Year-End Tax Planning Checklist for Ontario Business Owners

*By Bader Chowdry, CPA | Insight Accounting CPA | Insight Accounting CPA*

As the fiscal year draws to a close, Ontario business owners face a critical window for tax optimization. Whether you operate in Mississauga, across the GTA, or anywhere in Canada, missing year-end opportunities can cost your business thousands in unnecessary tax liability. This comprehensive checklistdesigned specifically for $500K+ enterprisesensures you capture every available deduction while remaining fully compliant with Canada Revenue Agency (CRA) requirements.

Why Year-End Tax Planning Matters for Ontario Businesses

The difference between reactive and proactive tax planning often translates to 15-30% in additional savings for Ontario businesses. Under the Income Tax Act, your ability to implement certain strategies expires when the fiscal year closesmaking November and December mission-critical months. Our tax planning services help businesses throughout Toronto and Mississauga optimize their tax position before year-end deadlines.

Strategic Timing Considerations

Ontario businesses benefit from understanding jurisdictional nuances:

Provincial Corporate Tax Rate: Ontario maintains a 11.5% small business rate on the first $500,000 of active business income
Federal Rate Integration: The federal rate of 9% combines with provincial obligations
Calendar Year vs. Fiscal Year: Many owner-managed businesses elect non-calendar fiscal years, creating specific planning windows

Pre-Closing Checklist: Actions Before Your Year-End

1. Income Deferral and Acceleration Strategies

The fundamental principle of year-end tax planning is timingwhen you recognize income and when you incur deductible expenses.

For Calendar-Year Businesses (December 31 year-end):

Consider invoicing timingissuing invoices before year-end accelerates income recognition
Review outstanding receivablesbad debts may be deductible under specific conditions
Evaluate prepaid expenseswhich can often be deducted when paid

For Non-Calendar Fiscal Years:

Assess whether your fiscal year-end aligns with your business cycle
Consider the tax deferral benefits available through strategic year-end selection

2. Expense Acceleration Opportunities

Maximize deductible expenses before year-end:

| Expense Category | Timing Strategy | CRA Considerations |

|—————–|—————|——————-|

| Equipment/Software | Purchase before year-end for CCA | Available for use rule triggers deduction |

| Professional Development | Pay registration fees before year-end | Must relate to current business |

| Insurance Premiums | Prepay multi-year policies | Limited to 12-month prepayment |

| Office Supplies | Bulk purchases for Q1 needs | Document business purpose clearly |

| Capital Projects | Complete projects before year-end | Significant CCA impact |

3. Capital Cost Allowance (CCA) Optimization

Understanding the Accelerated Investment Incentive is crucial:

Class 50 (Software): Up to 55% CCA rate
Class 8 (Furniture): 20% rate
Class 1 (Buildings): 4% rate
Class 44 (Patents/Franchises): 25% rate with specific rules

Immediate Expensing: Certain property may qualify for immediate full deduction under the enhanced Immediate Expensing rulespotentially the last opportunity for some businesses depending on legislative changes.

4. Owner Compensation Review

For Mississauga and GTA business owners, optimizing the salary versus dividend mix requires careful analysis:

#### Salary Planning

Maximizes RRSP room ($31,560 of earned income needed for maximum 2026 RRSP deduction)
Creates CPP contribution entitlements
Reduces corporate taxable income immediately
Required for loss carryback claims

#### Dividend Planning

More tax-efficient at certain income levels
No CPP contribution requirement
Subject to Part IV tax and potential Part I tax on association
Must comply with integration rules

Our CFO services can model optimal compensation strategies based on your specific tax bracket and retirement timeline.

Corporate Tax Planning Considerations

Related Party Transactions

Review all transactions with shareholders, related corporations, and family members:

Shareholder Loans: Ensure any amounts owing are repaid or structured properly to avoid income inclusion under subsection 15(2)
Reasonable Compensation: Salaries paid to family members must represent fair market value for services rendered
Inter-Corporate Charges: Management fees and shared services must be documented with appropriate transfer pricing

Passive Income Restrictions

The passive investment income rules limit the small business deduction when adjusted aggregate investment income exceeds $50,000. Year-end is the time to:

Review investment portfolio structure
Consider tax-efficient investment wrappers
Evaluate corporate-owned insurance strategies
Assess capital gains/loss harvesting opportunities

Loss Utilization

Maximize loss utilization strategies:

Non-Capital Losses: Can be carried back 3 years or forward 20 years
Net Capital Losses: Only usable against taxable capital gains
Allowance on Eligible Capital Property: Track cumulative eligible capital deductions for potential recapture

Personal Tax Integration for Business Owners

Income Sprinkling Rules (TOSI)

The Tax on Split Income rules significantly limited income splitting opportunities, but valid exceptions remain:

Excluded Shares Exception: Family members aged 25+ with specific ownership and involvement criteria
Reasonable Return: Based on contributions of capital, work, or risk assumption
Related Business Exception: Applies to aged 18-24 in specific circumstances

Proper documentation of family member contributions is essential for year-end compliance. Our Mississauga office has specific expertise in family business structures.

