Easy Guide on Small Business Tax Filing
Confused about small business taxes? Our simple guide is all you need.
If you’re wondering if you’ll need to file taxes for your small business, the answer is almost always “yes.” But where do you start? What forms do you need to file? How do you figure out how much you’ll owe? And is it really that bad if you don't file taxes for your business? Spoiler alert: it is.
Don’t stress quite yet, because filing taxes doesn’t need to be complicated. Consider this your complete guide to filing taxes as a small business.
Are you currently doing your own books for your business?
Gather your business records
Before you start anything, make sure you have all your relevant business records on hand. Depending on your type of business entity, you’ll need different things, but start by gathering the following:
Your Business Number (BN) from the CRA
Your Social Insurance Number (SIN)
Financial statements (balance sheet and income statement)
Receipts and expense records
Get your books ready for tax season
Accurate and up-to-date bookkeeping is possibly the most important ingredient for a stress-free tax season. If your books are a mess right now, that’s okay. You can hire Numinor to get you caught up, fast.
Or, you can do it yourself by following these steps:
1. Record and categorize every business transaction from your tax filing year
This is the hardest part, and it will take you a long time. But starting from the first day of the tax year, going back to January 1, you’ll need to record and categorize every single business transaction. You can use accounting software, or an Excel template. The important thing is that you record the amount, what category it falls under, the date, and a short description of what the transaction was for.
2. Reconcile your books with your bank accounts
If there are any discrepancies between your bank statements and your bookkeeping records, it’s best to catch these as soon as possible. Get in the habit of cross referencing transactions in your bank statements with transactions in your company records to ensure everything is accounted for. Reconciling helps you know for sure you’ve recorded every transaction properly. It’s best to do this with your bank statements and your credit card statements, making sure every transaction is accounted for on your books.
3. Produce financial statements
You’ll need to summarize all those transactions in the form of a balance sheet and income statement in order to file your taxes (particularly if you’re a corporation). Reason being, you need to know the total amount of income and expenses you’ve incurred. Those amounts will come up on your tax return. Numinor customers, we’ll take care of this for you.
4. Gather your receipts and invoices
It’s essential that you keep a detailed account of how you spent money on your business. Some of the types of receipts, invoices, and records you’ll want to track include invoices you sent to customers, business expenses, records of any bad debt write-offs, and vendor accounts.
5. File tax forms for your contractors and employees
You must record anyone your business employed. If you have employees, you must issue T4 slips by February 28. If you paid fees to contractors, you likely need to issue T4A slips. Make sure you have the necessary information from them to submit these to the CRA on time.
It’s also worth keeping in mind that different small business entities will need to supply different information for their tax returns, so we created a handy small business tax checklist for you to make sure you’re prepared with what you need.
How Numinor can help with your small business tax filing
Filing taxes may be the finish line, but bookkeeping is the marathon that gets you there. With Numinor, you have a team of bookkeeping and tax experts running that distance for you.
Your Numinor bookkeeping team automates your financial admin by connecting bank accounts, credit cards, and payment processors to import information into our accounting platform. Your team also answers questions and completes your tax prep ahead of filing season.
With a Numinor subscription, we handle your monthly bookkeeping and provide year-round business tax services, including tax installment support. and CRA filing. We file your taxes and give you access to unlimited, on-demand consultations with a tax professional. We’re here to ensure you’re up to date on the latest tax regulations, optimizing every deduction and seizing available tax credits, like SR&ED for our tech clients to minimize your tax liability. Learn more.
How much are small business taxes?
If your business is a Canadian-Controlled Private Corporation (CCPC), you may qualify for the Small Business Deduction. In Ontario, the combined federal and provincial tax rate for the first $500,000 of active business income is typically around 12.2%.
Set aside money to pay your taxes
When you run a business, it’s important to remember that you’ll be paying taxes based on your self-reported net profits. Keep in mind that for most small business structures—namely sole proprietorships, partnerships, and Canadian-Controlled Private Corporations (CCPCs)—the CRA requires you to pay your taxes in stages throughout the year rather than in one lump sum. Get a quick estimate of your estimated tax payment amounts using our free quarterly tax calculator.
The $3,000 Rule
You generally need to make quarterly tax installments if your "net tax owing" was more than $3,000 in the current year and in either of the two previous years ($1,800 for residents of Quebec). If you cross this threshold, the CRA will send you an "installment reminder" suggesting how much to pay.
Mark Your Calendar
Personal and small business installments are strictly quarterly within the calendar year. It is vital to have enough money in the bank to make these payments by:
March 15
June 15
September 15
December 15
Note: For corporations, while many pay monthly, eligible small CCPCs can often pay quarterly, with dates determined by their specific fiscal year-end.
How much should you save?
Saving about 25-30% of your net business income (income after expenses) will typically cover your federal and provincial income taxes. We recommend keeping this money in a separate business savings account to prevent you from accidentally using tax capital for daily operations.
Two ways to manage your tax savings:
For consistent income: Set up an automatic transfer to move a fixed percentage of your revenue into your tax account every month.
