This percentage is based on the number of kilometres driven for business vs those driven for personal purposes.

  For the purposes of the T2125, you will need

  a)business kms driven during the year

  b) Total kms driving during the year

  Divide a) by b) to arrive at the business % use that can be applied to the expenses listed above.

• The cost of the car can be depreciated based on the business % used during the year up to a maximum cost of $39k (starting in 2026).

• The CCA (capital cost allowance) class for most cars is Class 10 if the car costs $39k or less OR Class 10.1 if the car costs more than $37k.

• Cars included in class 10.1 must have a separate category for each car. If you sell the car at a loss, you are not allowed to deduct the loss (known as a terminal loss). Similarly, if you sell your car at a price higher than the depreciated value (known as undepreciated capital cost or UCC), you do not have to reflect it as income (known as recapture).

• Interest expenses on the financing of a car can also be deducted.

• If you are registered for GST (and HST/QST), you can claim a portion of the sales taxes which is based on the CCA rate that you claim in each year.

• The example below shows the CCA claim in year one (incorporating the half year rule) + the amount of sales tax that can be claimed. The amount of the sales tax is simply added to the GST/HST input tax credits amount.

Example: Calculating HST Claimable on a Car Purchase

If you purchase a car for $25,000 in Ontario, you will pay 13% HST, for a total of $3,250 in sales tax. However, you cannot claim the full HST — you can only claim the portion that relates to both your business use and the CCA you are claiming that year.

Assuming 75% business use, a 30% CCA rate (Class 10), and the 50% half-year rule in Year 1, your CCA claimable in Year 1 on the cost of the car is $2,812.50 ($25,000 × 30% × 50% × 75%). The HST claimable is then calculated as 13/113 × $2,812.50 = $373.89.

Note that the HST claimable on operating expenses such as gas, insurance and repairs is simpler as you can claim the full business-use percentage of the HST paid on those costs directly, without the CCA adjustment.

Car expenses for employees and/or owners of corporations

Corporations have more flexibility when claiming car expenses. There are three options for claiming the car expense deduction if you are an owner or employee or owner of a corporation:

Reimbursement for Per Km Rate Allowed by CRA

• The simplest option for an owner and/or employee of a corporation is to claim the per km rate allowed by Revenue Canada. For 2026 this rate is $0.73 per km for the first 5,000 kms of business travel and $0.67 per km for each km exceeding 5,000 kms. (For 2025 the rate was $0.72/$0.66 per km; for 2024 it was $0.70/$0.64 per km; for 2023 it was $0.68/$0.62 per km.) These rates are updated each January — check canada.ca for the most current figures.

• The corporation may pay/reimburse the employee/owner the amount calculated under this method without any tax consequences. This will also be considered to be an expense to the corporation and should be debited to the automobile/vehicle expense account.

• If this method is selected, no other expenses relating to the car may be claimed.

• The employee/owner must keep a log of kms driven for business to support the amount of kms claimed.

• Since the owner/employee only needs to keep a log of kms and not the individual expenses incurred or the total kms driven, this method can significantly reduce administration costs. Also, with this method there is no automobile taxable benefit to enter on the T4 slip and no additional taxes to pay.

Corporate ownership of Car

• The corporation may purchase the car for use by the employee or owner. In this case, the corporation can claim 100% of the expenses relating to the car including lease or interest payments and depreciation (subject to limits discussed above).

• The direct purchase of a car by a corporation results in a taxable benefit to the employee/owner for the % of personal usage of the car and must be reflected on their T4. An automobile log must be maintained that shows the percentage of personal vs business use. The taxable benefit can be calculated by using CRA’s calculator.

• If the car is used less than 50% of the time by the employee/owner the taxable benefit and resulting tax burden is significantly higher than if the per km method is used. It is therefore advisable to calculate the potential taxable benefit on a corporation owned car vs simply taking the per km rate explained above.

Fixed monthly/periodic car allowance

• A corporation may decide to give its employee(s) a fixed monthly car allowance. This will be tax deductible to the corporation, however, the full amount of the car allowance must be reported as income on the T4 for the employee.

• The employee may then deduct their expenses, listed above, on their personal tax return on Schedule T777 which is the schedule of employment expenses and has a specific section for motor vehicle expenses. Note that in order to claim the expenses, the employer must complete and sign the T2200 which shows that the employee used the car for business purposes.

Revenue Canada , while recognizing the deductibility of automobile expenses, wants to ensure that businesses don't benefit from personal use of car (since individuals who are not business owners generally don't have this option).  Ultimately, common sense should be used -  expenses incurred to earn income are deductible.  Expenses that are clearly personal in nature are not.

Interested in becoming better with your money? Sign up for my newsletter for expert insights on tax, finance, and accounting, Designed for self employed and small business owners.

1. How to Pay Yourself as a Sole Proprietor

As a sole proprietor, there is no legal separation between you and your business. You are simply an "extension" of the enterprise.

• Taxed on Profit, Not Withdrawals: You are taxed on your net income (Total Sales minus Business Expenses), regardless of how much cash you actually move to your personal account.

• The "Salary" Myth: You don't pay yourself a formal salary. Your "pay" is technically an Owner’s Draw, which is not a tax-deductible expense.

• CPP/QPP Obligations: You must pay both the employer and employee portions of CPP/QPP on your self-employment income. In 2026, be mindful of the CPP2 enhancement, which applies a second tier of contributions if your income exceeds ~$75,000.

Pro-Tips for Sole Proprietors:

• Set a "Fake" Salary: To maintain discipline, set up a fixed weekly transfer to your personal account.

• The 30% Rule: Set aside at least 25–30% of every dollar earned in a separate high-interest savings account to cover your year-end tax and CPP bill.

• Digital Reporting: If you earn income via platforms like Etsy or Uber, remember that as of 2026, these platforms report your earnings directly to the CRA.

2. How to Pay Yourself as a Corporate Owner

Incorporation offers more flexibility, allowing you to choose how much tax to trigger personally versus how much to defer within the corporation.

Option A: Pay a Salary (T4)

• Deductible: Salaries reduce your corporation’s taxable income.

• Benefits: This is "active income," which creates RRSP contribution room and counts toward CPP/QPP retirement benefits.

• Admin: Requires a payroll account, monthly remittances to the CRA/RQ, and annual T4/RL-1 filing.

Option B: Take Dividends (T5)

• Not Deductible: Dividends are paid from after-tax corporate profits.

• Passive Income: No CPP/QPP is required, but you also do not create RRSP room.

• Admin: Much simpler; you only need to file a T5/RL-3 summary by February 28th.

3. The "Shareholder Loan" Trap

One of the biggest risks for incorporated owners is withdrawing cash without declaring it as either salary or a dividend. This creates a Shareholder Loan. If this balance isn't cleared within one year of the corporation's fiscal year-end, the CRA may include the entire amount in your personal income—but without the benefit of the dividend tax credit.

Final Thoughts: Which is Best?

For most, a Salary is best for long-term retirement planning (RRSP/CPP), while Dividends are ideal for those wanting to minimize immediate paperwork and mandatory pension costs.

Next Step: If you’re incorporated and struggling with the math, see my deep-dive: Should You Pay Yourself a Salary or Dividend? 7 Key Considerations

Looking for guidance on Owner Compensation?

📝 Download the Free Dividend Filing Checklist
A checklist for those of you who want to prepare your own T5 dividend declarations. Download Now

📘 Dive Deeper 
Small Business and Your Dividends walks you through owner compensation strategies including a deep dive into salary vs dividends, tax considerations and step by step instructions on how to file your T5 dividend slips. Learn More.

Paying Yourself From Your Corporation tells you what every business owner should know, dispels the myths and helps you understand the math so that you can see what works for your situation. Learn More.

💬 Book a Consultation
Need personalized advice? Schedule a one-on-one session where we review the specifics of your situation and determine the best compensation strategy.
Learn More

For some of us, hobbies can actually turn into revenue generating activities which is (quite literally) an added bonus. It seems like the dream to actually earn some money or even make a career out of doing something that you love. Sadly, Revenue Canada (CRA) demands closer scrutiny of any activity that brings in cash.

At a Glance: Is it a Business or a Hobby?

• Business: You have a clear intent to profit, keep organized records, and invest significant time/capital. Benefit: You can deduct business losses against other income.

• Hobby: The activity is primarily for personal satisfaction and lacks "commerciality." Drawback: You cannot deduct expenses that exceed your revenue.

The Legal Test: Martin v. The Queen

This means that once you start generating revenue from your hobby, you have to make a determination as to whether it constitutes a business. This, unfortunately, is not based on our own personal definition . Rather we must follow guidance from the tax court of Canada and CRA on this issue. In a ruling, that has now become somewhat of a precedent for the hobby vs business test, the tax court made the following assertions in reference to a specific case :

The existence of a personal element must be put in perspective. There is frequently a personal element in the carrying on of a commercial enterprise in the sense that the person derives great personal satisfaction from the activity. This does not make the activity any the less a business. Professional artists, photographers, writers, musicians (and sometimes even lawyers) no doubt derive great satisfaction from what they do but if their activity is commercial and is intended to yield a profit it is nonetheless a business. It is only where the personal element so overshadows any element of commerciality as to substantially displace it that one may conclude that the activity is merely a hobby and is not a business at all.

To summarize, the "Ingredients of Commerciality" identified by the court include:

• Commitment of substantial capital.

• Organized and businesslike record-keeping.

• Devotion of significant time.

• Intent to earn a profit.

Source:https://taxinterpretations.com/cra/severed-letters/2012-0442371m4

2026 Compliance: Why the Distinction Matters Now

In 2026, the CRA's 'Digital Platform Reporting' means that income from Etsy, Airbnb, or eBay is reported automatically. If you're receiving these reports, the CRA already considers you to have a revenue-generating activity, making it even more important to prove your 'businesslike' intent if you plan to claim expenses.

How to Classify Your Activity

As someone engaging in a side project, you must ask yourself: Are you doing this with the intention of earning a profit?

Indicators of a Business:

• Tools & Investment: Have you purchased special tools or equipment?

• Financial Systems: Do you have an accounting system or separate bank accounts?

• Marketing: Do you promote your work on social media or other media?

• Registration: Have you officially registered your business name?

The Impact on Your Tax Return

The classification is most beneficial when it comes to expense deductions. If you are classified as a business, you can claim a loss on your tax return and deduct it from other income (like a T4 salary), reducing your overall taxes.

However, be aware: the CRA is consistent. If you have high revenues, they will want to call it a business. If you have high expenses and a loss, they may try to call it a hobby to deny those deductions. It is also important to note that if your "hobby" revenue exceeds $30,000 in four consecutive quarters, the CRA requires you to register for GST/HST, regardless of whether you’ve officially decided you are a business or not.

Final Thoughts: Navigating the Grey Area

The hobby vs business distinction, as such, is a grey area. There isn’t a checklist of facts that makes it one or the other. Instead it is a determination of all the facts. CRA will want to audit you when your taxes paid appear to be insufficient.

Want to Simplify Your Taxes?

📝 Download the Free Checklist

Get your free Small Business Tax Return Checklist to help you gather the key documents and information needed to prepare your return.

📘 Learn the Essentials

Check out my Small-Business-Tax-Resources for deeper dives and guidance on Canadian small business taxes written specifically for self-employed individuals and small business owners in Canada.

🎥 Looking for Personalized Guidance?

Book a consultation to get your accounting, finance and tax questions answered and receive actionable next steps.

From a tax perspective, whether you’re a self-employed gig worker, freelancer, independent contractor, or solopreneur, you are essentially seen as a small business. What this effectively means is, if you’re unincorporated, you’ll report your business income and expenses on the T2125 form (statement of business activities) as part of your personal tax return. If incorporated, you’ll file a T2 corporate return.

In addition to small business income, the question arises, what other types of income do you have to report and what is non taxable?

The Golden Rule: If you worked for it, invested for it, or it's a government benefit, it's usually taxable. If it's a gift, a lottery win, or earned inside a TFSA, it's usually not.

Income You Do Have to Report:

These are all considered taxable and must be included on your return:

• Self-employment/small business business income - essentially any income that you earn for which you do not receive a T4.

• Employment income and tips — reported on a T4 if you’re employed.

• Barter income — even if you exchanged services or goods with no cash involved (though I suspect much of this goes unreported). For tax purposes, barter transactions should be recorded at the fair market value of the services exchanged

• Rental income — including short-term or informal rentals like Airbnb. (There are special rules and a separate schedule for this.) Keep in mind that as of 2026, digital platforms are required to report your earnings directly to the CRA, so ensuring your records match their data is more important than ever.

• Investment income — such as interest, dividends, or capital gains earned on regular, non-registered investments, property or other assets.

• Foreign income — Canadians are taxed on worldwide income. If you earned interest, dividends, business or property income from foreign sources, it must be reported.

• Retirement income - including CPP/QPP, OAS, private pensions etc.

• Other income - you also might have to report government benefits (you will receive a tax slip), scholarship income, EI benefits etc.

Income You Don’t Need to Report

There are some situations where you receive money, but it isn’t considered taxable income:

• Gifts — as long as they’re not tied to work performed. (The rules are different and more complex in the U.S.)

• Inheritances — these are taxed in the estate before you receive them.

• Lottery or gambling winnings — unless you gamble professionally or frequently enough that it’s considered a business.

• Personal loans or transfers between accounts — not considered income.

• Sale of personal-use property — such as selling used personal items occasionally, but not as a business (e.g. on Facebook Marketplace or Kijiji). The key here is occasional and usually for less than what your purchased it for.

• GST/HST or QST collected — you’re collecting this on behalf of the CRA or Revenu Québec. It must be reported and remitted, but it’s not counted as income.

• TFSA earnings — interest, dividends, and capital gains earned in a TFSA are tax-free for life.

• RRSP income — not taxable until withdrawn in retirement. The income earned inside your RRSP is sheltered.

• Canada Child Benefit (CCB), GST/HST credits and other tax credits/refunds and life insurance payouts (typically)

If you’re unsure whether a type of income needs to be reported, it’s worth taking a few minutes to find out—often a quick internet search will be sufficient. While many forms of income will come with a tax slip or official document, it is important to note that not all do. That means it’s up to you to make sure you’re reporting correctly.

