Answers · Canada-US
Straight answers to the questions owners actually ask.
One question per page, the short answer first, then the detail that matters. 200 answers across 10 topics, from GST/HST on haircuts to departure tax, reviewed by our team and kept current.
By the AnalytIQ Accounting team · Last reviewed: September 6, 2026
Topic 1 of 10
E-commerce, Creators and US Sales Tax.
Are book royalties taxable in Canada, and how are KDP royalties reported?Yes, book royalties are taxable income in Canada.Are brand deals and gifted products taxable income for Canadian influencers?Yes.Can I deduct a home office for my online business in Canada?Yes, if your home is your principal place of business, meaning you run the business from there or use the space regularly and exclusively to meet clients.Do Canadian Amazon FBA sellers owe US income tax?Usually not, at the federal level.Do Etsy sellers in Canada need to register for GST/HST?Yes, once your worldwide taxable sales, including zero-rated exports to the US and elsewhere, exceed $30,000 over any four consecutive calendar quarters, the small supplier threshold no longer protects you and registration becomes mandatory.Do I charge GST/HST on sales to US customers?Usually no.Do I need a business number to sell online in Canada?Not right away.Does Amazon collect US sales tax for Canadian FBA sellers?Yes.How do Canadian creators stop the 30% US withholding on YouTube, Twitch, or OnlyFans income?The default 30% rate applies to a non-US creator only when no tax information has been filed with the platform, so the fix is submitting a Form W-8BEN, or a W-8BEN-E if you have incorporated, in that platform’s tax centre and claiming the Canada-US treaty benefit.How do I record Amazon settlements and fees in QuickBooks?Post each Amazon settlement as a journal entry that separates gross sales, referral and FBA fees, advertising spend, refunds, and the reserve held back, rather than entering the single bank deposit as revenue.How do I record PayPal and Stripe fees and payouts for tax?Record the full amount a customer paid as revenue and the fee PayPal or Stripe deducted as a separate expense, rather than recording only the smaller net amount that actually lands in your bank account.How is dropshipping income taxed in Canada?Dropshipping income is taxed the same way any retail business income is: the full amount a customer pays you is revenue, and the amount your supplier charges you to fulfill that order is cost of goods sold, with the difference being your gross margin before other expenses.How is GST/HST charged on digital products and online courses?A digital product or online course is intangible personal property for GST/HST purposes, and the tax follows the customer, not the seller.How is OnlyFans income taxed in Canada?OnlyFans earnings are self-employment income for a Canadian creator, reported on Form T2125 as a sole proprietor or through a corporate T2 return once incorporated, in exactly the same way any other self-employed income is reported.How is Shopify store income taxed in Canada?Shopify store income is business income in Canada, reported on Form T2125 attached to your personal return if you operate as a sole proprietor, or on a corporate T2 return if you have incorporated.How is YouTube and AdSense income taxed in Canada?YouTube and AdSense income is business income for a Canadian creator, reported on Form T2125 as a sole proprietor or on a T2 return once incorporated, and it is fully taxable regardless of whether Google issues a slip.How should an e-commerce business account for inventory and cost of goods sold?Inventory is an asset on your books until the unit actually sells, and only at the point of sale does its cost move to the income statement as cost of goods sold.What is a marketplace facilitator law and does it cover Canadian sellers?A marketplace facilitator law is a US state law that shifts the responsibility for collecting and remitting sales tax from the individual seller to the marketplace itself, such as Amazon, Etsy, eBay, or Walmart.What is a protective Form 1120-F and why do Canadian companies file one?A protective Form 1120-F is a US corporate income tax return that a foreign corporation files even though it believes the Canada-US tax treaty shields its profits from US tax, paired with a treaty-based disclosure on Form 8833.What is US economic nexus and when does a Canadian online seller cross it?US economic nexus is the rule that lets a state require an out-of-state seller to register for, collect and remit its sales tax once the seller's sales into that state pass a dollar threshold, even with no warehouse, staff or office there.
Topic 2 of 10
US Citizens and Cross-Border Personal Tax.