For variable income: If you work on a project basis or close large deals infrequently, get in the habit of making a manual transfer (e.g., 30%) the moment a client payment clears.
By treating these installments as a regular business expense rather than a year-end surprise, you’ll keep your cash flow predictable and avoid the CRA’s high-interest penalties for underpayment.
Claim your small business tax deductions
Here’s the great news about being a small business owner—in most cases, you qualify for more tax deductions and credits than a traditional employee receiving a T4 slip.
Here’s a high-level overview of some of the most popular categories of tax deductible business expenses. Most "reasonable" expenses incurred to earn business income are deductible. Here is a high-level overview of the most popular categories. Your tax professional can give you more specific, tailored advice on what expenses exist for your business.
Startup Costs
The CRA generally requires you to have already started your business activities before you can deduct expenses. Costs incurred before you open (like market research or legal fees) are often treated as eligible capital expenditures and must be added to a Capital Cost Allowance (CCA) class to be depreciated over time rather than deducted all at once.
Inventory and Raw Materials
You can deduct the cost of the items you purchased to provide the goods and services you sell (e.g., bulk flour for your bakery). However, you only deduct the cost of materials actually used or sold during the tax year. Remaining materials are considered inventory and stay on your balance sheet until the following year.
Office Supplies vs. Capital Property
Office Supplies: Small, "consumable" items like pens, stamps, and paper are fully deductible in the year you buy them.
Capital Property (CCA): Larger items that last for years (e.g., a $2,000 MacBook or a $1,500 ergonomic chair) cannot be deducted in full. Instead, you claim a percentage of their cost each year through CCA. For example, computers generally fall into Class 50 (55% rate).
Commercial Rent
The rent you pay for the space where you conduct your business (e.g., your office, a storefront, or a studio) is fully tax-deductible.
Business Use of Home (Home Office)
If your home is your principal place of business, you can claim a portion of your home expenses (heat, electricity, water, insurance, and even mortgage interest, but not the principal).
Business Insurance
You can deduct all ordinary commercial insurance premiums for buildings, machinery, and equipment required to run your business. Note that life insurance premiums are generally not deductible unless used as collateral for a business loan.
Business Travel & Meals
You can deduct travel expenses incurred to earn business income, such as airfare, hotel stays, and public transit.
The 50% Rule: In almost all cases, the CRA only allows you to deduct 50% of the cost of business-related meals and entertainment. This applies whether you are taking a client to lunch or eating alone while traveling for work.
Salaries and Benefits
Gross salaries and the employer-paid portion of CPP and EI premiums for your employees are fully deductible. If you hire your children or spouse, their salary must be "reasonable" for the work they actually perform to be deductible.
Track your business expenses
To claim an expense with the CRA, you must maintain specific documentation for every business-related purchase. Ensure you have the following information on hand for every transaction:
The total amount (including GST/HST)
The date the purchase was made
the name and address of the vendor/supplier
The form of payment used
The business purpose (i.e., its connection to earning income)
For meals and entertainment, a record of who was involved, including employees or clients, to comply with the 50% deduction rule
This information can be recorded in a spreadsheet, via a dedicated accounting app, or as a digital note attached to a photo of the receipt. Original records, including digital copies, must be kept for six years from the end of the tax year to which they relate. In the event of a CRA review or audit, these records will be requested to verify that every expense meets the necessary guidelines for business deductibility.
How to file small business taxes
Each type of small business files taxes a bit differently, so the forms you’ll need to fill out depend on how your business is structured. The main business structures include:
Sole proprietorship
Partnership
Corporation (including CCPCs)
Nonprofit
Below is a breakdown of how each type of small business files its taxes so you can jump straight to the information you need. To learn more about filing taxes for your business type, explore our simple guide for filing and paying small business taxes.
Filing taxes as a sole proprietor
Sole proprietorship is exactly what it sounds like—it’s a fancy way of saying an unincorporated business that has only one owner. In businesses slotted into this category, there is no legal distinction between the owner and the business entity.
If you run your own company with no partners, filing taxes is incredibly simple. All you have to do is include your business results on your annual personal income tax return (T1) and complete Form T2125, Statement of Business or Professional Activities, and attach it to your personal return. This form allows you to calculate your gross income and deduct eligible business expenses to arrive at your net profit or loss.
Filing taxes as a partnership
Partnerships do not pay income tax directly. Instead, the business income or loss "flows through" to the individual partners.
If the partnership meets certain criteria—such as having more than five partners or a corporation as a partner—it must file a T5013, Partnership Information Return. Regardless of whether a T5013 is required, each individual partner must report their share of the business's profits or losses on their own personal tax return using Form T2125. If a T5013 was filed, you will receive a T5013 slip showing your specific share of the income to report.
Filing taxes as a corporation
A corporation is a separate legal entity from its owners. If your small business is incorporated, you must file a separate corporate tax return known as the T2 Corporation Income Tax Return. This is required even if the corporation has no tax payable for the year.
Most Canadian small businesses are Canadian-Controlled Private Corporations (CCPCs), which allows them to access the Small Business Deduction. This significantly lowers the tax rate on the first $500,000 of active business income. Because corporate tax law involves complex concepts like the Capital Cost Allowance (CCA) and various refundable tax credits, most business owners hire a professional to ensure these forms are completed accurately.