Not reporting taxable income can lead to substantial penalties.
Conversely, reporting income you don’t need to could mean paying more tax than necessary.

Want more clear, actionable guidance on Canadian small business finance and taxes? Subscribe to my newsletter

]]>What You Do (and Don’t) Have to Report as IncomeRonika Khanna, CPA, CFAFri, 20 Mar 2026 18:26:00 +0000https://www.montrealfinancial.ca/blog/should-you-diy-your-taxes509ed143e4b001bf11102ee6:5227d59be4b0867ad33932e6:65b7fbadab59710e30bd667eAs tax season approaches, a question that I get often is whether you should do your own taxes or outsource them to a tax preparer or accountant. My answer, perhaps unsurprisingly, is that it depends.

How Complex Are Your Taxes?

The first and perhaps most important factor is to determine the level of complexity you are dealing with.

If your situation is simple e.g. you have a T4 slip from your employer, RRSPs and a couple of donations, it is quite easy to do it yourself especially using tax software which guides you through the process via an interview.

Check out my article that lays out a detailed checklist of everything you need to prepare for your taxes.

However, if you have sold a principal residence or rental property, or have an active investment portfolio or another arcane tax event , and you are unsure of how to deal with this, it might make more sense to outsource.

Self Employed/Small Business Owners (Unincorporated)

If you are an unincorporated small business owner/self employed/freelancer etc, you have a to complete a form referred to as the T2125, that requires information about the business, total sales and expenses by category. There are also special sections on the T2125 schedule that have to be completed that include CRA deductible car expenses, large purchases such as computer and furniture and home office expenses.

My advice in this case is to determine how comfortable you are with numbers. Often, if you do your own accounting, it isn’t a huge leap to do your own tax return. And again tax software greatly simplifies the process by taking you through an interview and informing you of errors along the way.

Of course, if the thought of doing the tax return on your own causes you an undue amount of stress, I recommend using a tax preparer or accountant.

Interested in doing it yourself, but want some guidance? Check out my course “Self Employed Tax Return Made Simple” which walks you through the process, step by step.

Incorporated Businesses

If you are an incorporated business owner, while I do recommend an accountant for the corporation, you can still do your personal taxes on your own as in many cases you might only have a T4 or T5 (dividend slip) and a handful of other tax items.

Why I (Often) Recommend the DIY Path

If you are on the fence, it might make sense to try it on your own (most tax software is free until you file your tax return) and assess your level of comfort. If you are still unsure, you can outsource and compare the results to the tax return that you did via software to identify differences and see if you were on the right track.

The primary reason I recommend doing it yourself (to the chagrin of many accountants) is to gain a better understanding of a significant component of your finances. Knowing how your taxes work is deeply empowering and gives you a sense of accomplishment. And of course it doesn’t hurt to save a bit of money that might be better used to reward yourself for doing your own taxes :) 

Want more clear, actionable guidance on Canadian small business finance and taxes? Subscribe to my newsletter

]]>DIY vs. Accountant: Should You File Your Own Canadian Tax Return?Ronika Khanna, CPA, CFAFri, 20 Mar 2026 16:45:00 +0000https://www.montrealfinancial.ca/blog/earned-income-vs-passive-income509ed143e4b001bf11102ee6:5227d59be4b0867ad33932e6:6845be17a8cb987156287422A common concept that I find myself explaining, when I talk to people about their taxes, relates to earned vs passive income.

This might sound a bit yawn inducing, but (like marginal tax rates), the type of income you earn determines how it’s taxed, how much you can contribute to your RRSP, and even what benefits you qualify for.

Earned Income: Money from Your Effort

This is the money you actively work for:

• Your salary or wages

• Freelance or consulting income

• Profits from your business

• Rental income (if reported personally—it’s passive when earned in a corporation)

Passive Income: Money from Your Assets

This is money that comes from things you own:

• Interest from savings or GICs

• Dividends from stocks

• Capital gains (profit from selling investments)

How This Affects You

1. Your Tax Bill

Earned Income: Taxed at your regular tax rate (the more you make, the higher the rate)

Passive Income:

• Interest and foreign dividends = taxed at your full rate

• Canadian dividends = taxed at a lower rate due to a tax credit

• Capital gains = only 50% of the gain is taxable at your marginal tax rate

2. Your Retirement Savings (RRSP)

This is crucial to understand and one of the key differences : Only earned income creates RRSP contribution room.

• Earn $50,000 → You can contribute $9,000 to your RRSP (18%)

• Earn $50,000 in capital gains → No RRSP room created

3. Government Benefits

• Canada Workers Benefit: Only those who earn employment income are eligible to receive this

• Old Age Security (OAS): Both income types count toward the clawback threshold i.e. once you earn over a certain amount, your OAS has to be repaid to CRA.

• Canada Child Benefit (CCB): Both types of income affect how much you receive

Simple Strategies That Make a Difference

For Everyone:

1.       Use Your TFSA First: Investment income in a Tax-Free Savings Account is tax-free and doesn't affect government benefits

2.      Choose Canadian Dividends: If investing outside registered (RRSP/TFSA/FHSA) accounts, Canadian dividend-paying stocks get better tax treatment

3.      Time Your Investment Sales: You only pay tax on investment profits when you sell (realized gains). Planning this in advance can help you reduce your tax bill.

For Parents:

Child care expenses can only be deducted against earned income (not investment income)

Higher earned income can mean lower Canada Child Benefits (but also higher RRSP room)

For Homeowners:

If you rent out part of your home, that rental income creates RRSP room

And of course keep track of rental expenses as they reduce your taxable rental income

Common Mistakes to Avoid

1.       Ignoring the TFSA: Many people max out RRSPs first, but TFSAs might be better for investment income. The allocation between the two should be part of a balanced investment strategy.

2.      Not Tracking Rental Expenses: Every legitimate expense reduces your taxable rental income

3.      Panic Selling Investments: Remember, you only pay tax when you sell and make a profit

4.      Forgetting About Dividend Tax Credits: Canadian dividends are much more tax-efficient than interest

Final Takeaways

Earned income builds your RRSP room and qualifies for work-related benefits
Passive income can be more tax-efficient, especially Canadian dividends and capital gains
Rental income is considered earned income
TFSAs are a great vehicle for investing
Timing matters when selling investments due to the way progressive tax rates work.

Understanding the difference between earned and passive income can help you make smarter financial decisions, both now and in the future. And while tax planning can get complex, knowing the basics can lead to a direct improvement in your bottom line.

Want more clear, actionable guidance on Canadian small business finance and taxes? Subscribe to my newsletter

]]>Earned vs Passive Income and Why The Distinction Matters for your TaxesPaying YourselfCanadian Income TaxRonika Khanna, CPA, CFAFri, 20 Mar 2026 04:05:00 +0000https://www.montrealfinancial.ca/blog/should-you-pay-yourself-a-salary-or-dividend-7-consideration.html509ed143e4b001bf11102ee6:5227d59be4b0867ad33932e6:5227d59be4b0867ad3393340While incorporation has many benefits for small business owners, it does introduce additional complexities that are not faced by registered  businesses. 

Unincorporated business owners are essentially taxed on their net business income, which is significantly simpler. They only have to file one tax return and are simply taxed on the profits of their business.

Incorporated business owners, on the other hand,  cannot just withdraw cash from their businesses as the need or whim arises.  There needs to be a formalized structure in place which usually takes the form of either salary or dividends.  When deciding whether to take salary or dividends there are several factors that every business owner should be aware of.

Quick Comparison

Salary (Active Income)

Tax Impact: Deductible for your corporation; taxed personally as earned income.

Retirement: Generates RRSP room and requires CPP/QPP contributions.

Quebec Bonus: Helps you meet the 5,500-hour rule for the small business tax rate.

Best For: Maximizing long-term benefits and SR&ED tax credits.

Dividends (Passive Income):

Tax Impact: Paid from after-tax profit; not deductible for the corporation.

Retirement: No RRSP room generated; CPP/QPP not required.

Simplicity: Much lower administrative burden (no monthly payroll/source deductions).

Best For: Simple cash flow and maximizing immediate tax deferral.

Related: How to Pay Shareholder Dividends & What is a Capital Dividend

Active vs. Passive Income/RRSP Contribution Room

Salaries are considered active income since they are paid to employees, while dividends are passive income paid to shareholders. Since RRSP contribution room is calculated based on active (earned) income, if your only source of income is dividends, you will not be able to build RRSP contribution room or benefit from the associated tax advantages. Similarly, child care expense deductions are based on earned income.

Tax Treatment of Salaries vs. Dividends

Salaries are paid from pre-tax income, which means they are tax-deductible. Dividends, however, are paid from after-tax earnings and are not tax-deductible.

To compensate for the additional corporate-level tax on dividends ,CRA and MRQ apply a gross-up and dividend tax credit mechanism, which reduces the personal tax payable on dividends.

The tax system aims for “integration,” meaning the total tax paid (corporate plus personal) should be roughly the same whether income is paid to the owner as salary or dividends. However, perfect integration is difficult to achieve and not always the case in practice. Note that dividends paid from income taxed at the small business rate are referred to as non-eligible dividends.

Administrative Requirements

Salaries require additional administration, including calculating, filing, and remitting source deductions (i.e. amounts deducted from your paycheque) on a monthly or quarterly basis. Late payments result in penalties and interest.

At year-end, employers must file T4s (and RL-1s in Quebec). If you are filing online, no summary is required to be sent to CRA. In Quebec, regardless of how you file, you must send an RL1 Summary.

Dividends, on the other hand, only require the annual preparation of T5s (and RL-3s in Quebec) so it is much simpler. No payment is due at the time of filing the T5, although quarterly instalments for your personal taxes may be required which are based on when income taxes on prior year income exceed $3,000.

Impact on Mortgages and Personal Financing

If you are planning to apply for a mortgage or a significant personal loan, your compensation choice matters. Banks and lenders often prefer the stability of a Salary (T4 income) over Dividends. Because dividends can fluctuate based on business performance, lenders may "discount" that income or require two to three years of history to prove consistency. If a home purchase is in your near future, a salary may simplify the approval process.

Impact on Business Income/Eligible Vs Non Eligible

Salaries, within reasonable limits, can be used to reduce taxable business income to the small business limit, which is taxed at a lower rate. Care must be taken to ensure that salaries are reasonable, as excessive amounts may be subject to scrutiny.

If you have a small business the dividend that you pay yourself will most likely be a non eligible (sometimes incorrectly referred to as ineligible) dividend. Non eligible in this case means that the corporation benefitted from the small business deduction and therefore the tax credit that you receive for payment of dividends is lower than for eligible dividends.

In some cases, however, small business owners will still be able to take eligible dividends usually when they receive eligible dividends from another corporation. This is accumulated in an account called the General Rate Income Pool (GRIP) and reflected on your corporate tax return. The balance in this account can then be paid out in eligible dividends for which recipients will pay less personal taxes. This is a complex area of tax but is useful to understand the basics.

Since dividends are paid from after-tax income, they do not reduce corporate profit. In Quebec, to qualify for the small business tax rate, a corporation must have employees who work more than 5,500 hours per year. Otherwise, the small business deduction is not available (in Quebec only).

CPP and QPP Contributions

CPP (Canada Pension Plan) and QPP (Quebec Pension Plan) contributions are not required on dividend income. This can result in annual savings of nearly $10,000 compared to salaries. However, not contributing means you will not be entitled to CPP/QPP benefits at retirement.

2026 Update: The Second Additional CPP (CPP2) In 2026, the cost of a salary has slightly increased due to the "CPP2" enhancement. For earnings between $74,600 and $85,000, there is now a second tier of contributions at a 4% rate for employers and employees (8% total for the self-employed). This makes high salaries more expensive than in previous years, which may tilt the math further in favor of dividends for high-earning owners who don't prioritize CPP benefits.

The maximum monthly CPP retirement benefit , in 2026, starting at age 65 is $1,507.65, while the average monthly amount is $803.76. Your actual benefit will depend on how much you’ve contributed to the plan over the years.

You can get an estimate of your CPP retirement pension by logging into your My Service Canada Account.

You can estimate your QPP retirement pension by logging into your Retraite Québec account using your login for “My Account for Individuals,” which provides access to both Revenu Québec and Service Québec services.

Salaries and the SRED Tax Credit

When calculating the SR&ED (Scientific Research and Experimental Development) tax credit, eligible salaries are an important part of the claim. Dividends do not qualify. If the business owner is involved in the SR&ED work, it may make more sense to take a salary to maximize the reimbursement.

Eligibility: Salaries vs. Dividends

Salaries must be paid to employees of the corporation, while dividends must be paid to shareholders. If you are only one or the other, the choice is clear.

Employment Insurance (EI) Considerations

Shareholders who own at least 40% of their corporation are not entitled to Employment Insurance, whether they receive salary or dividends. They are also not required to contribute to EI if they take a salary, unless they specifically register for the self-employed EI program.

You can also estimate your tax liability using the Simple tax calculator. When including dividends, the ineligible dividends field would be used.

A Warning on Income Splitting (TOSI Rules)

While it was once common to "sprinkle" dividends to a spouse in a lower tax bracket, the TOSI (Tax on Split Income) rules have made this difficult.Unless your spouse is "actively engaged" in the business (typically 20+ hours per week) or you are over age 65, paying them dividends could trigger the highest marginal tax rate. I highly recommend consulting with an accountant before issuing shares or dividends to family members.

The Quebec 5,500-Hour Rule

In Quebec, your corporation only qualifies for the lower Small Business Deduction (SBD) rate if it meets the 5,500-hour rule. If your company doesn't meet this threshold (approximately 3 full-time employees), your provincial tax rate jumps significantly. In some cases, paying yourself a salary (even if small) can help you reach those hours to unlock the lower tax rate for the entire corporation.

final Thoughts

The choice of salary vs dividend depends on the specific circumstances of the business owner.  It may be more beneficial to take out only the funds necessary to maintain your lifestyle while retaining any excess cash in your corporation, thereby deferring taxes.  Alternatively, by taking out a salary you may be able to maximize your RRSP and CPP contributions which can reduce your tax liability.  As always with these situations it is good to solicit the advice of your accountant.  

---

Looking for guidance on Owner Compensation?