Are Canadian mutual funds and ETFs PFICs for US citizens?Yes, in almost every case.Can Canadians owe US estate tax on US stocks and other US assets?Yes.Can I file FBARs for previous years I missed?Yes - late FBARs can be filed for any past year through the same free BSA E-Filing System used for current ones, and the IRS provides two routes that keep penalties off the table.Do Canadians pay tax on an inheritance from the US?Not on receiving it.Do Canadians working in the US pay tax in both countries?Often you file in both countries, but you rarely pay full tax twice.Do US citizens living in Canada have to file US taxes every year?Yes.Do US companies send a 1099 to a Canadian contractor?Generally not.Should Americans in Canada use the Foreign Earned Income Exclusion or the foreign tax credit?For most US citizens living in Canada, the foreign tax credit (Form 1116) is the better choice.How are US Social Security benefits taxed for Canadian residents?The Canada-US tax treaty gives Canada exclusive taxing rights over US Social Security paid to a Canadian resident, so the US generally does not tax or withhold on it.How do I get a US ITIN from Canada?You apply on IRS Form W-7, attached to the US tax return that needs the number or supported by one of the IRS exceptions such as a FIRPTA withholding certificate or a treaty withholding claim.How does the Canada-US tax treaty decide which country I am a resident of?Article IV of the treaty applies a fixed sequence of tests to anyone who counts as a resident of both countries under domestic rules: where you have a permanent home, where your personal and economic ties are closer, where you habitually live, and finally which country you are a citizen of.How is an RRSP treated on a US tax return?An RRSP is one of the few Canadian accounts the US tax system treats kindly.How many days can a Canadian spend in the US without becoming a US tax resident?If you repeat the same pattern every year, about 120 days keeps you under the IRS substantial presence test, because the test adds all of this year’s US days to one-third of last year’s and one-sixth of the year before and asks whether the total reaches 183.How much does a cross-border tax accountant cost in Canada?It depends on how many returns and information forms your situation needs.How much does it cost to file an FBAR?Nothing, if you file it yourself: the FBAR (FinCEN Form 114) is submitted free of charge through the Treasury BSA E-Filing System and there is no government filing fee.Is a TFSA taxable for US citizens living in Canada?Yes.What are the tax consequences of renouncing US citizenship from Canada?Renouncing ends your US filing obligations going forward, but it triggers a final set of them first.What is Form 8840 and when should a snowbird file it?Form 8840, the Closer Connection Exception Statement for Aliens, is a short IRS form that lets a Canadian who has met the substantial presence test remain a US non-resident by showing that their home, family and financial life are in Canada.What is Form W-8BEN and when does a Canadian need to sign one?Form W-8BEN is the IRS certificate a non-US individual gives to a US payer — a broker, an online platform or a client — to confirm foreign status and claim the reduced withholding rates in the Canada-US tax treaty.What is the IRS Streamlined Foreign Offshore Procedure and who qualifies?The Streamlined Foreign Offshore Procedures are the IRS program that lets US citizens and green-card holders living outside the United States catch up on missed filings without penalties.
Topic 3 of 10
GST/HST.
Are dance lessons and music lessons GST/HST exempt?Music lessons are exempt from GST/HST under a specific carve-out in the Excise Tax Act, regardless of whether they are private one-on-one lessons or group classes.Can I claim input tax credits on meals and entertainment?Generally, you can claim an input tax credit for only 50% of the GST/HST paid on meals and entertainment, the same 50% limit that applies to deducting these expenses for income tax purposes.Do nail salons and estheticians charge HST?Yes.Do veterinarians charge HST on their services?Yes.How do I file and pay my GST/HST return?Most registrants file a GST34 return online through the CRA’s My Business Account or GST/HST NETFILE, on a monthly, quarterly, or annual schedule the CRA assigns based on revenue.How do input tax credits work?An input tax credit, or ITC, lets a GST/HST-registered business recover the GST/HST it paid on purchases used in its commercial activity by netting that amount against the GST/HST it collected from customers on the same return.Is there HST on car washes and detailing?Yes.Is there HST on commercial rent and residential rent?Commercial rent, such as office, retail, or industrial space, is a fully taxable supply, so a registered landlord charges 13% HST on it and a tenant that is itself registered can generally claim an input tax credit on that rent.Is there HST on gym memberships and fitness classes?Yes.Is there HST on haircuts and salon services in Ontario?Yes.Is there HST on insurance in Ontario?No.Is there HST on massage therapy in Ontario?Yes.Is there HST on prescription glasses and contact lenses in Ontario?No, prescription glasses and contact lenses are zero-rated, meaning no GST/HST is charged, when they are supplied on the written order of an optometrist, ophthalmologist, or other professional entitled to prescribe them.Should I register for HST voluntarily before I hit $30,000 in sales?It depends on who buys from you and how much GST/HST you already pay on your own costs.What are the penalties for filing GST/HST late?When you owe an amount and file late, the CRA charges a late-filing penalty calculated as a percentage of the amount owing plus an additional monthly percentage for each full month you remain late, up to a maximum number of months, on top of daily compounding interest at the CRA’s prescribed rate.What is the difference between zero-rated and exempt supplies?Zero-rated supplies, such as basic groceries, prescription drugs, medical devices, and most exports, are taxed at 0%, which means no GST/HST is charged to the customer but the seller stays inside the GST/HST system and can still claim input tax credits on related costs.What is the quick method for GST/HST and who should use it?The quick method is an optional way to calculate what you owe on your GST/HST return: instead of tracking input tax credits on your purchases, you remit a set percentage of your HST-included sales to the CRA and keep the difference.When do I have to register for GST/HST?You must register for GST/HST once your worldwide taxable supplies, including zero-rated sales such as most exports, exceed $30,000 in a single calendar quarter or over the trailing four consecutive calendar quarters.Which groceries are taxable in Ontario?Most basic groceries, such as bread, milk, vegetables, meat, and coffee beans or ground coffee sold for home brewing, are zero-rated, so no GST/HST applies to them.Which province’s sales tax do I charge customers in other provinces?For goods, you generally charge tax based on the province the goods are delivered or shipped to, and for most services, you charge based on the customer’s address on file, not your own business location.