RPP and IPP Planning

Individual Pension Plans: Establish or contribute before year-end for additional corporate deductions
Retirement Compensation Arrangements: Consider whether an RCA structure benefits long-term planning
Personal Will: Review beneficiary designations on all corporate life insurance policies

Charitable Giving Optimization

For Ontario business owners with charitable inclinations:

In-Kind Donations: Donate appreciated securities from corporation for combined corporate and personal benefits
Private Foundation Setup: Consider establishing before year-end for immediate giving opportunities
Corporate Donations: Claim deduction in year paid or within 24 months after year-end

Documentation and Compliance Checklist

Accurate documentation substantiates all deductions. Before year-end, ensure:

General Records

[ ] All invoices issued and recorded
[ ] Expense receipts organized and captured
[ ] Bank and credit card statements reconciled
[ ] Inter-company balances reconciled and confirmed
[ ] Shareholder loan account balanced and documented

Specific Ontario Requirements

[ ] EHT (Employer Health Tax) filings reviewed
[ ] WSIB clearance certificates current
[ ] Ontario New Home Warranty registrations compliant
[ ] PST exemptions properly documented

CRA Compliance Checkpoints

[ ] GST/HST ITC eligibility reviewed
[ ] Large transactions requiring T106 filings identified
[ ] Foreign reporting obligations (T1135) assessed
[ ] Scientific Research and Experimental Development (SR&ED) projects documented

Industry-Specific Year-End Considerations

Construction Businesses

Holdback Reconciliation: Accrue holdbacks receivable and payable
Progress Billing Analysis: Percentage of completion adjustments
Construction-specific tax strategies: Union dues, apprentice incentives, bonding costs

Healthcare Practices

Professional Corporation Requirements: Review College regulations for corporation status
Healthcare accounting: Equipment purchases, patient billing timing
HST on Professional Services: Ensure exemption rules properly applied

Technology/SaaS Companies

SR&ED Documentation: Track time and expenditures through year-end for maximum claim
Capital vs. Expense: Software development cost treatment
Technology sector incentives: OIDMTC vs SR&ED optimization

Post-Year-End Actions: Your 120-Day Window

Several critical actions must occur in the first 120 days after year-end:

1. T5 and T4 Summary Filings

T4 Summary Due: Last day of February following calendar year-end
T5 Summary Due: Same deadline for investment income reporting
Penalties: $25/day minimum for late filing, up to $2,500

2. Corporate Tax Return Deadlines

Standard Deadline: 6 months after year-end
Balance Due: 2 months after year-end (3 months for CCPCs meeting specific criteria)
Instalment Requirements: Monthly or quarterly obligations based on prior year

3. GST/HST Remittance

Annual filers: 3 months after fiscal year-end
Quarterly/monthly filers: Vary based on assigned periods

FAQ: Year-End Tax Planning for Ontario Businesses

What is the deadline for year-end tax planning decisions?

Most tax planning strategies must be implemented before your fiscal year-end. For December 31 year-ends, this means December 30. However, certain elections (like CCA class selection) can be made when filing your tax returneven up to 6 months post-year-end.

How much should I set aside for tax after year-end?

Most Ontario CCPCs should reserve 12-15% of active business income for combined federal and provincial corporate taxes, plus additional amounts for shareholder personal taxes. Schedule a consultation for a precise estimate based on your business structure.

Can I change my fiscal year-end for tax advantages?

Yes, corporations can change fiscal year-ends with CRA approval, typically when there’s a legitimate business purpose. This can defer tax for up to 12 months or align with business cycles. However, the process requires professional tax advice.

What records does CRA require for year-end tax positions?

CRA requires contemporaneous documentation for all deductions. This includes contracts, invoices, receipts, emails confirming business purpose, and transfer pricing documentation for related party transactions. Digital records are acceptable if properly organized.

Are there Ontario-specific tax credits I’m missing?

Ontario offers several credits through the Ontario Innovation Tax Credit (OITC), Ontario Business Research Institute Tax Credit (OBRITC), and the Ontario Film and Television Tax Credit (OFTTC). Year-end is the time to verify qualification and complete applications.

How does the SR&ED claim impact year-end planning?

SR&ED tax credits must be claimed within 18 months of the fiscal year-end, but optimal documentation requires year-end actions. Proper time tracking system implementation, project documentation completion, and expenditure categorization should occur before year-end.

What’s the difference between accounting year-end and tax year-end?

While most businesses align their tax and accounting year-ends, some elect different periods for specific planning purposes. Understanding this distinction is critical for proper deduction timing and instalment calculations.

Take Action Before Year-End

Year-end tax planning isn’t just about complianceit’s about capturing opportunities that disappear when the clock strikes midnight on your fiscal year-end. At Insight Accounting CPA Professional Corporation, we help Mississauga and GTA business owners transform year-end from a stressful deadline into a strategic advantage.

Call (905) 270-1873 today to schedule your comprehensive year-end tax planning session with Bader Chowdry, CPA. Our Accounting Intelligence approach ensures no opportunity is missed.

*Disclaimer: This guide provides general information and does not constitute tax advice. Tax outcomes depend on specific circumstances, and professional advice should be obtained before implementing any strategy. Past performance does not guarantee future results.*

About Insight Accounting CPA

Insight Accounting CPA Professional Corporation serves business owners throughout Mississauga, Toronto, and the Greater Toronto Area with sophisticated tax planning, compliance, and advisory services. Led by Bader Chowdry, CPAa patent-pending innovator in AI governance for financial controlswe combine traditional accounting excellence with forward-thinking technology integration.

*Accounting Intelligence Where Technology Meets Financial Wisdom*