📝 Download the Free Dividend Filing Checklist
A checklist for those of you who want to prepare your own T5 dividend declarations. Download Now

📘 Dive Deeper
Small Business and Your Dividends walks you through owner compensation strategies including a deep dive into salary vs dividends, tax considerations and step by step instructions on how to file your T5 dividend slips. Learn More.

Paying Yourself From Your Corporation tells you what every business owner should know, dispels the myths and helps you understand the math so that you can see what works for your situation. Learn More.

💬 Book a Consultation
Need personalized advice? Schedule a one-on-one session where we review the specifics of your situation and determine the best compensation strategy.
Learn More

---

]]>Choosing Between Salary and Dividends in Canada: Everything You Need to KnowDeductions and ExpensesCanadian Income TaxGuides and TutorialsRonika Khanna, CPA, CFAWed, 18 Mar 2026 05:06:00 +0000https://www.montrealfinancial.ca/blog/20-essential-tax-facts-for-small-business-owners.html509ed143e4b001bf11102ee6:5227d59be4b0867ad33932e6:5227d59be4b0867ad3393342The most common question small business owners want to know, especially around tax time, is: "What types of expenses can I deduct?"

A business expense is tax deductible in Canada if you incurred it for the purpose of earning business income. That is the CRA's core test, and it applies whether you operate as a sole proprietor, a corporation, a freelancer, or a self-employed contractor.

What this means is that most ordinary costs of running your business qualify, from advertising and software subscriptions to professional fees and office rent. Where business owners run into trouble is when expenses have a personal element, when they involve capital purchases, or when the CRA questions whether a legitimate business exists at all. In this guide, we will look at all three.

What Business expenses are deductible?(CRA-Approved)

There are a number of deductible expenses which apply to any business structure, including sole proprietorships, partnerships and corporations. Note that this also applies to freelancers, self employed individuals, independent contractors, and anyone who earns income from a side hustle or hobby.

A comprehensive list of expenses from Revenue Canada (CRA) can also be found here

Operating and Direct Costs

• Cost of goods sold, including raw materials, products for resale, shipping, duties, and packaging

• Wages and salaries paid to employees, including fringe benefits

• Subcontractor fees paid to contractors who perform work and provide you with an invoice

• Advertising and marketing costs, including online ads, website costs, and sales commissions

• Office rent, utilities, insurance, and property taxes

• Office supplies, postage, and courier costs

• Conference, training and business travel expenses

• Transportation costs such as transit passes, taxis, and ride-shares when meeting clients or suppliers

Professional and Technology Expenses

• Ongoing software subscriptions (Dropbox, Google Workspace, QuickBooks, etc.) used for business purposes

• Business publications and industry memberships that directly relate to your work

• Accounting, legal, and business consulting fees

• Bank charges and interest on business loans and credit cards

• Credit card processing fees paid to merchant service providers

Mixed-Use Deductions (Subject to Specific Rules)

• Meals and entertainment where you discussed business (50% deductible, see below)

• Automobile expensesincluding fuel, insurance, lease payments, and repairs (see below)

• Home office expenses (see below)

Restrictions Relating to Specific Types of expense Deductions

The above list captures major expenses, but keep in mind that most expenses that are incurred to earn business income are considered to be deductible. For example a writer can expense cost of paper, payments to writing associations, research costs and home office expenses.

Meals and Entertainment

With certain exceptions, only 50% of meals and entertainment can be written off. You must be able to demonstrate that the meals related to earning business income. It is a good practice to write the name of the client/customer or business purpose on all receipts in case of audit.

Life Insurance Premiums

Life insurance premiums are generally not tax deductible, unless the beneficiary is the business itself.

Capital Cost Allowance (CCA)

When you buy larger items, such as equipment, furniture, or vehicles, with a useful life exceeding one year, you cannot expense the full cost in the year of purchase. Instead, the CRA requires you to depreciate these "capital assets" over time using Capital Cost Allowance (CCA).

A few key CCA rules to know:

Each asset falls into a specific CRA class, and each class has a prescribed depreciation rate

Computer hardware, including computers, smartphones, tablets, and hard drives, generally falls under Class 50, which carries a 55% depreciation rate

You cannot use CCA to create a loss for an unincorporated business. If taking CCA would push you into a loss, you carry the excess forward and deduct it against business income in a future year

Automobile Expenses

Car expenses that are deductible include lease costs, interest on financing, repairs, gas and rental of vehicles for business purposes are deductible but are subject to specific rules. Keep in mind that CRA and MRQ (revenue Quebec) tend to require a log book i.e. a record of mileage, dates and clients. As long as you can demonstrate that they relate to business, they are deductible. There are also limits to how much you can deduct with respect to lease payments or car costs (which means that your brand new BMW is probably not deductible in its entirety).

Home Office Deduction

Home office expenses can be used to reduce business income as long as the office represents your principal place of business. The deduction is based on the percentage of your home that you can allocate to the home office.

Business Losses

Business losses, excluding CCA and home office expenses, can be used to reduce income from other sources and corresponding income taxes if you have an unincorporated business. Corporations are separate entities and as such losses cannot be deducted against personal sources of income .

Sustained losses over a few years will however lead the CRA to look more closely at your business. As such it is important for business owners to take care that there is a reasonable expectation of profit.

Clothing and Uniforms

Clothing, such as business suits or anything that you purchase in your capacity as a business owner is generally (specifically) not deductible, unless it forms part of a required uniform or protective gear that you would not reasonably wear outside of work. In other words, it cannot be something that you can wear to another occasion even if you don’t.

How to File Taxes as a Small Business Owner in Canada

Sole Proprietors and Unincorporated Businesses

You report your business income and expenses on your personal tax return by completing Form T2125 (Statement of Business or Professional Activities). Most Canadian tax software, including UFile and TurboTax, includes this form.

Corporations

Corporations file a separate corporate tax return. Because corporate returns are more complex, most business owners benefit from working with a professional accountant.

If you are weighing whether to incorporate, see my post on incorporating vs. operating as a sole proprietor.

Hobby vs. Business: Why the Distinction Matters

If the CRA decides your activity is a hobby rather than a legitimate business, you cannot deduct expenses that exceed your income.

Accrual Accounting

Business should record their revenues and expenses based on the accrual method i.e. when the sale or expense is made rather than when cash is received. The only exceptions to this rule are farmers, fisher(wo)men and self employed commissioned sales agents.

Record-Keeping

It is extremely important to keep all receipts, bills, invoices, cancelled cheques, deposit slips. If you have any doubts, then keep it! As well ensure that you retain all documents received from the government including notices of assessments and other requests for information. If you receive a letter from CRA or RQ and aren’t sure what it means, ask an accountant (or someone who might know) as ignoring it can lead to a host of other problems

Canadian Business Tax Filing Deadlines

Missing these dates leads to interest charges, penalties, or both. Here is a quick reference.

Personal and Unincorporated Business Returns

The income tax filing deadline for unincorporated businesses in Canada is June 15th which is later than the April 30th for individuals. However any tax amounts that are payable are on due on April 30th, after which both CRA and RQ start to charge interest. Penalties will only apply if the business tax returns are not filed by June 15th. Tax filing deadlines always occur on weekdays so if the general deadline falls on weekend, the filing date will be pushed to the Monday after the weekend.

Download the 2026 Business Tax Deadline Calendar

Corporations

Incorporated entities are required to file their corporate tax returns 6 months after their year end, but similar to unincorporated business, taxes payable are due 3 months after year end. Similar interest and penalty provisions apply.

GST/HST and QST

Sole proprietorships who are registered for GST/HST and QST, have less than $1.5 million in sales and have selected an annual reporting period are required to pay their GST-QST returns by April 30th. Penalties, particularly by Revenue Quebec can be significant so it is important to pay these by the deadline.

Payroll

• T4s, RL-1s, and payroll summaries are due by February 28

• CNESST (formerly CSST) Summaries and amounts due (in Quebec) are due by March 15th.

For more detail on payroll obligations, see our post on T4s and year-end payroll filing.

Tax Instalments

If you expect to owe more than $3,000 in taxes for the year, the CRA requires you to make quarterly instalment payments. The due dates are:

• March 15

• June 15

• September 15

• December 15

You can base your instalments on your prior-year tax owing or estimate them based on your current-year income.

Final Thoughts: Good Preparation Saves You Money

Although preparation for tax filing is rarely an exciting time for small business owners,  understanding what it entails and being prepared can make it a little less harrowing.  A good accounting systemwill significantly streamline the process, and can actually result in significant savings by increasing tax deductions and eliminating potential interest and penalties.  A well organized set of books can also reduce the pain and possibility of audits

Frequently Asked Questions

What is the difference between a business expense and a personal expense for tax purposes?

A business expense is any cost you incur for the purpose of earning income from your business. A personal expense serves your private needs and is not deductible. When an expense has both a personal and business component, such as a vehicle you use for both purposes, you can only deduct the business portion.

Can a sole proprietor deduct expenses that exceed their income?

Yes, with some exceptions. Business losses from an unincorporated business can generally offset income from other sources, such as employment income. However, you cannot use Capital Cost Allowance (CCA) or home office expenses to create or increase a loss. If the CRA also decides your business looks more like a hobby, it may disallow losses entirely.

What is Form T2125 and who needs to file it?

Form T2125 is the Statement of Business or Professional Activities. Sole proprietors and self-employed individuals use it to report their business income and expenses as part of their personal tax return. You do not file T2125 separately; it is included with your T1 return. See our full T2125 walkthrough for step-by-step guidance.

Do I need to keep receipts for every business expense?

Yes. The CRA expects you to have documentation supporting every deduction you claim. This includes receipts, invoices, bank statements, and contracts. For meals and entertainment, it is especially important to note the business purpose and the name of the client on the receipt at the time of the meeting.

What happens if the CRA considers my business a hobby?

If the CRA classifies your activity as a hobby, you cannot deduct expenses that exceed your income from that activity. You may also be required to repay deductions you have already claimed. The key factor is whether you have a reasonable expectation of profit and operate in a businesslike manner. Read more in our post on hobby income vs. business income.

When does it make sense to incorporate instead of operating as a sole proprietor?

The answer depends on your income level, liability exposure, and long-term plans. Incorporation can offer tax deferral advantages once your net business income reaches a certain threshold, and it limits your personal liability. However, corporations also carry higher administrative and accounting costs. Our post on incorporating vs. operating as a sole proprietorwalks through the key considerations.

What is Capital Cost Allowance and how does it work?

Capital Cost Allowance (CCA) is the CRA's system for depreciating capital assets over time rather than expensing them all at once. Each type of asset belongs to a specific class with a set depreciation rate. For example, computers fall under Class 50 at 55% per year. You claim CCA on your tax return each year, and the amount reduces your undepreciated capital cost (UCC) for the following year. See our full post on Capital Cost Allowance for a breakdown by asset class.

What are tax instalments and do I need to pay them?

If you expect to owe more than $3,000 in federal income tax (or $1,800 in Quebec), the CRA requires you to pay tax in quarterly instalments throughout the year rather than in one lump sum at filing time. This applies to self-employed individuals and business owners whose employers do not withhold enough tax at source.

How do I deduct home office expenses?

You can deduct home office expenses if the office is your principal place of business, or if you use it exclusively and regularly for meeting clients. The deduction is based on the proportion of your home used for the office. Eligible expenses include a portion of your rent or mortgage interest, utilities, internet, and property taxes. For the full rules and calculation method, see our post on the home office deduction.

Are automobile expenses fully deductible for self-employed individuals?

Not always. You can deduct the business-use portion of your vehicle costs, including fuel, insurance, repairs, lease payments, and loan interest, but you need a mileage logbook to support your claim. There are also CRA-imposed limits on deductible lease payments and the capital cost of purchased vehicles. See our post on automobile expenses for self-employed individuals for the current limits and how to track your use.

---

Want to Simplify Your Taxes?

📝 Download the Free Checklist

Get your free Small Business Tax Return Checklist to help you gather the key documents and information needed to prepare your return.

📘 Learn the Essentials

Check out my Small-Business-Tax-Resources for clear, practical guidance on Canadian small business taxes written specifically for self-employed individuals and small business owners in Canada.

🎥 Looking for Personalized Guidance?

Book a consultation to get your accounting, finance and tax questions answered and receive actionable next steps.

---

]]>Canadian Small Business Taxes (2026): What You Can Deduct, When to File, and How to SavePersonal FinanceCanadian Income TaxQuebec TaxesRonika Khanna, CPA, CFATue, 17 Mar 2026 20:22:42 +0000https://www.montrealfinancial.ca/blog/make-taxes-easier-with-this-checklist509ed143e4b001bf11102ee6:5227d59be4b0867ad33932e6:66103ea662c6d179bffe1f8e Table of Contents

The deadline to file tax returns is quickly approaching, resulting in various degrees anxiety for some taxpayers and accountants, many of whom having a number of questions about personal and business taxes.  The good news is that the stress can be managed fairly easily with some simple organization techniques.  The most effective starting point is to evaluate your tax situation and prepare a checklist of the documentation that you will need with respect to your specific tax situation. A checklist can help to ensure that important items are not overlooked in the rush to put everything together (and, of course, its always satisfying to cross something off the list).

Why File A Tax Return

• I encourage everyone to file a tax return , regardless of whether they owe tax or even have any income. There are certain circumstances where you must file tax return. But even if you don’t meet these “have to” criteria, you should file as you might be entitled to some benefits or to carryforward tax credits. More importantly, it can prevent unpleasant and protracted interactions with the government.

• The majority of Canadians have a fairly simple tax return. I’m a big proponent of people doing their own tax returns especially when it is straightforward. At the very least, you can use one of the many software out there to enter your information and then assess whether you feel comfortable with the results. You don’t actually pay for the software until you decide to submit your tax return, so the only real cost is time. Doing it on your own is also empowering and you don’t have to wonder if your tax preparer missed something or why your tax bill is so much higher than you thought.

• If you find diy-ing your tax return to be cumbersome, or you feel a sense of unease that you aren’t doing something correctly then it makes sense to seek out a professional tax preparer or an accountant. If you do submit your tax return and realize after the fact that there is an error, wait for the notice of assessment as often CRA (and Revenue Quebec) will discover the error and issue a notice of assessment with the correct information. If you receive the notice of assessment and the error hasn’t been corrected, you can then file an amended return.