Topic 4 of 10
Bookkeeping and Deductions.
Are funeral expenses tax deductible in Canada?No.Are investment advisor fees tax deductible in Canada?Fees you pay separately for investment advice or for managing a non-registered investment account are deductible on line 22100 of your personal return, as long as the fee is charged and paid on its own rather than embedded in the investment itself.Can house cleaning be claimed on taxes in Canada?For most people, the cost of cleaning your own home is a personal expense and cannot be claimed on your tax return, no matter how the cleaning is billed.Can physiotherapy and massage be claimed as medical expenses in Canada?Physiotherapy always qualifies as an eligible medical expense because physiotherapists are authorized medical practitioners in every province.How do I catch up on years of unfiled bookkeeping?Start by gathering every bank and credit card statement for the missing years; most banks can produce up to seven years of statements on request, which is usually enough to rebuild a full history.How do I record owner draws and contributions?A sole proprietor records money taken out of the business as an owner draw and money put in as an owner contribution, both equity entries rather than expenses or income, since the owner and the business are the same taxpayer.How do I record USD transactions in Canadian books?Canadian businesses report their income tax return in Canadian dollars, so every USD transaction needs to be converted to CAD, generally using the exchange rate in effect on the date of that transaction.How do I separate business and personal expenses?Open a business-only bank account and card and run every business purchase through them, never a personal one.How do I track vehicle mileage for the CRA?Keep a logbook recording the date, destination, purpose, and kilometres driven for every business trip, for a full 12 months in the first year of claiming vehicle expenses.How long do I need to keep business records for the CRA?As a general rule, the CRA requires you to keep business records for six years from the end of the last tax year they relate to.How much does a bookkeeper cost in Canada?There is no single flat rate; a bookkeeper's fee mainly reflects how many transactions move through your accounts each month, whether you run payroll, whether you are registered for GST/HST, and how clean your books already are.How often should a small business update its books?A small business should capture transactions weekly, close the books monthly with a full reconciliation and review, check in quarterly on tax obligations, and treat year-end as a formality rather than the first look at the numbers.QuickBooks Online or Xero: which is better for a Canadian small business?For most Canadian small businesses we default to QuickBooks Online, mainly because of how well it handles GST/HST coding, its integration with payroll tools like Wagepoint, and how widely Canadian accountants and bookkeepers already know it.Should my small business use cash or accrual accounting?The CRA requires accrual accounting for most Canadian small businesses, meaning you record revenue when it is earned and expenses when they are incurred, not when cash changes hands.What financial statements does a small business need?Every small business needs three core financial statements: a balance sheet, an income statement, and a cash flow statement.What is a bank reconciliation and how often should I do one?A bank reconciliation matches every transaction in your books to the corresponding line on your bank or credit card statement, confirming nothing was missed, duplicated, or entered incorrectly.What is a chart of accounts and how should a small business set one up?A chart of accounts is the full list of accounts your bookkeeping software uses to categorize every transaction, organized into five groups: assets, liabilities, equity, revenue, and expenses, with cost of goods sold usually broken out on its own.What is Dext and do I need it for my bookkeeping?Dext is a receipt and invoice capture tool that reads a photo or forwarded email of a document, extracts the vendor, amount, date, and HST, and publishes the transaction directly into QuickBooks or Xero.What is the difference between a bookkeeper and an accountant?A bookkeeper handles the day-to-day work of recording transactions, categorizing them, and reconciling bank accounts so your books stay accurate month to month.What receipts do I need to keep for my business taxes?You need a receipt or invoice for every expense you claim, showing the vendor, the date, the amount, and enough detail to show what was purchased, not just a line on a credit card or bank statement.
Topic 5 of 10
Payroll and Contractors.
