When they have a revolutionary concept for a brand new good or service, many Canadian business people have that “lightbulb moment”.

Business founders are ardent about their concepts and want to make a difference in their world, but they might not be considering possible business tax issues they can encounter. There is never a bad time to consider tax reduction methods and how to lower the tax liability.

Before knowing about the corporate tax planning strategies in Canada let’s go through the business tax problems.

What Are The Main Challenges?

The various business tax challenges faced by Canadian business owners are:

1. Missing The Self-employment Tax Deadline

This is why first-time taxpayers who are new to small business owners could be taken aback.

2. Omitting To Pay The Expected Quarterly Tax

Unlike traditional, W-2 employees, self-employed business owners do not have taxes deducted from their paychecks. In general, you should send the IRS quarterly tax payments if you anticipate owing at least $1,000 in taxes.

There could be considerable interest and penalties if you don’t remember to make your quarterly anticipated tax payments.

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3. Failure To Disclose Cash Payments

To prove income and expenses, cash-based enterprises need meticulous recordkeeping. If it’s not done then there will be consequences.

4. Too Many Business Deductions

Business owners frequently deduct phone costs, home offices, business travel costs, and entertainment costs to reduce their taxable income. Thought must be given to not overstating deductions by business owners. What kind of spending and how much of that item is deductible is governed by some guidelines set forth by the IRS.

5. Failure To File

Does your business owe taxes? Some businessman fails to file because they are unable to pay the outstanding tax bill. This can create a major issue for your business.

What Are The Strategies?

You must identify strategies if you own a small business to minimize costs and increase revenue. Below are a few corporate tax planning strategies listed to minimize the issues faced in business tax planning:

Gather Invoices For Work-related Expenses

You must gather invoices for all business-related expenses if you wish to benefit from all of your tax deductions and lessen your tax liability. Being a business owner, you will be busy every time but you will have to keep a track of the purchases no matter what.

Business expenses range from the cost of internet advertising as well as promotional items like business cards and also the interest you pay for the real estate purchased for your company.

It is necessary to keep original records of all these expenses because Canada Revenue Agency does not accept statements of credit cards as proof of all business expenses. You will have to provide the CRA with the original receipts if they want to validate your claims.

Take Benefits From Home-based Business Expenses

If you are someone who runs their business work from home then there are many advantages of it. If you use your home as the principal workplace for your business or if you meet your clients there, then you are eligible to deduct a portion of your housing expenditures.

The percentage will depend on your office size concerning the house size in total. All of your residential expenses such as house insurance, mortgage interest, utilities, and many more that are directly related to running your business can be partially written off.

Report Non-Capital Losses

If the business consists of any non-capital losses then determine the year in which you may use this to reduce the income tax obligation. Non-capital losses may be beneficial for offset income.

Using some tax professionals’ help you may decide that it will be better to use this loss in the present tax year or carry this loss forward for offsetting a large tax amount.

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Managing The Contributions Of RRSP And TFSA

The best way of maximizing tax deductions for Canadian business owners are The Registered Retirement Savings Plans (RRSP) and Tax-Free Savings Accounts (TFSA). The amount of contribution depends on the yearly variation in your revenue.

RRSP contributions help in tax deduction and you will receive tax relief as well as tax shelter growth. If you want to increase the advantages of this RRSP you must contribute to this when you have a high tax bracket.

Using the TFSA will not give you any tax relief, however, everything of your money-including capital gains, bond growth, and other financial products that pay interest-accumulates tax-free.

Organize Your Business

Organizing your small business can help you minimize your tax. When you take this step, you get some advantages of a few tax benefits which are not applicable for the unincorporated business like splitting of income tax and exemption from capital gain whenever you sell your business.

This will lower your corporate rate of incorporating the business and helps you in lowering the tax rates in corporate.

What Is The Most Important Thing?

The most crucial thing about business tax strategies is providing accurate data to the appropriate IT authorities. Also, you need to file your business taxes on time as the late filing will cost you penalties, which is unnecessary.

Another big reason that you should not forget about filing your tax is you will have to collect all your information at the same time. Tax planning should take place by previewing all the challenges faced by the company or the business.

Also, take advice from a professional who will guide you in making those plans on business tax. They have knowledge as well as experience about these things and will help you to take the best decisions.


Tax planning for business is a crucial thing that a business owner needs to know about. A business owner may face a lot of issues regarding this business tax planning such as missing the deadline, not filing for tax, a large number of business deductions, and so on.

These types of issues can be removed if you create strategies for business tax planning. Following those planning will help you to minimize your tax rate and increase your revenue. You can consult a legal professional to get help in this matter.