Before You Start

• When prepping for taxes, I recommend creating a physical folder as well as one on your computer, where all documents that potentially relate to your taxes are saved. This might include a T4 for salary (RL1 in Quebec), T5 (RL3) for investment income, RRSP contribution slips, medical expenses, donations receipts (these have a very specific format). Additionally, you might have a T5008 which shows gains and losses on investments during the year, childcare expenses paid to a daycare or babysitter, a receipt for professional dues or education/tuition receipts.

• If you think something is tax deductible and have not received a tax receipt, it is worth reaching out to the service provider as it may have gotten lost in the mail (or your email).

• CRA also has a feature called AutoFill your return, where you can download information that they already have on file such as your T4 and T5s (since these are usually submitted electronically to them). This can reduce some of the inaccuracies of manual entry.

• If you are self employed or have an unincorporated small business, your tax return might be a little more complicated. However, I still encourage business owners who have an accounting system set up (whether it is a spreadsheet or accounting software) to give it a try. Essentially, you need to reflect your total sales for the year and expenses by category. In addition you can claim some home office and deduct car expenses (all to be discussed in greater detail in upcoming newsletters).

• CRA also has a feature called AutoFill your return, where you can download information that they already have on file such as your T4 and T5s (since these are usually submitted electronically to them). This can reduce some of the inaccuracies of manual entry.

Basic Information:

If this is the first time that you are filing your tax return, you will need the following information with respect to yourself, your spouse (common law or married) and dependents:

• Full name

• Social insurance number

• Current address

  Note that if your address has changed since the last time you filed your tax return, you must contact Revenue Canada and, if applicable, Revenue Quebec to advise them of the change before e-filing your return to avoid the inevitable confusion that can ensue from filing the tax return without making this change. The best way to do this is by signing up for “my account” with CRA and RQ.

• Date of birth

• Province of residence as at December 31st which determines where you are taxed and what tax rates apply.

• Marital status

• Quebec residents must also determine if they are signed up for the Quebec prescription drug plan or if they have private insurance to cover prescription medication.

If you have filed your tax return before either using tax software or with an accountant, this information can be carried forward. Any changes since the previous year should be assessed and changed on the tax return, if applicable.

Employment Income - T4 and RL-1(Quebec):

If you are or were an employee at any point during the year, you will have received a T4 (AND an RL-1 in Quebec) for every place that you worked whether part time or full time (even if for just a couple of weeks). If you have not received the T4/RL1 you should contact your employer and make sure that they send it to you as there can be penalties for failing to include all relevant slips.

Another way to see your T4s is to access your CRA My Account online, where any of the T4s that have been filed by your owner electronically are posted for the current and previous years.

Other t-Slips

Pension & Benefits Slips

• If you received CPP/QPP Benefits you will receive a T4A(P) slip which reflects amounts received and any taxes withheld.

• Retirees will also receive an T4 (OAS) reflecting their old age security.

• Other pension benefits are usually reported on a T4A slip

• EI benefits are also reported on T4A slips

Note that if you have received income during the year, for which you did not receive a slip, you should look into whether the item is taxable (internet searches can be a great help). If it is taxable, you should reach out to the issuer to get the slip.

Investments and Dividends - T5 and RL-3 (Quebec):

• T5 slips and RL3s are issued by financial institutions and corporations to anyone who has earned investment or dividend income in excess of $50 annually.  If you have any investments in corporations, trusts or banks ensure that you have the tax slips.  The deadline to submit T5 slips by the issuing institution is the last day of February so you should received them by early March.

• In addition to T5 slips, you might also receive a T3 slips which applies to trusts (and is very common for investments). Note that the deadline to issue T3 slips is March 31st which means that you might get these slips as late as April. As such you might not be able to do your tax return until you receive these.

  It is important to verify with your financial institution whether they will in fact be issuing a T3 before submitting your tax return as this can result in penalties for non inclusion.

• Note that there are no slips for investments in RRSPs as income accumulates tax free until it is withdrawn at retirement. There are however situations where you might withdraw funds from your RRSP early for which you will be issued a T4RSP tax slip. There is usually a withholding tax that is automatically taken which should also be entered as tax paid .

• There are also no tax slips for contributions to, or income earned in a TFSA account as the income in this account accumulates tax free. It is important to ensure you are not trading frequently otherwise CRA might consider it to be a business and disallow the TFSA tax exempt status.

• If you are an owner of an incorporated business and have taken dividends during the year, you or your accountant should prepare a T5 slip and an RL3 (if you reside in Quebec). 

Capital Gains and Losses:

If you have an investment portfolio, any gains or losses on sales of investments (i.e. realized gains or losses) must be reported on your tax return. Most investment brokers will provide clients with a T5008 - Statement of Securities Transactions - which reflects the sale of investments. However, they don’t always provide you with the cost of securities which is required to calculate the capital gain or loss.

If this is not provided by the investment provider, you will have to keep track of your purchases along with related costs and foreign currency rates on the date of purchase, if applicable.

Rental Property Income

All amounts earned from rental property must be declared, while expenses relating to rental property may be deducted.  Ensure that you have these amounts on hand to enter into form T776. These include:

• Rental income

• Interest paid on the mortgage (most banks will send you year end summary which provides you details relating to principal, interest and other fees and costs)

• Property taxes including municipal, school and water tax

• Insurance

• Utilities (if not paid by the tenant)

• Repairs and maintenance during the year

Related Article: What You Need to Know about Rental Property Income and Expenses

Unincorporated/Self Employed Business Income/T4A Box 20 or Box 48

Anyone who earns income via the gig economy, as self employed, a small business, freelancer, etc. is required to complete an additional schedule on their personal tax return referred to as the statement of business activities form T2125. 

To complete this form, you require your sales from your business and related expenses by category. This information is essentially found in a profit and loss statements which can be prepared using accounting software such as QuickBooks or compiled in an excel sheet. It is important to include the date of each transaction along with the supplier, category of the expense (eg. rent, office supplies, cost of goods sold etc.), net amount before sales tax and sales tax amounts. (Note that it essential to also maintain all the related documentation including invoices, bills, receipts, bank and credit card statements).

Many small business owners also receive a T4A for business services provided. This is usually reflected on box 20 or box 48 on the slip. These should be reported on the T2125 in the line item for income from T4As.

Read this article for a comprehensive review of tax considerations for unincorporated business (sole proprietorship or partnership)

Looking to prepare your own self employed tax return? Check out my course Self Employed Tax Return Made Simple.

RRSP Contributions and Withdrawals/First Home Savings Account (FHSA)

You should receive a slip from your financial institution for contributions to your RRSP for the current year. The slip will indicate whether it is “remainder of the year” of the “the first 60 days of the current year ” both of which can be deducted on your taxes.  

Keep in mind that you are only allowed to claim RRSP contributions that do no exceed your unused contribution room. This information can be found on your prior year notice of assessment from Revenue Canada. If you overcontribute to your RRSP, penalties will apply.

The T4RSP slip represents any withdrawals taken during the year along with the withholding tax. This must be reported on your tax return.

You should also receive a contribution slip for FHSAs which are a tax deduction similar to RRSPs. The difference is that you can only contribute in the year pertaining to your tax return whereas with RRSPs you can contribute up to two months after the end of the calendar year.

Medical Expenses

Individuals are entitled to claim medical expenses that exceed the lower of 3% of their net income or $2,834 in 2025.

Note that medical expenses can apply to any 12 month period as long as at least one month pertains to the current taxation year and was not previously claimed.   All expense receipts including date of visit, name of healthcare provider and amount should be accumulated which includes any amounts paid by the individual (not the employer unless in Quebec) to a private health insurance plan

To determine if the medical expense is claimable, you can see this comprehensive list from CRA

Union or Professional Dues

If you contribute to a union or are a member of a professional order, you are usually allowed to claim this as a deduction.

Related: Line 21200 - Annual union, professional, or like dues

Charitable Donations

All amounts paid to charities must be supported by official receipts from the registered Canadian charity and the amounts paid should correspond to the receipts (there is often a service component that is not included in the total amount).

Also note that amounts contributed to an American charity can only be deducted against income received from the US. International charity donations are generally not deductible.

Related: 9 Facts About Charitable Donations

Tuition Amounts

If you have enrolled for post secondary education, you will likely receive a T2202, T2202A, TL11A, B or C.  from your educational institution which means that it is deductible. If you do not receive a slip, you should reach out to the educational institution to determine if it is in fact tax deductible.

Any scholarship or grants should also be reported as income, for which you will usually receive a tax slip. Usually enrollment in a full time education program offsets any taxes owing on scholarships.

Interest paid on student loans is tax deductible. You will receive a document from your financial institution indicating the amount that is deductible.

You can also carry forward tuition expenses from prior years that have not been offset against income. This is why students enrolled in post secondary education should complete a tax return even if they don’t have any income to report (they will also be entitled to a GST credit).

First Time Home Buyer’s Credit

If you are a first time home buyer, you are entitled to claim a tax credit of up to $10,000. To qualify both of the following conditions should apply:

• you or your spouse or common-law partner acquired a qualifying home

• you did not live in another home owned by you or your spouse or common-law partner in the year of acquisition or in any of the four preceding years (first-time home buyer)

Although no documents need to be sent at the time of filing, the CRA might ask to see copies of the purchase agreement and other documentation (which you should have on hand in case they ask)

Related: Line 31270 – Home buyers' amount

Sale of Principal Residence

If you have sold your principal residence (your home) during the year, you must report the details of the sale on Schedule 3 which is where you report capital gains and losses. You are not taxed on the proceeds but if you neglect to report it, capital gain exemption will be disallowed.

Dependants

You are allowed to claim certain expenses for your dependants for which you must have documentation.  These include: 

• Babysitter

• Boarding School

• Daycare

• Camp

• Tuition (see above)

In most cases you will receive a tax slip or document that will provide you with the exact amount that you are allowed to claim.

In Quebec, individuals receive the RL24 which should reported on the tax return. Quebec subsidized daycare is not deductible in Quebec, however, it is deductible on your federal (CRA) return.

Babysitters must provide a receipt that includes their social insurance number, name period to which the babysitting applies and total amount received (as this is reported on their personal tax return as business income).

Home Office Expenses

The temporary flat rate method, that was allowed during the Covid years, is no longer an available option. Instead, to claim your home office expenses, you must have your employer complete and sign the T2200 detailing the types of expenses you are entitled to.

Foreign Income verification statement T1135

If you have any foreign property, investments, bank accounts etc. the combined total of which exceeds $100,000 in Canadian dollars it must be reported on the T1135. Failure to report this by the deadline of April 30th for individuals or June 15th for self employed individuals can result in a hefty penalty.

Related: T1135 Foreign Income Verification Statement

Other income and deductions to consider

• Workers compensation T5007

• Moving expenses can be deducted if certain criteria are met.

• Carrying charges (e.g investments fees) on investments can be deducted against taxable investment income

• Determine if the caregiver amount is applicable to your situation

• Eligible teachers are entitled to a tax credit for school supplies purchased by them

• Disability tax credit for disabled members of the family

There are a variety of other tax items, the majority of which will be accompanied by some sort of tax slip or other documentation.  When you receive something that looks vaguely official it is always a good idea to keep it and if you are unsure what to do with it, seek the guidance of an accountant. 

If you are e-filing your return, then it is not necessary to include any of the tax slips or supporting documentation, however CRA or RQ might ask for the supporting documentation (and generally do for tax items that are not received electronically by them).

It is good practice to keep your tax return and related documents for at least 6 or 7 years after the year for which the income tax return is filed.  It is important to note that it is the responsibility of taxpayer to ensure that they meet their tax obligation and report all (worldwide) sources of income .  Although this same obligation does not necessarily extend to deductions and credits, it is clearly in the taxpayers interest to ensure that they claim everything that they are entitled to.

Interested in improving your financial literacy? Sign up for my newsletter for expert insights on tax, finance, and accounting, designed for self employed and small business owners.

]]>The Complete 2026 Canadian Tax Checklist for Individuals & Self-EmployedRonika Khanna, CPA, CFASat, 28 Feb 2026 03:25:00 +0000https://www.montrealfinancial.ca/blog/roadmap-to-retirement509ed143e4b001bf11102ee6:5227d59be4b0867ad33932e6:65c98fabc71a2350e9535574For many of us, retirement seems like a long way off and consequently we perhaps don’t spend enough time thinking about it until it’s too late to make much of a meaningful change. Unlike employees, business owners don’t receive consistent cash flow in the form of a salary nor do they have the safety net of an employer-sponsored pension plan. Excess profits are often reinvested in the business or simply accumulate in a bank account while you attend to more pressing matters. This is why having a some sort of retirement plan is essential.

The Power of Compounding

To demonstrate the power of compounding, consider this: 5,000 per year over 30 years i.e. a total investment of $150,000 invested at 5% (which is lower than the average return on the stock market) would result in $338,899.11 at the end of 30 years. This applies to all types of investments and is essentially the power of compounding which is a function of the rate of return and time i.e. the number of years the investment is earning the return. This demonstrates that contributing, even small amounts, as early as is possible, can lead to a significant nest egg.

Sources of Retirement Income for the Self Employed

Unlike employees, business owners don’t receive consistent cash flow in the form of a salary nor do they have the safety net of an employer-sponsored pension plan. Excess profits are often reinvested in the business or simply accumulate in a bank account while you attend to more pressing matters. This is why having a some sort of retirement plan is essential.

The key sources of retirement income available to Canadian small business owners

(There is also Old Age Security, but this is automatic at retirement)

Canada (Quebec) Pension Plan(CPP or QPP)

• The CPP is a government-administered program that essentially provides a basic level of retirement income. Contributions are mandatory.

• If you are an employee or owner manager of a corporation that receives a paycheque, you will contribute roughly 6% of your gross pay (up to a maximum salary amount of approximately $80k) while your employer/corporation contributes an equal amount.

• If you are self employed, since you don't have an employer, you must contribute twice the amount of an employee or about 12% . The maximum salary amount is the same.

• While this may seem like a significant amount, the advantage of mandatory contributions is that you are guaranteed to receive a pension upon retirement.

• Currently, the maximum CPP benefit is projected to be $1,500 per month, but most Canadians receive less, with the average around $800 per month. Note that this is indexed to inflation and will increase each year.

• The amount that you receive depends on how much you have paid into the plan which is directly proportional to your earnings and how many years you have contributed.