Can a sole proprietor hire employees in Canada?Yes.Can I pay my children or spouse a salary from my business?Yes, a business can pay a spouse or child a salary, and the CRA generally accepts the deduction as long as the work performed is genuine, the pay is reasonable for the type and amount of work done, and the payment is actually made rather than just recorded on paper.Do I need WSIB coverage for my Ontario business?If your business operates in one of the industries Ontario classifies as mandatory, which covers most construction, manufacturing, and many service industries, you must register with the WSIB within 10 days of hiring your first worker.Employee or contractor: how does the CRA decide?The CRA weighs the overall working relationship using a set of common law factors: who controls how, when, and where the work is done; who owns the tools and equipment; whether the worker has a genuine chance of profit and risk of loss; and how integrated the worker is into the business.How and when do I issue T4 slips?Every employer must issue a T4 slip to each employee who received employment income, taxable benefits, or had CPP, EI, or income tax withheld during the calendar year, and file those slips with the CRA together with a T4 Summary by the last day of February following the year.How do I pay a US contractor from a Canadian business?If the US contractor performs all their work from the United States, you generally pay them like any other vendor invoice: there is no Canadian tax to withhold and no T4A to issue, since Canadian contractor information-return rules are built around payments to Canadian residents.How do I run payroll for tipped employees in Ontario?Tips split into two categories with very different payroll treatment.How do I set up payroll for my first employee in Ontario?You need a CRA payroll (RP) account, a completed federal and Ontario TD1 form and Social Insurance Number from the employee, and a payroll system that calculates CPP, EI, and income tax deductions correctly.How does vacation pay work in Ontario?Under Ontario’s Employment Standards Act, most employees earn at least two weeks of vacation time and vacation pay equal to 4% of gross wages once they complete a year with an employer, rising to three weeks and 6% after five years with the same employer.How is statutory holiday pay calculated in Ontario?Ontario’s Employment Standards Act calculates public holiday pay with a formula: total regular wages plus vacation pay earned in the four work weeks before the holiday, divided by 20.What are the penalties for late payroll remittances?The CRA charges an escalating penalty on late source deduction remittances: generally 3% if the payment is one to three days late, 5% for four or five days, 7% for six or seven days, and 10% for anything more than seven days late or never remitted at all.What does an employee really cost an employer in Ontario?An employee costs more than the salary or hourly wage posted in a job listing, because the employer also pays CPP contributions, an additional CPP2 amount on higher earnings, EI premiums at 1.4 times the employee rate, vacation pay of at least 4% or 6% of wages, statutory holiday pay, and, depending on the business, WSIB premiums and the Employer Health Tax.What employee benefits are taxable in Canada?Most benefits an employer provides beyond salary are taxable to the employee unless a specific CRA exception applies.What is a Record of Employment and when do I issue one?A Record of Employment, or ROE, is the document employers must issue to Service Canada whenever an employee has an interruption of earnings, most often a layoff, resignation, or dismissal, so that person can apply for Employment Insurance benefits.What is a T4A and which contractors get one?A T4A is an information slip that reports amounts paid to a self-employed individual or unincorporated contractor for services, using box 048, along with other payments such as pension income, scholarships, and certain commissions.What is a T5018 and which contractors have to file it?A T5018, the Statement of Contract Payments, is filed by businesses primarily engaged in construction to report payments made to subcontractors for construction services.What is CPP2 and how does it affect payroll?CPP2 is the second additional Canada Pension Plan contribution, in effect since 2024, charged on earnings that fall between the regular yearly maximum pensionable earnings (the YMPE) and a higher ceiling called the YAMPE.What is the Ontario Employer Health Tax and who pays it?The Employer Health Tax, or EHT, is a payroll tax that Ontario employers pay on the total remuneration they pay to employees who work at or report to a permanent establishment in the province, at rates that scale up to 1.95%.When are payroll remittances due to the CRA?Most small employers are regular remitters and must send CPP, EI, and income tax deductions to the CRA by the 15th of the month following the month they were withheld.Which payroll software should a Canadian small business use?For most small Ontario businesses, we look for payroll software that auto-calculates and remits CPP, EI, and income tax; files T4s and ROEs electronically; handles Ontario WSIB premiums and Employer Health Tax where applicable; and connects directly to your accounting system rather than requiring manual re-entry.
Topic 6 of 10
Moving, Residency and Departure.
Can I keep my TFSA if I move to the US?You can keep a TFSA after moving to the US, and Canada will never tax it.Do Canadians working remotely from Canada for a US company pay US tax?No, in the normal case.Do I pay into both CPP and US Social Security if I work in both countries?No.Do non-residents of Canada need to file a Canadian tax return?Not automatically.Do US stocks held in a Canadian brokerage account count for T1135?Yes.Does departure tax apply to my principal residence?No.How are CPP and OAS taxed if I retire in the US?Once you are a US tax resident, the Canada-US tax treaty makes CPP and OAS taxable only in the United States.How can a US company hire a Canadian employee or contractor?A US company has four workable routes: register directly with the CRA as a non-resident employer and run Canadian payroll, use an employer of record that hires the person on its behalf, engage the person as an independent contractor, or incorporate a Canadian subsidiary.How do I become a non-resident of Canada for tax purposes?You become a non-resident of Canada by severing your significant residential ties, primarily a home in Canada, a spouse or common-law partner, and dependants, and by taking steps to build a genuine life elsewhere.How do I report foreign income on a Canadian tax return?Canadian residents report worldwide income, so every foreign amount goes on the T1 in Canadian dollars at the gross figure before any foreign tax was withheld.How does the 25% non-resident withholding on Canadian rental income work?When a non-resident owns Canadian rental property, whoever pays the rent, usually the tenant or a property manager acting for them, must withhold 25% of the gross rent and remit it to the CRA by the 15th day of the month after the rent was paid.How does the foreign tax credit work in Canada?The Canadian foreign tax credit reduces your Canadian tax by the income tax you paid to another country on the same income, so the income is taxed once at the higher of the two rates rather than twice.What happens to my 401(k) or IRA when I move to Canada?You can generally leave a 401(k) or traditional IRA exactly where it is after becoming a Canadian resident, and the Canada-US tax treaty preserves the tax-deferred growth inside the account for