Filing taxes as a nonprofit
Nonprofits are generally exempt from paying income tax, but they still have annual filing obligations. Almost all nonprofit corporations must file a T2 Corporation Income Tax Return within six months of their fiscal year-end.
Additionally, a nonprofit may be required to file a T1044, Non-Profit Organization (NPO) Information Return. For the 2026 tax year, the reporting requirements have been updated: organizations with more than $50,000 in gross annual revenue or assets exceeding $200,000 must file this return. Smaller organizations below these thresholds may be eligible to use a new, simplified short-form return to maintain their tax-exempt status.
Self-employed taxes
Since you’re your own boss, you are responsible for paying both the employee and employer portions of the Canada Pension Plan (CPP). For the 2026 tax year, the self-employed CPP contribution rate is 11.9% on your pensionable earnings.
Additionally, if your net income exceeds the first earnings ceiling of $74,600, you will also contribute to the CPP2 (the second additional component). For earnings between $74,600 and $85,000, the self-employed contribution rate is 8%. These contributions are calculated on Schedule 8 of your tax return and help ensure you are building your future retirement benefits just like a salaried employee. For a straightforward breakdown of how these contributions and income tax brackets work together, check out our simple guide to self-employment taxes.
Understanding sales tax for small businesses
Sales tax is a consumption tax that you are required to collect from customers and remit to the government. This is primarily the Goods and Services Tax (GST) or Harmonized Sales Tax (HST).
If your total taxable revenue exceeds $30,000 over four consecutive calendar quarters, you must register for a GST/HST account. Even if you are an e-commerce store without a physical storefront, you are responsible for collecting and remitting tax based on the "place of supply"—which is typically where your customer is located.
Depending on your annual revenue, you will be assigned a reporting period—annually, quarterly, or monthly:
Annual Filers: Revenue of $1.5 million or less
Quarterly Filers: Revenue between $1.5 million and $6 million
Monthly Filers: Revenue over $6 million
One of the major advantages of being a GST/HST registrant is the ability to claim Input Tax Credits (ITCs). This allows you to recover the GST/HST you paid on your own business expenses (like equipment, inventory, or rent) by subtracting it from the tax you collected from customers. To better understand your specific obligations, including provincial taxes like PST, RST, or QST, take a look at our detailed sales tax overview.
Managing payroll taxes
As an employer in Ontario, you are responsible for withholding, contributing to, and remitting several payroll-related taxes to the CRA and provincial authorities.
For the 2026 tax year, your primary responsibilities include:
Canada Pension Plan (CPP & CPP2): You must match your employees' contributions. For 2026, the employer rate is 5.95% on pensionable earnings up to $74,600. For earnings between $74,600 and $85,000 (the CPP2 range), you contribute an additional 4%.
Employment Insurance (EI): Unlike CPP, which you match 1:1, employers typically pay 1.4 times the amount of EI premiums that they withhold from employees. For 2026, the employer rate is $2.28 per $100 of insurable earnings (outside of Quebec).
Income Tax Withholdings: You are responsible for calculating and withholding federal and provincial income tax from each employee's pay cheque based on the information they provide in their TD1 forms.
Employer Health Tax (EHT): In Ontario, private-sector employers are generally exempt from this tax on their first $1 million of annual payroll. If your total Ontario remuneration exceeds this threshold, you must register and pay EHT on the amount above the exemption at rates ranging up to 1.95%.
You can calculate exactly how much to withhold using the CRA’s T4032 Payroll Deductions Tables or the PDOC (Payroll Deductions Online Calculator). Most businesses use specialized payroll software to automate these calculations and ensure remittances are submitted by the 15th of the following month. For a deeper dive into managing your team's pay, explore our comprehensive guide to payroll tax.
How to pay small business taxes
Most businesses are required to pay tax in stages throughout the year via installments, rather than in one lump sum at year-end.
Submitting your payment to the CRA is a breeze and can be handled entirely online. You can pay through your financial institution’s online banking service, just as you would a utility bill. Simply add the CRA as a payee and select the appropriate account:
Federal – Corporation Tax Payments – TXINS (for corporate installments)
Federal – GST/HST Payment – GST-P (for sales tax)
Federal – Tax Instalment (for personal business income)
Alternatively, you can use the CRA’s My Business Account to set up a pre-authorized debit (PAD), allowing you to schedule payments for specific dates. For those who prefer to use a credit card, PayPal, or Interac e-Transfer, third-party service providers like PaySimply or Plastiq can facilitate these payments for a fee.
As of 2024, any payment exceeding $10,000 must be made electronically to avoid penalties.
Paying taxes involves several key steps—from determining your specific installment thresholds to filing the correct returns on time. Requirements will vary based on your business structure, total revenue, and whether you have employees. For a comprehensive overview of staying compliant and avoiding high-interest penalties, check out our complete guide to paying small business taxes.
If you’ve found this guide useful, you might find it helpful to download our Small Business Tax Checklist for staying organized.
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