Registered Retirement Savings Plans (RRSPs)

• While CPP provides a foundation, it’s often not enough for a comfortable retirement. Consequently, if you do not have another type of pension plan or a nest egg, it is important to have RRSPs.

• An RRSP, for those of you who don't know, is a tax-deferred savings account that allows you to set aside money for retirement. The benefit and incentive of RRSPs is that contributions, up to a maximum limit, reduce your taxes payable in the year that you contribute.

• To contribute, you would set up an RRSP account with your bank or a brokerage and invest your contributions. These investments will then grow over time.

• As an incentive to start as soon as possible (although it is important to remember that it is never too late) consider the example above where we looked at the power of compounding.

• The maximum amount you can contribute in any given year is the total of:

18% of the previous year's earned income (this can be found on your notice of assessment for last year)

Plus

Any unused contribution room from previous years (also on your notice of assessment)

• Since RRSPs reduce your taxable income, the benefit is greater when you have higher levels of income that are subject to a higher tax rate.

• While you can withdraw from most RRSPs anytime, you will have to pay tax (at your current tax rates) if done before retirement and you lose the contribution room. So, while early withdrawal is an option, it is not recommended.

• Once you do retire, you would convert your RRSP to a RRIF and are required to withdraw a minimum amount each year starting at age 71. The amount that you take out is then taxable.

Other Sources of Retirement Income for the Self Employed/Small Business Owner

Old Age Security (OAS)which is a monthly stipend paid to all Canadians at approximately the same rate. Currently this is about $740 per month. Note that above a certain amount of income, this is clawed back.

Tax Free Registered Savings (TFSA) Withdrawals are 100% tax-free at any time and don't count toward the OAS clawback

Employer Pension Plan (RPP) is usually applicable to employees who work for the government as well as some businesses in the private sector.

Corporate Investment Portfolios for those who are owners of corporations and have set up investment portfolios for their excess earnings

Other Personal Assets/Savings including home equity, especially if you expect to move after retirement and non registered savings/investment account.

How Much Do You Actually Need?

No matter what stage of life you are in, it is useful exercise to estimate how much you might need to retire. There are a variety of retirement calculators out there. This one from Revenue Canada is quite thorough. I also like this one from Wealthsimple. Note that like with all estimates, it doesn’t have to be exact. But most of us can extrapolate our future expenses based on our current lifestyles.

Steps to Start Saving

Like with anything difficult, it is helpful to build a habit around saving.

• Once you know how much you want, you can work backwards (using an online calculator and some assumptions) to determine how much you need to save monthly or annually.

• Create an entry in your calendar to remind yourself to contribute or automate withdrawal of a monthly amount from your bank account.

• Make sure your underlying investments are consistent with your long term goals by speaking with an advisor at your bank/brokerage or a financial planner.

If you feel stressed about whether you’re saving enough for retirement, you’re not alone—this is a common sentiment among many Canadians. The good news is that it isn't that hard to assess your situation and make small, consistent efforts towards building a comfortable retirement.

Want more clear, actionable guidance on Canadian small business finance and taxes? Subscribe to my newsletter

]]>Retirement for the Self-Employed: A Guide to Canadian Pension SourcesDeductions and ExpensesCanadian Income TaxRonika Khanna, CPA, CFASun, 25 Jan 2026 20:52:25 +0000https://www.montrealfinancial.ca/blog/tax-deductions-every-self-employed-business-owner-should509ed143e4b001bf11102ee6:5227d59be4b0867ad33932e6:6976795727362c6e6cc7bb12If you’re self‑employed, you probably know that business expenses can reduce your tax bill, but knowing what you can deduct (and how) is where things can seem a bit confusing.

One of the most common issues I see when in my discussions with self employed business owners is not properly claiming expenses. There is a lot of conflicting information, and it is easy to be unsure about what actually counts as a legitimate deduction.

I have written a number of articles that outline key tax‑deductible expenses. In this post, I highlight ones that apply to many (if not most) self‑employed business owners, along with important rules and common misunderstandings to watch out for.

1. Home Office Expenses

If you work primarily from home and don’t have another office, you may be able to deduct home office expenses.

To simplify things (and avoid unnecessary complexity), I generally recommend having a space that is used exclusively for your business. This can be a separate room, or a clearly defined area within a room.

Once you’ve identified your workspace, you calculate:

• The square footage of your office space

• Divided by the total square footage of your home

That percentage is then applied to eligible home expenses, such as:

• Rent

• Utilities

• Home insurance

• Property taxes

• Maintenance expenses

• Mortgage interest (interest only — not principal)

It’s important to keep a simple schedule showing:

• Your calculations

• The percentage used

• The expenses claimed

For unincorporated business owners, these expenses are reported on Form T2125 (Statement of Business Activities).

👉 You can read a more detailed breakdown of home office expenses here

2. Vehicle (Car) Expenses

Vehicle expenses don’t apply to everyone especially in the current business environment for so many of us that work online and meet with customers virtually. Tut for those who do use a car for business, this can be a significant deduction.

The key principle is the same whether you’re incorporated or unincorporated: Only the business‑use portion of your vehicle expenses is deductible.

To determine this, you should keep a mileage log that tracks:

• Business kilometres driven during the year

• Total kilometres driven during the year

Your business‑use percentage is calculated by dividing business kilometres by total kilometres.

You then apply that percentage to vehicle expenses such as:

• Fuel

• Insurance

• Repairs and maintenance

• Leasing costs or depreciation

If you’re incorporated, there are additional options (such as per‑kilometre allowances or having the corporation own the vehicle), but these come with additional considerations and potential taxable benefits.

Good record‑keeping is essential here, as mileage logs are commonly reviewed in audits.

For a more detailed analysis, check out my post on vehicle expense rules for both sole proprietors and incorporated businesses

3. Subscriptions, Software, and Professional Dues

Many self‑employed business owners overlook how quickly subscriptions and software costs add up.

Expenses in this category may include:

• Accounting or bookkeeping software

• Cloud storage (e.g. document management tools)

• Design or marketing software

• Professional association dues

• Licenses required to operate your business

As long as these tools are used primarily for business purposes, they are generally deductible.

It’s a good idea to periodically review your subscriptions to ensure:

• They’re still needed

• They’re being claimed appropriately and relate to your business

For a more detailed analysis, check out my post on membership/subscription expenses that you can deduct

4. Phone and Internet Expenses

Phone and internet costs are often connected to home office expenses, but they are usually calculated separately.

Unlike home office expenses (which are based on square footage), phone and internet deductions are based on business usage.

For example:

• You might use your internet 50% for business

• Your phone usage percentage may be higher or lower

The important thing is to have a reasonable and supportable calculation. The percentages for phone and internet do not need to match your home office percentage.

Expenses may include:

• Cell phone plans

• Internet service

• Video conferencing tools (e.g. Zoom)

5. Training, Courses, and Conferences

Training and education expenses are deductible when they relate to your current business.

Generally deductible:

• Courses that improve or update existing skills

• Training related to finances, marketing, technology, or operations

• Short‑term workshops or professional development

However, there’s an important distinction to understand.

If a course is taken to acquire an entirely new skill set (for example, training for a new profession), the cost is not deducted immediately. Instead, it’s treated as capital property and written off over time through capital cost allowance.

Conferences have additional rules:

• You’re generally limited to two conferences per year

• The conference should be directly related to your business

• It should not reasonably be available closer to home

For a more detailed analysis, check out my post on conference, course and training expenses for self employed small businesses.

Professional Fees

Professional fees are one of the most straightforward deductions.

These may include fees paid to:

• Accountants or bookkeepers

• Lawyers

• Consultants or advisors

• Translation services

For example, if you book a consultation with me it is tax deductible since it usually directly relates to your business.

Annual registration and filing fees required to operate your business are also deductible.

One Common Expense That Is Not Deductible

A common misconception is that clothing and personal grooming expenses are deductible if you use them “for business.”

In most cases, they are not deductible, including:

• Everyday clothing

• Haircuts

• Makeup

• Personal appearance costs

The main exception is a required uniform that is clearly identified with your business (for example, branded clothing with a logo).

Read more on why clothing expenses are not deductible

Final Thoughts

When claiming business expenses, it’s helpful to put on your “business hat” and ask:

• Does this expense relate directly to my business?

• Are there specific rules that limit or restrict this deduction?

You should absolutely claim all expenses you’re entitled to, but for areas like home office, vehicle, phone, and internet expenses, it is important to be reasonable. Taking a conservative approach reduces stress and being flagged by Revenue Canada.

---

Looking for support as a self-employed business owner?

If you’d like ongoing guidance, you can:

• sign up for my newsletter, or

• download one (or more) of my free resources

If you’re looking for deeper support, you can also join Ask Ronika which is a membership where you can ask questions, learn about small business finance, and be part of a supportive community.

---

]]>6 Tax Deductible Expenses Every Self-Employed Business Owner Should KnowQuickbooksSmall Business Accounting & AnalysisGuides and TutorialsRonika Khanna, CPA, CFAMon, 29 Dec 2025 21:34:00 +0000https://www.montrealfinancial.ca/blog/how-to-close-your-year-or-period-end-in-qbo509ed143e4b001bf11102ee6:5227d59be4b0867ad33932e6:619d5e5ba95bc50362b6e391Doing your own accounting in accounting software such as QuickBooks Online (QBO) is relatively straightforward especially if you have set up your QBO file optimally.  You periodically enter invoices, expenses, bills and allocate transactions from the banking download.  And while QBO is designed for non accountants, it is also equally appreciated by many accountants for its simplicity and user friendliness (although, as with any software product, there are grievances). 

There does come a point, however, when you might notice that some things don’t look right.  The bank balance or credit card balance might not match to the QuickBooks balance or your income and/or expenses might seem much too high or inconsistent with previous years.   The solution to identifying and fixing these discrepancies is to perform what accountants refer to as year end (or month end) closing procedures, that if done properly, should correct any discrepancies that crop up.  The ultimate goal of closing the books monthly or annually is to ensure that you can rely on the integrity of your data. 

---

Digital download Available at Amazon

---

What does it mean to close a period in accounting?

Day to day accounting involves entering invoices, bills, expenses, transfers and all other types of transactions that happen regularly in a business.  This can simply involve a handful of invoices, bills, payments and bank/credit card transactions for small owner managed businesses while larger organizations might have more numerous and somewhat more complex transactions to enter.

Closing a period is meant to:

• Capture transactions that are not entered as part of the regular routine of entering transactions

• Catch errors, omissions and duplicates

• To ensure that each account balance (as represented by the chart of accounts) is accurate. This often requires adjustments. 

A year end or period/month end closing involves certain procedures which, when deployed, can help you to ensure that your books are as pristine as possible. 

What are procedures for closing the books ?

Generating Reports in QBO

To generate a balance sheet in QBO, go to reports  and from favourites select “balance sheet”.  A profit and loss report can be generated in the same way.

Other reports that are referenced below including Accounts Payable (AP) Aging summary and Accounts Receivable (AR) Aging summary, inventory summary and detail, sales tax reports etc. can all be found in the reports section. It is a good idea to review all the reports available in QBO to which ones pertain to your situation and might provide insights and guidance on your business.

Tip: When you have generated a report, pay attention to the date range and other options on the top of the report. For the date range you would want to choose the period you are reviewing and make sure you “run report” (otherwise the data will not update)

Year End Closing Procedures for Balance Sheet

The video below shows you how to review your balance sheet at year end

The balance sheet is where you can see a list of your asset, liability and equity accounts. 

Assets include the balances in your bank account, accounts receivable, inventory, fixed assets such as equipment and investments. 

Liabilities include amounts owing to suppliers, credit card balances, taxes payable, loans from banks and related parties.  Equity accounts show how much owners have contributed to the corporation and accumulation of profit and/or losses since inception, which is collectively known as retained earnings. 

The purpose of the year end closing is to review each account on the balance sheet to ensure that the balances are accurate.

Bank and credit card accounts

These should be reconciled at the end of each period, ideally monthly, using the reconcile feature in QBO.  For very small businesses with only a handful of transactions, the bank and credit card reconciliations can be done less frequently.  It is, however, essential that you do reconcile your accounts.  

A bank reconciliation does not necessarily mean that the bank balance on the balance sheet has to be exactly same as the amount on the bank statement; it just means that any reconciliation differences should relate to outstanding transactions such as cheques issued and not cashed or deposits made but not yet processed etc.

Accounts receivable

Amounts that customers owe you (accounts receivable) should be compared to the accounts receivable aging summary (that can be found by going to reports) to ensure that they match.  If the total balance doesn’t match, this needs to be investigated.  Usually this is a result of entering a transaction improperly to the accounts receivable account (such as through a journal entry) without reflecting a customer. 
Additionally, review each customer balance on the AR aging summary and determine whether it is accurate of whether any amounts need to be written off as bad debts or require further investigation.

Inventory

The total inventory asset amount on the balance sheet should be compared to the inventory summary report in QBO to ensure that the totals match. 

Inventory items should also be reviewed individually to determine if they need to be adjusted for obsolence or errors.

Fixed assets

This includes equipment and furniture should be reviewed to determine if any have been sold or are no longer be used and should be written off.  It is important to keep track of fixed assets adjustments as tax treatment is often different from accounting treatment.
An important year end (and for some monthly) adjustment relates to depreciation of fixed assets. See my article on how to record the journal entry for depreciation.

Investments, loans receivable, prepaid expenses, deposits and other assets

These should also be reviewed to determine if they are still valid and adjustments made if necessary.

For example, a common prepaid expense is a rental deposit that you made towards your rent for a specific month or period. If this period has passed you must reallocate it from the deposit account to the rent expense account.

Investment accounts should be reconciled to the statement from your broker, using book values + any income received.

Undeposited funds

This is an account that is used to track deposits from customers and can often cause issues in QBO or any other accounting system as sometimes deposits are not correctly allocated to this account.  Any balance in this account should only represent payments received from customers but not yet deposited to the bank account.  It is rare to have amounts in undeposited funds that are older than a couple of weeks.

Accounts payable

Accounts payable is similar to accounts receivable and should be compared to the AP Aging summary to ensure that the balance on the balance sheet matches the balance per the AP aging summary report. 

Also individual accounts payable balances should be reviewed to determine if adjustments need to be made.