Canadian purposes as it already is under US rules.What happens to my RRSP and TFSA when I leave Canada?Your RRSP is not affected by the departure-tax deemed disposition, so it keeps growing tax-deferred, but withdrawals made as a non-resident face Canadian withholding tax rather than being added to a Canadian return.What is a deemed disposition and when does the CRA apply it?A deemed disposition is a rule that treats you as having sold a property at its fair market value for tax purposes, even though no actual sale took place and no cash changed hands.What is a dual-status tax year and how do I file one?A dual-status tax year is a US concept: within one calendar year you were a nonresident alien for part of the year and a resident alien for the rest, which is what happens in the year you move to or from the United States.What is a section 216 return for non-resident landlords?A section 216 return is an election that lets a non-resident who earns rental income from Canadian real estate be taxed on the net rental income, after expenses, at graduated Canadian rates instead of the default 25% withholding on the gross rent.What is departure tax in Canada and how much is it?Departure tax is the income tax that arises when the CRA treats you as having sold most of your property at fair market value on the day you stop being a Canadian resident.What is the 60-month rule for Canadian departure tax?The 60-month rule excuses you from the departure-tax deemed disposition on certain property if you were resident in Canada for 60 months or less during the 120 months (10 years) before you leave.What is the penalty for not filing a T1135, and how do I fix a missed year?A T1135 filed late carries a penalty of $25 for every day it is overdue, with a minimum of $100 and a maximum of $2,500 for the year, as at the time of writing.
Topic 7 of 10
Corporate Tax and Owner Pay.
Can I pay my spouse dividends from my corporation?Yes, but only tax-efficiently if your spouse is a genuine shareholder who fits one of the tax-on-split-income (TOSI) exclusions, since otherwise the dividend is taxed in your spouse’s hands at the top personal rate no matter how little other income they have.Can my corporation deduct life insurance premiums?Generally, no.Can my corporation pay for my car, and how is it taxed?Yes, a corporation can own or lease a vehicle and pay all its costs, but if you use that vehicle personally at all, you are taxed on a standby charge for having the car available and an operating benefit for the personal portion of actual use, calculated under specific CRA rules.Do I issue myself a T4 or a T5 as an owner-manager?A salary you pay yourself is reported on a T4, which requires a payroll account, source deduction remittances, and CPP contributions from both you and the corporation.How does passive investment income reduce my small business deduction?Once a Canadian-controlled private corporation, together with any corporations it is associated with, earns more than $50,000 of adjusted aggregate investment income in the prior fiscal year, its $500,000 small business limit for the current year shrinks by $5 for every $1 of investment income above that threshold, reaching zero once passive income hits $150,000.How does RDTOH work when my corporation earns investment income?RDTOH stands for refundable dividend tax on hand, an account that tracks the refundable portion of the extra tax a corporation pays on investment income like interest, rental income, and taxable capital gains.Should I pay myself salary or dividends from my corporation?There is no single correct answer: Canada’s tax system is designed so that salary and dividends land at roughly the same total tax once you account for what the corporation already paid, a concept called integration.Should I set up a holding company for my business?A holding company (holdco) is worth it when your operating company has built up retained earnings you want to protect from business creditors, when you are planning to sell and need to keep the operating company “pure” for the lifetime capital gains exemption, or when you are setting up an estate freeze or running multiple ventures under one roof.What are the penalties for filing a T2 late?Filing a T2 late when tax is owing triggers a penalty of 5% of the unpaid tax, plus 1% of that balance for every month the return is late, up to a maximum of 12 months.What fiscal year-end should I choose for my corporation?You can choose any date within 53 weeks of the date your corporation was incorporated, and after that first year, the fiscal year-end generally repeats on the same date each year.What is a personal services business and how do I avoid PSB status?A personal services business (PSB) exists when the person providing services through a corporation would reasonably be considered an employee of the client if the corporation did not exist, and the corporation has fewer than six full-time employees and is not providing services to an associated corporation.What is a shareholder loan and what happens if I do not repay it?A shareholder loan is money the corporation lends to a shareholder, often an owner-manager drawing cash informally rather than through salary or dividends.What is SR&ED and can my business claim it?SR&ED, the Scientific Research and Experimental Development program, is a federal tax incentive for businesses that carry out eligible research and development work, and yes, many Canadian businesses can claim it, including software companies, manufacturers, and other sectors that do not think of themselves as research-focused.What is the capital dividend account?The capital dividend account (CDA) is a notional running balance a private corporation keeps of amounts that can be paid out to shareholders completely tax-free, most commonly the non-taxable half of capital gains the corporation has realized, along with life insurance proceeds in excess of the policy’s adjusted cost basis and certain capital dividends received from other corporations.What is the corporate tax rate for a small business in Ontario?As at the time of writing, a Canadian-controlled private corporation in Ontario pays a combined federal and provincial rate of roughly 12.2% on the first $500,000 of active business income each year, made up of a 9% federal small business rate plus Ontario’s 3.2% small business rate.What is the difference between eligible and non-eligible dividends?Eligible dividends come from corporate income that was taxed at the higher general corporate rate, so they carry a larger dividend tax credit and are taxed more lightly in your hands.What is the lifetime capital gains exemption and how do I qualify?The lifetime capital gains exemption (LCGE) lets an individual shelter a set lifetime amount of capital gain, $1.25 million for dispositions of qualified small business corporation (QSBC) shares after June 24, 2024, from personal tax entirely.What is the small business deduction and who qualifies?The small business deduction (SBD) lowers the federal corporate tax rate on the first $500,000 of active business income earned by a Canadian-controlled private corporation (CCPC) each year, bringing the combined federal and Ontario rate to roughly 12.2% instead of the general 26.5% rate.When does a corporation have to pay tax instalments?A corporation must pay tax instalments when its net tax payable is more than $3,000 in the current year and in either of the two preceding years.When is a T2 corporate tax return due in Canada?A T2 corporate tax return is due six months after the end of the corporation’s fiscal year, regardless of whether the corporation owes tax or had any activity at all.
