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Last updated: Jan. 30, 2024
In an attempt to save money, small business owners often ask, “Can I do my own corporate taxes?”
Our answer is: “Yes, of course you can!” However, it’s important to know what you are getting yourself into because DIY business tax filing can end up costing far more than hiring a tax specialist.
Let’s take a look at some of the pros and cons of doing your own corporate taxes.
The Pros of Doing Your Own Corporate Taxes
If you are tax savvy, there are a few benefits to filing your own business taxes (in addition to saving on the cost of hiring a tax specialist).
For example, you will get a deeper understanding of Canada’s tax laws. These laws change fairly frequently, so if you decide to do your own taxes, be sure to do your due diligence to avoid costly filing errors.
Doing your own taxes will also help you discover deductions and credits you didn’t know about. This insight may help you make choices throughout the year that reduce your tax responsibilities at filing time.
The Cons of Doing Your Own Corporate Taxes
Although filing your own corporate taxes may save the cost of hiring a tax specialist, the effort and potential risks outweigh the benefits for many small business owners.
Here are some of the drawbacks to filing your own business taxes:
Corporate tax preparation is complicated and time-consuming.
The Canada Revenue Agency (CRA) has very specific rules and regulations for filing corporate income tax returns. Many small business owners don’t have the in-depth knowledge of Canadian business tax rules required to do it properly.
You could end up paying more taxes than you owe.
There are many tax credits for small business owners in Canada that can reduce the amount of tax your business owes. However, understanding which credits you are eligible to claim can be complicated, and even innocent mistakes may trigger an audit.
Filing deadlines vary and are easy to miss.
Unlike personal income tax returns that have a set filing deadline of April 30, corporate tax filing deadlines aren’t universal. If your fiscal year ends on the last day of a month, your return is due by the last day of the sixth month after the end of your tax year. If the last day of your fiscal year isn’t on the last day of a month, your return is due by the same day of the sixth month following the end of the tax year.
For example, if your 2023 fiscal year ends Dec. 31, your corporate tax return is due six months later on June 30, 2024. However, if your tax year ended on Sept. 15, 2023, your return must be submitted by March 15, 2024.
You are responsible for paying estimated taxes on time.
Most Canadian corporations are required to pay estimated taxes in instalments throughout the year. The amount due either monthly or quarterly will depend on the business’s location, the type of business structure, and the work being done.
Filing mistakes may trigger an audit.
If you aren’t extremely well-versed in Canadian tax laws, it’s easy to make one or more of these mistakes when filing your corporate tax return, resulting in a CRA audit:
- Miscategorizing employees as contractors
- Late or inaccurate wage taxes
- Misreporting home office deductions
- Underreporting income
- Deducting travel mileage without documentation
- Inaccurate inventory counts
- Unreasonable corporation owner’s wages compared to shareholder income
Tips to Streamline Corporate Tax Planning and Filing
Doing your taxes is never going to be completely stress-free. However, we do have some tips to help you stress less about planning and filing your corporate taxes.
Start tax planning early.
Leaving your taxes for the last minute puts you on the fast track to anxiety. Be ahead of the game by making tax planning a year-round priority to ensure you are taking advantage of all of the tax deductions you are entitled to.
Here are some of our top tax planning strategies to help you get an early start.
Use this tax preparation checklist.
Corporate tax preparation requires sharp attention to detail. But the day-to-day responsibilities of running a small business often make it hard to find the time—and the brain power—to laser focus on tax prep.
Our tax preparation checklist can help you stay organized so you aren’t scrambling to find documents or missing out on write-offs when you prepare your tax return.
Hire a tax specialist.
Working with a trusted tax specialist who understands the challenges that small business owners face is the best way to minimize your tax responsibilities, maximize your tax incentives, and file accurate returns on time—every time.
Schedule a free 15-minute consultation with a member of the FBC team to find out how we can help.
Keep More of Your Hard-Earned Money at Tax Time
Filing corporate tax returns can get pretty complicated, and errors can cost you thousands of dollars in missed deductions, late fees, and penalties.The tax specialists at FBC can help you navigate the complexities of corporate tax planning and preparation to lower your business’s tax obligation and keep more of your money.
Want more corporate tax tips and expert insights? Download The Ultimate Guide to Incorporated Small Business in Canada.