Credit cards

All credit cards should be reconciled to the credit card statement by using the bank reconcile function in QBO.

Sales tax and Payroll balances

The amounts reflected on the balance sheet should match the balance in the Taxes tab in QBO and usually reflect the balance owing for the period that has not yet been filed and submitted. 

They should also agree to the balances payable or receivable reflected in CRA My Business Account (and RQ My Business Account). 

Finally, you should generate a sales tax detail report to review whether GST/HST and QST codes in QBO are being properly applied to sales and expense transactions (frequently a taxable transaction will show up as exempt and vice versa or the wrong tax code will have been applied)

Bank and other loans payable

These should be reconciled to the loan statements which should be available from your bank or lender. This helps to ensure that the principal balance is correctly shown as a liability and the interest properly shows up as an expense on the profit and loss statement.    

Accrued payables

Also known as accrued liabilities represent amounts owing to suppliers for which a bill might not yet have been received or salaries/bonuses payable to employees that have not yet been processed through payroll.  These charges are usually entered via journal entry and should relate to the period being reviewed.   

Shareholder loan

The shareholder loan account specifically relates to corporations, should be reviewed to ensure that the balance accurately represents what the corporation owes to the shareholder (s) or what the shareholder owes to the corporation.  In the case where an individual (non corporate) shareholder owes the corporation funds, ensure that these funds are either repaid within one fiscal year or declared as dividends to the shareholder.

Equity accounts

These should be reviewed for any changes.  If share capital has increased for a shareholder, ensure that the funds have actually been received.

Retained Earnings

The retained earnings balances should agree to the retained earnings balance from the previous year + the profit or loss from the current year.  If not, there might be an entry that was made directly to retained earnings which would need to fixed.

Foreign currency revaluation

If you have foreign currency turned on in QBO, you must revalue balances on the balance sheet as of the year end date. QBO allows you to revalue the currency for balance sheet accounts on any date you choose by going to the gear/settings/currencies.

Year End/Month end Closing Procedures for the profit-loss

One of the benefits of a comprehensive review of each account on the balance sheet is that it fixes most of the issues with the profit and loss. 

Bank/ credit card reconciliations takes care of errors, duplicates and omissions that affect bank and credit card accounts. 

AR , AP and Inventory reviews ensure that sales, expenses and cost of goods sold are properly reflected. 

Agreeing loan balances to loan statements ensures that interest is properly allocated to the expense account. 

Procedures for a profit-loss review are largely to ensure that the allocation to each account in the profit and loss is accurate.

• Generate a detail report from QBO of all transactions in the profit-loss and review each transaction to ensure that it has been allocated to the proper account.  If this report is simply too large to review each transaction, you can export the report to excel and choose transactions that exceed a certain amount. 

• Compare the balances in each account on the profit loss to the previous year and investigate any large differences.  Sometimes this will reveal inconsistencies in allocation from year to year.

• Ensure that any accounts that have tax implications, eg. Meals, properly include all transactions.

• Enter any year end adjustments, that have not been entered already, such as home office expenses, depreciation entries (discussed above), income tax journal entries etc.

Tip: If you are simply doing a month or quarter end closing, you do not have to do all the procedures listed above especially for transactions that might only need to be entered once a year.  Of course, the more frequently you perform these procedures, the less work you will have to do at year end when recalling the transactions can be a bit more challenging.

Closing the Books in QBO

Once you are satisfied that your balances seem correct, you can go in and close the books in QBO for the period that you have finished reviewing by going to settings/company settings/advanced/accounting and entering your year end (or period end) date in “close the books”.  You can also choose to set a password, which I strongly recommend.  This ensures that you are warned before making any changes to a date prior to the closing date.  Since your tax reporting is based on these numbers, any changes after your tax returns have been submitted can result in overstatement/understatement of income/expenses which can lead to numerous issues in the future.   

Once this is done, nothing more needs to be done in QBO.  If you did miss a transaction (or a few) that relates to the previous year, generally you can enter it in the current year as long as it isn’t significant.  If it is significant, you might have to amend your tax filings. 

Download your free QBO setup checklist or join my newsletter to set up your business for success from the start!

]]>How To Close Your Year End (or Period End)in QBOCanadian Income TaxManaging Business FinancesGST/HST & QSTSales TaxesQuebec TaxesRonika Khanna, CPA, CFASat, 13 Dec 2025 03:32:00 +0000https://www.montrealfinancial.ca/blog/is-the-quick-method-of-reporting-gsthst-qst-the-right-choice.html509ed143e4b001bf11102ee6:5227d59be4b0867ad33932e6:5227d59be4b0867ad339334eIf you are a self-employed individual or a small business in Canada with annual sales between $30,000 and $400,000, you are likely looking for ways to simplify your tax obligations. The Quick Method of reporting GST/HST and QST can be a great option to do just that. It's essentially a simplified alternative to the regular method of reporting sales taxes. While the regular method requires you to track and calculate every dollar of sales tax collected and paid (known as Input Tax Credits, or ITCs), the Quick Method allows you to apply a single, reduced rate to your total sales. The tradeoff is that you generally don't claim back taxes paid on expenses.

Below, I'll break down how the Quick Method works, its specific rates for service-based businesses, and provide a simple way to calculate if this method is worth it for your small business.

Quick Method Calculator for GST

Are You Eligible to Use the Quick Method?

The Maximum Taxable Sales Threshold

• Your total taxable sales (including GST/HST) are $400,000 or less over a 12-month period

• You exclude things like financial services, real estate sales, and selling business assets when doing this calculation

• Your business has a permanent establishment in Canada

• If your business is registered in Quebec, then the for QST purposes, your annual taxable sales be less than $418,952.

Business Types That Cannot Use the Quick Method

• persons that provide book keeping, financial consulting, tax consulting or tax return preparation services in the course of their commercial activities e.g. bookkeepers, financial/tax consultations

• persons that provide legal, accounting or actuarial services in the course of their professional practice i.e. accountants and lawyers

• listed financial institutions

• charities

• public institutions

• non–profit organizations with at least 40% government funding in the year (qualifying non–profit organizations)

• See the full list of exceptions

How Does the Quick Method Compare to the regular Method?

With the regular method, you would charge your customers GST/HST (and QST in Quebec). The amount that you collect must then be remitted to Revenue Canada (CRA) when you file your GST/HST Return. You are also allowed to claim back GST/HST paid on expenses.

With the Quick Method, you would still charge your customers GST/HST (and QST in Quebec). However, the amount that you have to remit to CRA is at a lower rate. The tradeoff is that you are not permitted to claim sales taxes paid on expenses.

Example Calculation of Regular Method vs quick Method:

• Assume an Ontario-based service business with:

  • $100,000 in sales (before HST)

  • 13% HST, so $13,000 collected

  • $20,000 in expenses, on which HST was paid

  Regular Method

  Under the regular method:

  • HST collected: $13,000

  • HST paid on expenses:
    $20,000 × 13% = $2,600 (claimed as ITCs)

  HST remitted to CRA:
  $13,000 − $2,600 = $10,400

  Quick Method

  Under the Quick Method (service-based business in Ontario):

  • You calculate remittance based on total sales including HST

  • Total sales including HST:
    $100,000 + $13,000 = $113,000

  • Quick Method remittance rate: 8.8%

  • Plus a 1% credit on the first $30,000 of sales

  Step 1: Calculate the Quick Method amount
  $113,000 × 8.8% = $9,944

  Step 2: Apply the 1% credit
  $30,000 × 1% = $300

  HST remitted to CRA:
  $9,944 − $300 = $9,644

  The Difference

  • Regular Method: $10,400

  • Quick Method: $9,644

  Savings using the Quick Method: $756

From the example above, we can see that if you have a service based business, with low taxable expenses, you can save money by using the Quick Method.

Is GST/HST Paid on Capital Assets Claimable Under the Quick Method?

Under the Quick Method, GST/HST paid on day-to-day expenses is generally not recoverable. However, GST/HST paid on capital assets, such as a car, computer, or real property, can still be claimed, which helps offset larger one-time purchases.

Below is a brief explainer video, with example, of how the Quick Method works.

What are the Quick Method Rates

The Quick Method rates you use depend on what you sell and where you are located.

If 40% or More of Your Sales Are From Goods Purchased for Resale

If 40% or more of your sales come from goods purchased for resale (that is, tangible items you buy and resell — such as vehicles, furniture, inventory, or animals):

• GST Quick Method rate: 1.8%

• QST Quick Method rate: 3.4%

If Less Than 40% of Your Sales Are From Goods (Service-Based Businesses)

If less than 40% of your sales are from goods purchased for resale (in other words, you are effectively a service-based business):

• GST Quick Method rate: 3.6%

• QST Quick Method rate: 6.6%

1% Credit on the First $30,000 of Sales

For both GST and QST, you are eligible for a 1% credit on the first $30,000 of sales when using the Quick Method.

If You Charge HST

If you charge HST, the Quick Method rates vary by province, so the applicable rate depends on where your business is located.

Important Clarifications

• The Quick Method does not change the tax rate you charge your customers.
  You still charge:

  • 5% GST

  • 9.975% QST

• The Quick Method rate is applied to your total sales including the tax.
  As shown in the example above, the rate is applied to $113,000 (sales + tax) — not $100,000.

How to Start Using the Quick Method

• To start using the Quick Method for GST and HST anywhere in Canada , except Quebec, you must complete election GST74 Election and Revocation of an Election to use the Quick Method of Accounting. The application can also be made using CRA My Business Account

• To use the Quick Method in Quebec for both GST and QST ,you must complete form FP-2074-V, Election Respecting the Quick Method of Accounting for Small Businesses, and file it with Revenu Québec. Acceptance of the election will be confirmed in writing.

• The deadline for the application for the Quick Method are as follows:

  • For Quarterly or monthly returns, it must be before the due date of the filing. For example, if you file quarterly and your due date is April 30th for the period from January 1st to March 31st, the election must be filed by April 30th.

  • For annual returns it must be no later than the first day of the second quarter. This would be April 1st for all businesses with a year end of December 31st. For any other year end date that is not the calendar year, the due date for the election is three months + 1 day after the year end.

• Once the election has been approved, it can be revoked (reversed) after waiting for a minimum of one year. 

When to Use the Quick Method

Because the Quick Method is simpler than the regular GST/HST and QST reporting method, it can be an effective way to meet your sales tax obligations while reducing bookkeeping time and complexity.

The Quick Method generally makes sense if you:

• have low taxable expenses, and

• have high sales relative to your expenses

In these situations, the Quick Method can result in both time savings and lower net tax remittances.

As shown in the example above and using the Quick Method calculator below, a service-based business with:

• $50,000 in sales, and

• $5,000 in taxable purchases

would save approximately $660 by using the Quick Method. Over time, these savings can add up.

This example assumes a service-based business using the 3.6% GST Quick Method rate.

Quick Method Calculator for GST

When Not to Use the Quick Method

The Quick Method is not always the best choice.

Businesses with higher taxable expenses, particularly startups, may actually pay more under the Quick Method because they give up the ability to claim full input tax credits on those expenses.

Using the same calculator above, if your taxable expenses increase to $20,000, the Quick Method would result in a higher remittance than the regular method.

For this reason, it’s important to estimate your taxable expenses before electing the Quick Method.

That said, for businesses with minimal ongoing expenses such as many consultants, programmers, and contractors (as long as you don’t fall under the exceptions list noted above) the Quick Method can be a very practical and cost-effective option.

---

Take the Next Step for Your Small Business Finances

Interested in becoming more confident with your small business/solopreneur finances? Choose your next step:

📚 Free Resources & Tips: Download one of my free resources and/or sign up for my newsletter where I provide practical tips and advice.

🛑 Stop Googling Your Questions: Join the Ask Ronika Membership for instant access to direct answers, a growing library of masterclasses and guides, and a supportive community.

🤝 Personalized Guidance: Book a consultation for personalized answers to your specific questions and customized financial guidance.

---

---

]]>Is the Quick Method of Reporting GST/HST & QST the Right Choice for your Small BusinessSmall Business Accounting & AnalysisManaging Business FinancesRonika Khanna, CPA, CFAFri, 12 Dec 2025 20:52:00 +0000https://www.montrealfinancial.ca/blog/how-to-prepare-a-business-budget.html509ed143e4b001bf11102ee6:5227d59be4b0867ad33932e6:5227d59be4b0867ad3393320As a solopreneur or small business owner, you might not think a budget is necessary. And for some businesses, that may be true especially if you have a service based business with steady income and minimal expenses.

But for many small business owners, cash flow can be inconsistent from month to month. Your sales can be very high one month and much lower in other months. Similarly you might have to pay a significant expense in particular months, while others are much leaner. And while this uncertainty is part of what makes entrepreneurship exciting, it also makes it stressful.

One of the most effective ways to reduce that uncertainty is to create a cash-flow budget and update it as your actual numbers come in.

A budget, very simply, is a tool that helps you predict your sales, expenses and profitability as well as your cash flow needs.  It is based on estimates, which in turn are based on a combination of experience, history and industry knowledge. In terms of presentation, a budget should be similar to your profit and loss statement. A cash flow budget will also include all of your other inflows and outflows.

Why a Budget Matters (Especially at Year-End)

The end of the year is an ideal time to set up a budget for the year ahead.

It’s when many business owners are:

• reflecting on what actually happened this year

• thinking about upcoming expenses, renewals, and taxes

• wondering what next year will realistically look like

A budget helps shift you from simply reacting and potentially making rash decisions, to knowing what’s coming and planning ahead. It gives you clarity around what your business can support and where adjustments might be needed.

Managing Uncertainty as a Small Business Owner

One of the defining characteristics of running a small business is uncertainty. You may have a great product or service, but it’s not always clear how you can translate it an ongoing consistent stream of income.

Of course a budget doesn’t completely eliminate uncertainty, but it does put structure around your finances.

Rather than guessing month to month and hoping for the best, a cash-flow budget allows you to:

• make informed assumptions

• see how those assumptions play out

• adjust before small issues become bigger problems

It’s important to remember that a budget is an estimate based on:

• your experience

• your business history (for those of you who have it)

• your intuitive understanding of your business

As your business evolves and more information becomes available, your budget becomes more robust.

Cash-Flow Budget vs. Profit & Loss Budget

Before going further, it’s important to clarify what the distinction between a cash flow budget and a profit-loss budget.