Topic 8 of 10
CFO, Cash Flow and CRA Problems.
Can I set up a payment plan with the CRA?Yes.How do I build a 13-week cash flow forecast?A 13-week cash flow forecast starts with a business's actual opening cash balance, then adds expected receipts and subtracts expected disbursements in weekly buckets, one column per week, for the next thirteen weeks.How do I build a small business budget?Build a budget from last year's actual revenue and expenses rather than a blank spreadsheet, then break revenue into the drivers that actually produce it and split costs into fixed and variable, adjusting for known seasonality.How do I calculate my break-even point?Break-even is the point where total revenue equals total costs; in revenue terms it is fixed costs divided by the contribution margin ratio, and in unit terms it is fixed costs divided by the contribution margin per unit.How do I choose an accountant for my small business?Choosing an accountant comes down to a handful of practical questions: are they a CPA with actual experience in your industry, do they work on the cloud accounting stack you use or want to use, do they quote fixed fees or bill hourly, and are they proactive about planning rather than focused only on compliance.How do I hand a family business to the next generation tax-efficiently?A tax-efficient handoff usually combines an estate freeze, which locks in today's value and lets future growth pass to the next generation, with the intergenerational transfer rules that took effect in 2024, which can allow the lifetime capital gains exemption on a genuine sale to a child's corporation.How do I prepare for corporate year-end?Preparing for corporate year-end means working through a checklist in the weeks before your fiscal year-end date: reconcile every bank and credit card account, review receivables and payables, count inventory if you carry it, list fixed asset additions, clean up any shareholder loan balance, decide on a bonus or dividend, and tie out HST and payroll to your books.How do I qualify for a small business loan in Canada?Qualifying for a small business loan in Canada generally requires two to three years of financial statements or a compilation, current CRA filings for both the business and the owner, a debt service coverage ratio that shows the business can afford the payments, and often a personal guarantee from the owner.How do I value my small business?There is no single formula for valuing a small business; the three main approaches are a multiple of normalized earnings (EBITDA or SDE), the value of the underlying assets, and a discounted cash flow projection.How much should I set aside for taxes as a self-employed Canadian?A commonly used approximate range is to set aside 25 to 35% of net self-employment income, covering income tax at your marginal rate and both the employee and employer halves of CPP; where you land in that range depends on your total income, since Canada's tax and CPP rates are graduated.Should my business lease or buy equipment?There is no universal answer: buying builds equity and lets you claim capital cost allowance, while leasing preserves cash and shifts obsolescence risk to the lessor, and lease payments are generally fully deductible as they are paid.What does a fractional CFO do for a small business?A fractional CFO does the same forward-looking finance work a full-time CFO would: building cash flow forecasts, managing pricing and margin, setting up KPI dashboards, preparing for financing, and reporting to owners or investors, but on a part-time, ongoing basis rather than a full-time salary.What happens if I have not filed taxes in years?Not filing for several years brings late-filing penalties that grow the longer a return sits outstanding, the possibility of the CRA filing an estimated assessment on your behalf that rarely favours you, and the loss of benefits and refunds tied to having a return on file.What is CRA taxpayer relief and when can penalties be waived?CRA taxpayer relief is a request, filed on form RC4288, asking the CRA to cancel or waive penalties and interest, not the underlying tax itself, on grounds of extraordinary circumstances such as illness or disaster, an error or delay caused by the CRA, or genuine financial hardship.What is gross margin and what should mine be?Gross margin is calculated as (revenue minus cost of goods sold) divided by revenue, expressed as a percentage, and it shows how much of every sales dollar is left after covering the direct cost of delivering the product or service.What is the CRA Voluntary Disclosures Program?The Voluntary Disclosures Program, or VDP, lets a taxpayer come forward and correct a past error or omission, an unfiled T1135, unreported income, or a missed GST/HST filing, before the CRA has contacted them about it, in exchange for reduced penalties and, in many cases, partial interest relief and protection from criminal prosecution for that matter.What KPIs should a small business track monthly?Almost every small business should track four numbers monthly: cash runway, gross margin, accounts receivable days, and accounts payable days, plus revenue by line to catch a shrinking segment before it drags down the total.What triggers a CRA audit and how do I prepare?A CRA audit is usually triggered by something that looks statistically unusual for the business's industry, results that fall outside typical benchmarks, repeated years of losses, unusually large HST refund claims, cash-intensive operations, real estate flips, or a mismatch between a T1135 and other reported information, along with occasional informant tips and data the CRA receives directly from platforms and financial institutions.When does a small business need a CFO?A small business typically needs CFO-level support once its finances get complex enough that the owner can no longer answer basic questions, like current runway or true product margin, off the top of their head.Why is my business profitable but always short on cash?A business can be genuinely profitable and still run short on cash because several real cash outflows never show up as an expense on the income statement: unpaid customer invoices, inventory bought but not yet sold, loan principal repayments, owner draws, tax and HST instalments, and equipment purchases.
Topic 9 of 10
US Real Estate, Investments and Trading.
Can the CRA tax my TFSA for day trading?Yes.Do Canadians pay capital gains tax when selling US property?Yes, twice over, though a foreign tax credit stops it from being double tax.Do Canadians pay US tax on US dividends and stock gains?Dividends and capital gains are treated very differently.Do Canadians with US brokerage accounts need to file US taxes?Usually no.Do I need an ITIN to sell US property as a Canadian?Yes.How does the CRA tax income from a US LLC?The CRA treats a US limited liability company as a foreign corporation, regardless of how the IRS classifies it, which means a Canadian member is generally not taxed on the LLC’s income as it is earned but only when the LLC actually distributes a dividend.How is a US vacation home taxed for Canadians who do not rent it out?If you never rent it out, a US vacation home does not require an annual US federal income tax return, because there is no US income to report.How is cryptocurrency taxed in Canada?The CRA treats cryptocurrency as a commodity, not currency, so tax applies every time you dispose of it: selling for cash, trading one coin for another, spending it on goods or services, and earning it through staking or mining are all separate taxable events.How much US estate tax could a Canadian owe on a Florida condo?Without treaty relief, a non-resident who is not a US citizen only gets a US$60,000 exemption before US estate tax applies to US-situs assets like a Florida condo.Is day trading taxed as business income or capital gains in Canada?There is no bright-line rule; the CRA and the courts look at how you actually trade, weighing factors like how often you buy and sell, how briefly you hold positions, how much time and specialized knowledge you bring to it, and whether you trade on margin.Should a Canadian buy US real estate personally, through a corporation, or through an LLC?For a single vacation home or a small rental, buying personally, or jointly with a spouse, is the default that works for most Canadians: it is simple, it lines up cleanly with the Canada-US tax treaty, and it avoids the double taxation an LLC creates.Should Canadians hold US stocks in a TFSA or an RRSP?For a dividend-paying US stock, the RRSP is generally the better choice.What expenses can day traders deduct in Canada?What you can deduct depends entirely on how your trading is classified.What is a 1042-S and what do I do with it on my Canadian return?A Form 1042-S is a US information slip a payer, typically a brokerage, a US company or an online platform, issues to report US-source income paid to a non-resident and how much US tax was withheld on it.What is a Schedule K-1 and how do Canadians report it?A Schedule K-1 is the US slip a partnership, including a US real estate syndication or investment fund structured as a limited partnership, issues to each partner showing their share of the partnership’s income, deductions, gains and credits for the year.What is FIRPTA withholding and how do Canadians reduce it?FIRPTA is the US rule that forces the buyer of US real property to withhold a share of the gross sale price whenever the seller is a non-resident, including a Canadian, and send it to the IRS as a deposit against the seller’s eventual US tax.What is Form 8288-B and how does it reduce FIRPTA withholding?Form 8288-B is an application to the IRS for a withholding certificate that lets a foreign seller of US real estate reduce FIRPTA withholding down to the actual maximum tax that could be owed, instead of a flat percentage of the gross sale price.What is the 871(d) net election for Canadians with US rental property?The 871(d) net election is a choice, made on your US non-resident return (Form 1040-NR), to have US rental income taxed on the net profit at graduated rates rather than at a flat 30% of gross rent.What is the superficial loss rule in Canada?The superficial loss rule denies a capital loss when you sell property at a loss and you, or an affiliated person such as a spouse or your own RRSP or TFSA, buys the identical property within 30 days before or after the sale and still holds it 30 days after.Which exchange rate do I use to report US rental income on my Canadian return?For ongoing rental income and expenses, the CRA accepts either the Bank of Canada exchange rate on the date each amount was received or paid, or the annual average rate for the year, as long as you apply the same method consistently from year to year.
Topic 10 of 10
Incorporation and Not-for-Profits.