For most solopreneurs and small business owners, I recommend starting with a cash-flow budget rather than a profit & loss (P&L) budget.

A cash-flow budget tracks:

• money when it is received

• money when it is paid

• what actually happens in your bank account

A traditional P&L budget often works on an accrual basis, meaning sales and expenses are recorded when they’re invoiced or incurred and not when cash changes hands.

While a profit and loss budget is important and recommended if you have the time, for many small businesses with uneven income, what matters most day to day is understanding how much cash is coming in, how much is going out, and whether there’s enough to support the business.

That’s what a cash-flow budget shows clearly.

What a Simple Cash-Flow Budget Includes

A cash-flow budget often mirrors the structure of a profit & loss statement, but with one key difference: everything is based on cash timing.

Income (Cash In)

Start with your income sources, such as:

• services

• product sales

• other cash receipts relevant to your business

Income is budgeted when you expect to receive the cash, not when you invoice.

Estimating income is about making a reasonable best guess. You can use:

• prior year numbers, if available

• recent trends

• your own experience and intuition

It’s important to remember that estimates don’t have to be perfect. They simply have to be good enough.

Expenses and Cash Outflows

In a cash-flow budget, this section includes everything that money is spent on, even if it wouldn’t appear as an “expense” on a profit & loss statement.

Common categories include:

• advertising and marketing

• software and subscriptions

• office supplies and utilities

• rent

• subcontractors or contractors

• professional fees (legal, accounting)

• insurance

• bank fees and interest

If you take money out of the business as an owner (draws or salary), that should be included as well, since it affects cash.

Items That Matter for Cash (But Not the P&L)

This is where cash-flow budgeting becomes especially useful.

A cash-flow budget should also include:

• loan repayments

• equipment purchases

• income tax estimates

• loan/grants received.

For example, equipment may be treated as an asset for accounting purposes, but from a cash perspective, it’s money leaving your business. Including it helps you see when your cash balance will go down and ensure that you are prepared.

Large or annual expenses (such as insurance) are shown in the month they’re paid, not spread evenly across the year. This makes cash fluctuations visible and easier to plan for.

Budget vs. Actual: How the Budget Is Used

Once your budget is set up, you would want to treat it as a dynamic document. That means you should update it regularly with the actual numbers and update the budget itself where it makes sense .

As the year progresses:

• you enter your actual cash received

• you enter your actual cash paid

• you compare budgeted amounts to reality

This process helps you:

• see where assumptions were off

• understand why differences occurred

• adjust future months accordingly

The goal isn’t necessarily to “hit the budget.” Rather the goal is to have a better understanding of your business and your cash needs.

Opening and Ending Cash Balances

One of the most valuable parts of a cash-flow budget is tracking:

• your opening cash balance

• your ending cash balance

This allows you to see:

• whether your cash buffer is growing or shrinking

• which months are tighter than others

• whether your business can support upcoming expenses

If you have more than one bank account, you can combine them to get a full picture of your cash position.

Why This Matters

Many small business owners carry financial stress simply because they don’t have a clear picture of what’s happening.

A cash-flow budget helps you:

• understand where money is actually going

• make informed decisions

• identify where changes are needed

At a high level, you only have two primary levers:

• increase money coming in

• decrease money going out

A budget shows you which lever matters most and when.

Final Thoughts: From Uncertainty to Clarity

A cash-flow budget won’t remove every unknown, but it will replace guesswork with information.

For many business owners, that shift alone reduces stress and improves confidence. If you’ve been meaning to get more organized financially, the end of the year or the start of a new one is an excellent time to begin.

---

Looking for a small business Budget template?

The cash-flow budget template used in the walkthrough of my video is available inside my Ask Ronika membership, along with numerous other tools, resources, and guidance designed to help small business owners/solopreneurs remove uncertainty and feel more financially confident.

Learn more ]]>How to Prepare a Small Business BudgetManaging Business FinancesSmall Business Accounting & AnalysisCanadian Income TaxRonika Khanna, CPA, CFAFri, 21 Nov 2025 17:16:00 +0000https://www.montrealfinancial.ca/blog/10-year-end-financial-and-tax-tips-for-your-small-business.html509ed143e4b001bf11102ee6:5227d59be4b0867ad33932e6:5227d59be4b0867ad3393322As the end of the year approaches, some of us find ourselves overwhelmed by top 10 lists, the hordes of shoppers and endless renditions of Christmas Music.  Businesses tend to experience a slowdown, which makes it the perfect time for small business owners to take a closer look at their overall business, financial and tax situation.  When you are not buying gifts for your customers, family and friends, a review and analysis of your business will allow you to optimize your current financial situation, implement some beneficial changes that can help avoid last minute tax preparation stress and also prepare for the future. 

Watch my video below for 5 Year End Tax Tips for Small Business/Solopreneurs:

1. Review Your Bank Account

Review your outstanding cheques and write off any cheques that have not been cashed for 6 months, as they are no longer valid.  Additionally, other items that you or your bookkeeper may have been avoiding like duplicate charges, outstanding deposits etc. should be reviewed and any unidentified charges that you have noticed in your bank account should be discussed with your bank. If you have an accounting software such as QBO, ensure that you reconcile your bank accounts 

If you are self employed and do not have a separate bank account for your business, I highly recommend setting one up in the new year, as this can help organize your finances even if you leave your accounting to the last minute. A separate credit card is also very useful for to maintain the separation between personal and business.

Many business owners accumulate amounts in their checking or low interest savings accounts. If this is you, then it is a great time to review your options and at the very least set up a high interest savings account. Alternatively, you can invest your funds in stocks, ETFs etc. by setting up a brokerage account. If you have a corporation, you can also invest excess corporation funds for which there are several options.

2. Review Customer Accounts and Inventory

This is a good time to thoroughly review amounts that customers owe you and write off amounts that you don’t think you will be able to recover.  In addition to cleaning up your accounts receivable list , this will help reduce your taxes payable as the write off is reflected as a bad debt expense. 

Designated amounts can also be submitted to a collection agency and in the event that you ultimately collect the amounts you can show it as a bad debt recovery.  This also reduces stress levels as you don't have to see the names of frustrating customers when you are reviewing the list in the new year.

For self employed people who are unincorporated or have corporate year ends at December 31st, you should do an inventory count should at the year end. Once the count is complete, all items in inventory should be reviewed and older and/or obsolescent items should either be written off or reduced to the amount that you think they are worth.   The write-down of inventory is reflected as an expense in the cost of goods sold and correspondingly reduces your tax liability.

3. Donate to Charity

It is a great time of year to be generous as, not only do you feel like you’ve done something good, you are also entitled to a tax deduction.  Keep in mind that only donations to Canadian charities are tax deductible unless you have income from US sources which then allows you to deduct donations to US charities up to the amount of US based income you have earned.  While the deadline to contribute for the current year is December 31st, donations can be carried forward up to 5 years.

4. Review Your Fixed Assets

Take a look at your business fixed assets i.e. computers, furniture, equipment etc and sell or dispose of anything that is reflected on your books but you are no longer using (do you really need that 5 year old phone?).  If you dispose of it for less than the depreciated value , you might be able to claim a loss.  And less clutter can go a long way to improving productivity.

5. Review Your Credit Card Balances

Many business owners don’t pay their monthly credit card balances simply because they don’t pay attention to the due date. Cash flow permitting, this is the perfect time to pay down your credit cards, thereby reducing completely unnecessary interest paid on outstanding balances. 

If you are not able to pay down your credit cards on a monthly basis, it is also a good time to speak to your bank about getting a line of credit.  Interest rates on a line of credit are usually significantly lower than credit card interest (especially as interest rates are going down) and can lead to substantial savings.

It is also be a good time to set up automatic transfers and/or monthly reminders in your calendar to ensure that you pay as much of your credit cards as possible every month to avoid the high expense of credit card interest.

6. Pay Bonuses

The year end is a natural time to decide on bonuses for you and your employees. For those with December 31st year ends, paying bonuses is a great way to reduce your taxable income, rather than deferring them to the New Year.  (And it makes for happy employees). You can “accrue” a bonus at December 31st, which can then be paid up to 3 months after the year end. This means that the business enjoys the tax deduction in the current year, while the employee only has to report the income next year.

Also, if the net income of your business exceeds $500,000, you should consider paying yourself or family members (who are employed in the business) a bonus for the excess amount.  This will allow you to take advantage of the small business deduction that applies to Canadian Corporations with net income less than $500,000. 

7. Invest in Large Purchases or Supplies

If you have excess cash and are contemplating a new computer or some furniture for your office or tools or supplies in the near future, it might make sense to purchase it before the new year. This allows you to claim CCA (depreciation) on the computer or furniture or simply expense the purchases in the current year thereby reducing taxes payable (for something you were going to buy anyway).

This post on the benefits of buying computer hardware or other fixed assets before the year end explains it in greater detail.

8. Do your Accounting

• Many small business owners are simply too busy or find the process of accumulating receipts and itemizing them extremely tedious. This is however the best time of year to actually take the time to do your accounting since there is still a comfortable distance to tax time.

• Ideally, you should set up a separate accounting folder , on your computer, where you can save/scan all your invoices, bills, receipts etc. (this fujitsu scanner is excellent and has allowed me to advance towards my goal of a paperless office)  

• Once you have saved your receipts, they can be organized by category eg. telephone, insurance, gas, food etc. or alphabetically or even by month.

• Also ensure that you have all your business bank statements for the year. 

• Accounting software goes a long way to easing the pain of filing and accounting (while saving hours) by allowing download of bank transactions, creation and email of invoices to customers and saving of receipts etc directly within the software.

• Alternatively, you can use a spreadsheet to do your accounting.

9. Analyze Your Financial Statements and Budget

Your financial statements are your report card for your business and let you know how you have done.  These typically include your profit and loss and balance sheet.

To analyze your financial statements , you can look at how much you sold, and how much it costs you to sell it , also know as gross margins.

It is a great time to see if you are charging your clients or customers enough (or possibly too much?) and plan to implement pricing changes, which customers expect at this time of year. Sometimes even a small increase, indexed to inflation, can go a long way in increasing your bottom line.  

You should also review your other expenses to see if you are spending too much relative to your revenues and potentially take this time to see if another cell phone provider will give you lower rates or if you can get a better deal with your insurance provider or if your bank has a cheaper plan better serves your needs.  Service providers will often reduce rates if you imply that you are planning to leave them for a competitor. 

Once everything is order,  you should start planning for next year by preparing a small business budget which will allow you to assess your cash flow requirements and estimate your profitability.

As we invariably wonder where the year went, and gear up for the holidays, this is a great time to organize your business finances, reflect upon (and pat yourself on the back for) your accomplishments, understand your business mistakes so that you can avoid them in the future and prepare for next year.

10. Invest in RRSPs/FHSAs and/Or TFSAs

If you have accumulated some savings, this is a great time to invest them in one of these tax saving vehicles.

• RRSP (Registered Retirement Savings Plan): Contributions reduce your taxable income, making them a great choice especially if you're in a higher tax bracket as the deduction is based on your top tax rate. Contributions made before the RRSP deadline of March 1st can also boost your tax refund, which you can then reinvest (or take a nice vacation).

• FHSA (First Home Savings Account): A great tax savings vehicle for first-time homebuyers, this combines the tax benefits of an RRSP with the flexibility of a TFSA. Contributions are tax-deductible, and withdrawals (including investment growth) are tax-free when used for a qualifying home purchase.

• TFSA (Tax-Free Savings Account): Although there’s no tax deduction for contributions, the investment earnings in a TFSA account grow tax-free. . These are great for saving towards medium- or long-term goals or as an emergency fund.

Related Articles:

• Home Office Tax Tips

• Tax Tips and Deductions for Small Business

Interested in improving your small business/solopreneur finances?

• Download one of my free resources and/or sign up for my newsletter where I provide practical tips and advice.

• Join my Ask Ronika membership to get answers to your questions, simplify your finances and feel more confident.

• Book a consultation for personalized answers to questions and customized guidance.

]]>10 Year End Financial and Tax Tips for Your Small BusinessManaging Business FinancesCanadian Income TaxRonika Khanna, CPA, CFAFri, 07 Nov 2025 21:03:16 +0000https://www.montrealfinancial.ca/blog/how-long-to-keep-your-business-documents-according-to-cra509ed143e4b001bf11102ee6:5227d59be4b0867ad33932e6:690e57449eb3c53c21c7b5e0If you’ve been in business or a solopreneur/self employed for some time, you’ve probably wondered how long you need to keep your business related documents. Shoeboxes and/or filing cabinets take up physical space that is often limited and can be better used for more important things (like a nice cabinet or artwork).

Unfortunately, you can’t just dispose of these business related records at anytime. The Canada Revenue Agency (CRA) has strict rules about where your records must be kept, how long you need to keep them, and what to do if you want to destroy them before the end of the specified retention period.

Where to Keep Your Records

The CRA requires you to keep your business records at your place of business or residence in Canada, unless you receive written permission to keep them elsewhere.

If your records are stored electronically on a server outside of Canada, that doesn’t count as “in Canada” even if you can access them from here.

You can request permission to keep records outside of Canada by writing to your tax services office. The CRA will likely approve your request, but they’ll specify any terms or conditions in writing.

If approved, you must ensure that the CRA can access your records electronically in Canada, that the files are readable using CRA software, and that they provide enough detail to support the information on your returns.

Tip: If you’re using cloud accounting software (like QuickBooks Online or Xero), its a good idea to check where your data is hosted.

Tip: Both CRA and RQ accept electronic documents as long as there are clear and legible and complete. For more details check out my article on digitizing your documents and maintaining a paperless office.

For more details on the rules, check out CRA’s guidance in Information Circular IC05-1 (Electronic Record Keeping) and GST/HST Memorandum 15.2 (Computerized Records).

How Long to Keep Your Records

In general, you must keep all business records and supporting documents for six years from the end of the last tax year they relate to.

That includes:

• Invoices and receipts (sales and expenses)

• Bank and credit card statements

• Tax returns and schedules

• Payroll, GST/HST, and other supporting records

Your tax year is:

• The fiscal year for corporations

• The calendar year for sole proprietors and individuals

So, for example, if your 2025 tax year ends on December 31, you must keep those records until December 31, 2031.