Do I need a shareholders’ agreement?Yes, if your corporation has, or is about to have, more than one shareholder.Do not-for-profits pay tax in Canada?Most Canadian not-for-profits pay no income tax under paragraph 149(1)(l) of the Income Tax Act, as long as they are organized and operated exclusively for non-profit purposes with no income available for the personal benefit of a member.Federal or Ontario incorporation: which should I choose?If your business operates only in Ontario, provincial incorporation through the Ontario Business Registry is usually simpler and cheaper, and it protects your name only within Ontario.How do I bring a partner into my incorporated business?There are two basic mechanics: the corporation issues new shares to the incoming partner in exchange for cash, assets, or services, which brings in new capital without you selling anything personally, or you sell some of your existing shares directly to them, which is a personal sale that can trigger a capital gain and may qualify for the lifetime capital gains exemption.How do I dissolve a corporation in Ontario?Voluntary dissolution follows a set order: settle the corporation’s debts, distribute whatever assets are left to the shareholders, file a final T2 return covering the period up to the dissolution date, close the GST/HST and payroll accounts with the CRA, and then file articles of dissolution through the Ontario Business Registry.How do I incorporate a not-for-profit in Ontario?You incorporate an Ontario not-for-profit by filing articles of incorporation under the Ontario Not-for-Profit Corporations Act, or ONCA, through the Ontario Business Registry, which as at the time of writing carries a filing fee in the neighbourhood of $155 that you should confirm before you file.How do I register a charity in Canada?You generally start by incorporating a not-for-profit, under ONCA in Ontario or the CNCA federally, with purposes that fall within a recognized category of charitable purpose and a dissolution clause directing remaining property to another registered charity or qualified donee.How much does it cost to incorporate in Ontario?As at the time of writing, incorporating provincially through the Ontario Business Registry costs $300 in government fees when filed online, while incorporating federally through Corporations Canada costs $200 online, plus a separate Ontario extra-provincial registration if you plan to operate here.Should I incorporate my small business in Ontario?Incorporating usually pays off once your business earns more than you personally need to live on, since leftover profit sits inside the corporation at the combined federal-Ontario small business rate of 12.2 percent on the first $500,000 of active income, well below your personal marginal rate.Sole proprietorship or corporation: how do the taxes compare?As a sole proprietor, every dollar of profit is taxed on your personal return in the year you earn it, at your marginal rate, which in Ontario can reach roughly 53.53% at the top bracket, and you pay both the employer and employee halves of CPP on your net business income.What does it take to start a staffing agency in Ontario?Beyond incorporating, an Ontario temporary help agency needs a licence under the Employment Standards Act, which since July 2024 requires an application fee and a security deposit posted with the Ministry of Labour, on top of WSIB coverage, an Employer Health Tax account once payroll crosses the exemption threshold, and payroll set up to run continuously even before client invoices are collected.What goes in the articles of incorporation for a not-for-profit?Ontario not-for-profit articles filed under ONCA need a corporate name, a purposes clause describing the organization’s mission, at least three initial directors, any classes of members, restrictions on the corporation’s activities or borrowing powers if you want them, and a dissolution clause directing remaining property to a similar organization rather than to members.What is a corporate annual return, and is it the same as a tax return?No, they are two different filings with two different governments.What is a minute book, and do I really need one?A minute book is the corporation’s legal record book: articles of incorporation and by-laws, director and shareholder registers, the securities register, share certificates, and the resolutions that authorize what the corporation does each year, from declaring a dividend to approving year-end statements.What is a NUANS report?A NUANS report is a search result comparing a proposed corporate name against a database of existing corporate names, business names, and registered trademarks across Canada.What is a personal real estate corporation (PREC)?A personal real estate corporation, or PREC, is a corporation that lets a licensed Ontario real estate agent or broker have their commissions paid to the corporation instead of to them personally, a structure Ontario allowed starting in October 2020 under the real estate regulations now consolidated in TRESA.What is a professional corporation and who can have one?A professional corporation is a corporation that a member of a regulated profession, such as a physician, dentist, lawyer, public accountant, engineer, architect, or veterinarian, forms to carry on their practice through, incorporated under the Business Corporations Act with extra restrictions layered on by the profession’s own regulatory college.What is a section 85 rollover?A section 85 rollover is an election under the Income Tax Act that lets you transfer property, such as a sole proprietorship’s goodwill and equipment, or shares of one corporation into another, at an elected amount instead of fair market value, deferring the tax that a normal sale would trigger.What is the difference between a not-for-profit and a registered charity?A not-for-profit organization is simply exempt from income tax under paragraph 149(1)(l) of the Income Tax Act as long as it is organized and operated exclusively for non-profit purposes, but it cannot issue official donation receipts and still files a T2 return every year.What licences and registrations does a security company need in Ontario?A business providing security guard or private investigator services in Ontario needs a business licence under the Private Security and Investigative Services Act (PSISA), issued by the Ministry of the Solicitor General, and every individual guard it employs needs their own personal security guard licence as well.
Answers
Did not find your question.
Ask it on a short call. You get a plain answer and, if you want us to handle it, a fixed quote.