Exceptions and Special Cases

There are several situations where the retention period is longer (or shorter):

• Property and share records: Keep indefinitely, since they can affect future capital gains or liquidation.

• Late-filed returns: Keep records for six years from the date the return was filed.

• Objections or appeals: Keep everything until the later of (a) the objection/appeal is resolved, (b) the appeal period has passed, or (c) the six-year period has ended.

• Unfiled GST/HST returns: You must still file them and keep supporting records as the six-year clock doesn’t start until they’re filed.

• Dissolved corporations: Keep all records for at least two years after dissolution.

• Business closure (unincorporated): Keep records for six years from the end of the tax year in which the business closed.

• Mergers or amalgamations: The new corporation must keep the records of all former entities for six years.

• Deceased taxpayers or trusts: You can destroy records once a CRA clearance certificate has been received.

Tip: When in doubt, keep it! Digital storage is inexpensive, and keeping good records can save time and stress in an audit or sale.

How to Request Permission to Destroy Records Early

If you want to destroy your paper or electronic records before the end of the retention period, you must get written permission from the CRA.

You can:

• Fill out Form T137 – Request for Destruction of Records, or

• Write to your tax services office explaining your request

Destroying records without CRA permission could result in penalties or prosecution.

Keep in mind, CRA approval only applies to records under federal tax legislation. You may need to comply with provincial or municipal record retention rules as well.

Tip: If your records were destroyed in a disaster, visit the CRA’s “Support if You’re Affected by a Disaster” page for instructions on what to do.

Final Thoughts

The easiest way to ensure that you are compliant with these rules is to make maintaining records as part of your regular workflow.

• Use accounting software that automatically stores receipts and transactions.

• Organize digital folders by year and category.

• Back up your data securely (ideally both in the cloud and locally).

To summarize, it is essential that you keep your business records in Canada (unless you have CRA permission), hold on to them for at least six years, and don’t destroy them early unless you have written approval.

---

Want to Simplify Your Taxes?

📝 Stay Organized

Get your free Small Business Tax Return Checklist to help you gather the key documents and information needed to prepare your return.

📘 Learn the Essentials

Check out my Small-Business-Tax-Resources for clear, practical guidance on Canadian small business taxes written specifically for self-employed individuals and small business owners in Canada.

🎥 Looking for Personalized Guidance

Book a consultation to get your tax questions answered and receive advice customized to your unique situation.

]]>How Long to Keep Your Business Documents According to CRARonika Khanna, CPA, CFAFri, 07 Nov 2025 16:12:00 +0000https://www.montrealfinancial.ca/blog/federal-budget-2025509ed143e4b001bf11102ee6:5227d59be4b0867ad33932e6:69136081b69db94f23ce34c0The Canadian federal budget is usually released in March but was delayed by several months this year, ostensibly due to the election. Many people were waiting with anticipation, but the result itself was somewhat anticlimactic. There aren’t sweeping tax changes or new programs, particularly for individual taxpayers or small business owners, so there isn’t really too much to get excited (or conversely, worried) about.

But, as with every annual budget, it’s useful to understand the more relevant changes.

If You’re an Individual Taxpayer

➡️ The 2025 budget confirms the proposal to reduce the lowest federal income tax rate (announced in May 2025)

Lowest Federal Tax Rate Reduced from 15% to 14.5%
The government plans to reduce the lowest personal income tax rate from 15% to 14.5% in 2025, and then to 14% in 2026 onward.

• Applies to taxable income up to $57,375 in 2025 (indexed annually).

• This is expected to save most individuals around $200 per year, or about $400 for a two-income family.

⚠️ Note: Because the rate used to calculate most non-refundable tax credits (like the basic personal amount, tuition, and medical credits) will also drop, the overall benefit depends on your situation.

➡️ Elimination of the Underused Housing Tax (UHT)
The UHT will be eliminated starting in 2025. No filing or payment will be required for 2025 or later, but filings are still required for 2022–2024.

➡️ New Tax Credit for Personal Support Workers (PSWs)
A temporary refundable credit will provide eligible PSWs working in healthcare settings 5% of eligible earnings, up to $1,100 per year.

➡️ Automatic Filing for Low-Income Canadians
Starting with 2025 tax returns, the CRA will be able to automatically file returns for certain lower-income Canadians. This should help many of these taxpayers to receive benefits like the GST/HST Credit and Canada Workers Benefit, that they weren't receiving since they weren't filing their returns.

➡️ No More Double Claims for Home-Related Credits
The same expense can no longer be claimed under both the Medical Expense Tax Credit and the Home Accessibility Tax Credit.

➡️ Simplified Registered Plan Rules (Effective 2027)
Rules for RRSPs, TFSAs, and similar plans will be simplified and harmonized, making it easier for these accounts to invest in Canadian small businesses.

➡️(Previously announced) Elimination of the GST for first-time home buyers on new homes up to $1 million and reduction of the GST for first-time home buyers on new homes between $1 million and $1.5 million.

💼 If You Run a Small Business

Most business measures focus on faster write-offs and investment incentives.

➡️ Immediate Write-Off for Computers and Software
Businesses can now deduct the full cost of computers, systems software, and productivity-enhancing assets in the year of purchase.
Applies to assets acquired after Budget Day and first used before 2030.

➡️ 100% Write-Off for Manufacturing or Processing Buildings
Eligible manufacturing or processing facilities can be fully expensed in the first year, rather than depreciated over time.

➡️ Enhanced SR&ED (Research & Development) Credit
The spending limit for the 35% refundable SR&ED credit rises to $6 million, supporting CCPCs investing in innovation.

➡️ Extended Clean Economy Incentives
Full credit rates for Carbon Capture (CCUS) investments are extended to 2035, and more critical minerals now qualify under the Clean Technology Manufacturing credit.

➡️ Lifetime Capital Gains Exemption (LCGE)
The LCGE that was available when you sell shares of a qualifying small business corporation is $1.25 million starting in 2024

➡️ Limits on Tax Deferral in Tiered Structures
New measures aim to limit deferring tax on investment income through groups of corporations with staggered year-ends.

➡️ Phase-Out of the Luxury Tax on Aircraft and Vessels
The luxury tax on certain aircraft and boats will be eliminated, but it remains in place for vehicles.

➡️ Cancellation of the Canadian Entrepreneurs’ Incentive (CEI)
The CEI, which would have reduced capital gains tax on certain small business shares, will not proceed.

If you are interested in the finer points, the size of the deficit and how the government intends to spend taxpayer money, I recommend going to the budget page itself.

Other takes on the budget:

CPA Canada
PWC
Global news (for individuals)

]]>Budget 2025: What You Need to Know.Managing Business FinancesSmall Business Accounting & AnalysisRonika Khanna, CPA, CFAFri, 24 Oct 2025 04:41:00 +0000https://www.montrealfinancial.ca/blog/7-reasons-why-debt-is-good-for-your-business.html509ed143e4b001bf11102ee6:5227d59be4b0867ad33932e6:5227d59be4b0867ad339334cDebt is often perceived negatively. Debt can be “evil”, “crippling” and an “unforgiving master”( the last one from the Google query “Debt is…”;).   It can suggest a lack of sufficient cash flow and an inability to fulfil your funding requirements.  It also an indication of increased risk, as if you are unable to service your debt repayments, it could have dire consequences for your business. 

There is however a good side to debt supported by the fact that the majority of the most successful businesses have some level of debt.  It can be a great way for individuals and businesses to earn a return on their investment.  And of course it is an integral part of the engine that drives the world economy. 

For small business owners, debt can significantly improve your bottom line as long as it is managed responsibly. 

Check out my related newsletter article on Good Debt vs Bad Debt

---

---

1. Debt can help you grow your business

One of the primary ways to grow your business is to take on debt.  Many small business owners find themselves at a crossroads when facing rapid growth as they are not able to finance their expansion on their own.  When this happens, access to debt in the form of lines of credit, bank loans ond other third party debt allows small businesses to expand.

2. Debt is cheaper than equity

A fundamental concept in finance, when discussing the cost of capital, is that debt can be cheaper than equity (investing your own money).  

One the primary reasons for being in business is to earn a higher rate of return than you would get from putting it in another type of investment.   This means that as a business owner you expect a return on equity that is higher than the cost of debt. 

More debt allows you to have a lower equity base resulting in a higher after tax profit/equity return rate.  This is especially meaningful when you are calculating earnings per share.

3. Government sponsored debt programs

Both Canada and the U.S. offer government-backed loan programs designed to help small businesses get access to financing at competitive rates. These programs have favourable repayment terms, and in some cases, loans may be partially forgiven if the business is unsuccessful. These programs can make borrowing less risky and more attainable for new or growing businesses.

For a list of funding programs offered in Canada check out this link

4. Mitigates your risk

It is rarely a good idea to put all of your proverbial eggs in one basket.  Using business debt allows you to share risk with lenders and limit your personal exposure if things don’t go as planned. And while bankruptcy is never ideal, having borrowed funds rather than investing all of your own assets can reduce the long-term financial impact.

5. Suggests confidence in your business:

If someone is willing to lend your business money (other than perhaps some generous family members) it suggests that they believe that your business has potential. 

The loan application process often requires business plans, projections, and a thorough understanding of your operations all of which reinforce your professionalism and credibility.

6. Helps you build credibility and maintain discipline

In the same way that credit cards help you build a credit profile, debt helps you build relationships with financial institutions and other debt holders.  Others are more likely to lend to your business when they see that it isn’t the first time. 

If you continue to make your payments on schedule,  it is much easier to expand your credit facilities. 

Finally since most debt agreements have reporting and financial covenants, it helps you to maintain financial discipline for your business.

7. Interest is tax deductible:

The cost of debt is actually less on an after tax basis than the interest rate suggests.  If your interest rate is 5% and your business tax rate is 20% then the effective cost (interest) of your debt is actually only 4% which is a significant tax savings.

It goes without saying that there should be careful evaluation of your business circumstances prior to taking on debt.  There are many businesses, often service based, that have low capital requirements and do not require much in the way of additional funding. And of course debt should not be used to replace fiscal discipline. 

Want more clear, actionable guidance on Canadian small business finance and taxes? Subscribe to my newsletter

]]>7 Reasons Why Debt is Good for Your BusinessPersonal FinanceCanadian Income TaxRonika Khanna, CPA, CFAFri, 10 Oct 2025 12:27:00 +0000https://www.montrealfinancial.ca/blog/9-tax-facts-about-charitable-donations-for-individuals-and-s.html509ed143e4b001bf11102ee6:5227d59be4b0867ad33932e6:5227d59be4b0867ad33932feEvery good act is charity. A man's true wealth hereafter is the good that he does in this world to his fellows. - Moliere.

Unfortunately, the Canada Revenue Agency (CRA) has specific criteria for what qualifies as a charitable donation and not all good acts qualify for a tax benefit. Growing a moustache (although not without its costs) or running a marathon, are generally not considered to be a charitable donations according to the tax code. Luckily there are a multitude of charitable organizations that do qualify the donors to receive a tax credit for their donations. 

1. How Much You Can Claim

Individuals can claim donations up to 75% of their net income each year.
In the year of death (and the preceding year), this limit increases to 100% of net income.

2. Federal and Provincial Tax Credits

Charitable donations qualify for both federal and provincial tax credits, which vary depending on where you live.

For example, a $1,000 donation could provide an estimated tax credit of:

• $494 in Quebec

• $550 in Alberta

• $361 in Ontario

You can estimate your tax savings using the CanadaHelps Charitable Tax Credit Calculator. While it’s not an official CRA tool, it’s good way to estimate how much your donation will help you to save on taxes.

3. Carry Forward Unused Donations

If your total donations exceed the annual limit that you are allowed to contribute, or if your income is lower in a given year, you can carry forward unused donations for up to five years.
You can also combine donations from several years which helps you to maximize the credit.

4. Combine Donations Between Spouses

Spouses and common-law partners can combine their donations to take advantage of higher credit rates. Since the first $200 of donations receives a lower credit rate, combining donations on one return can result in a larger tax benefit.

5. Donate Only to Qualified Charities

To qualify for a tax credit, donations must be made to qualified donees, which include:

• Registered Canadian charities

• Certain registered municipalities, universities, and hospitals

• The United Nations and its agencies

• The Government of Canada (and certain provincial governments)

You can confirm an organization’s eligibility using the CRA’s Charities Listings database.

6. Donations to U.S. Charities

You can claim donations made to U.S. charities if you have U.S. source income. In that case, you may claim up to 75% of your U.S. income.
Unfortunately, donations to charities outside Canada or the U.S. are not eligible for a Canadian tax credit.

7. Self-Employed and Unincorporated Business Owners

If you’re self-employed or operate as a sole proprietor, your donations are claimed personally rather than as a business expense.
You would list your donations on Schedule 9 of your personal tax return to receive the credit.

8. Incorporated Business Owners

Corporations can also make charitable donations, up to 75% of the corporation’s net income.

While individuals donate from after-tax income, corporations donate from pre-tax income, which can make corporate donations more tax-efficient in certain cases.
Because small business tax rates (around 16–22%) are generally lower than top personal rates (over 50%), it might make sense to review your situation with your accountant to determine which approach gives you the maximum benefit.

9. Non-Cash Donations

Donations don’t have to be in cash. You can also donate publicly traded securities, land, or goods.
The fair market value of the donated property determines the amount of your tax credit.

In most cases, donating publicly traded securities is especially tax-efficient because capital gains on these securities will be exempt from tax.

Bonus: How Tax Software Can Help

Anyone who does their own tax return can take advantage of tax software that automatically handles:

• Calculating your donation tax credit

• Optimizing between spouses

• Tracking and applying carryforward donations

Through this optimization, tax software can help you reduce your tax bill.

Final Thoughts

The tax incentive for donating to charity is fairly generous (particularly if you live in Quebec) reducing the effective cost of the donation significantly and making the act of giving (to a registered charity) both an emotionally and financially gratifying experience.

Ronika Khanna is an accounting and finance professional who helps small businesses achieve their financial goals. She is the author of several books for small businesses and also provides financial consulting services.

Subscribe to our biweekly newsletter to receive articles, tips, tools and special offers for small businesses.

]]>9 Tax Facts about Charitable Donations for Individuals and Small Business Owners