Common Tax Mistakes Part 2: A Practical Tax Checklist for Canadian Businesses

In Part 1, we explored the most common tax mistakes business owners make at the start of the year — from delaying tax planning to mismanaging payroll and HST. In Part 2, we shift from what not to do to what you should do.

A strong start to the year can prevent tax surprises, improve cash flow, and set your business up for smarter financial decisions. The checklist below is designed specifically for Canadian and Ontario business owners, and reflects what accountants see most often when reviewing early-year financial health.

At Koroll & Company, this is the same framework we use when helping clients move from reactive tax filing to proactive tax planning.

Why a Start-of-Year Tax Checklist Matters

January and February are not just about closing the books if that is your financial year-end — they’re about positioning your business for the year ahead. Decisions made early affect:

• How much tax you’ll pay
  
• How smoothly cash flows through your business
  
• Whether you can take advantage of deductions and credits
  
• How prepared you are for CRA deadlines
  

The Start-of-Year Tax Checklist for Canadian Business Owners

1. Review Last Year’s Financial Results

Before planning forward, look back:

• Review your year-end financial statements
  
• Identify trends in revenue, expenses, and profitability
  
• Flag unusual transactions or one-time events
  

Understanding last year’s results helps guide budgeting, compensation planning, and tax strategy for the year ahead.

2. Confirm Your Business Structure Still Makes Sense

Business circumstances change — your tax structure should keep up.

• Are you still operating as a sole proprietor when incorporation may now be beneficial?
  
• Does your corporation still qualify for the small business deduction?
  
• Are multiple shareholders structured efficiently?
  

A structure that worked two years ago may no longer be tax-optimal today.

3. Revisit Owner Compensation Strategy

January is the best time to assess salary vs. dividends:

• Review last year’s compensation mix
  
• Consider personal and corporate tax implications
  
• Factor in CPP contributions, RRSP room, and cash flow
  

Making this decision early allows payroll adjustments to be implemented cleanly throughout the year.

4. Set Up or Refine Your Budget and Cash-Flow Forecast

Tax planning is closely tied to cash flow.

• Build a realistic operating budget
  
• Forecast major tax payments (corporate tax, instalments, HST, payroll)
  
• Plan for seasonal fluctuations
  

Many tax issues arise not from high taxes — but from poor cash-flow planning around tax obligations.

5. Review HST/GST Obligations

HST errors are among the most common issues flagged by the CRA.

• Confirm registration status
  
• Review filing frequency
  
• Ensure HST collected is being set aside, not spent
  

If revenues have increased, filing requirements or remittance amounts may have changed.

6. Confirm Payroll and Remittance Compliance

Payroll mistakes tend to compound quickly.

• Review CPP, EI, and income tax withholding rates
  
• Confirm remittance deadlines
  
• Review WSIB coverage and classifications
  

Early-year payroll reviews help prevent interest, penalties, and employee trust issues later.

7. Assess Capital Purchases and Asset Planning

If you’re planning to buy equipment, vehicles, or technology:

• Review capital cost allowance (CCA) rules
  
• Consider timing purchases for optimal deductions
  
• Evaluate leasing vs. purchasing
  

Asset decisions have long-term tax implications and should be planned — not rushed.

8. Confirm Tax Instalment Requirements

If instalments apply:

• Confirm required amounts and due dates
  
• Build instalments into monthly cash-flow planning
  
• Avoid interest charges by staying current
  

This step alone can prevent costly and unnecessary CRA interest.

9. Clean Up Bookkeeping Systems

Strong records support better tax outcomes.

• Ensure bookkeeping software is up to date
  
• Reconcile bank and credit card accounts
  
• Separate personal and business transactions
  

Clean books mean fewer surprises — and lower accounting costs.

10. Schedule a Planning Meeting with Your Accountant

The most important item on the checklist:

• Review tax planning opportunities
  
• Discuss growth, hiring, or exit plans
  
• Identify risks before they become problems
  

At Koroll & Company, early-year meetings allow us to help clients plan, not just file.

Start the Year Proactively — Not Reactively

Tax problems rarely appear overnight. They build quietly when planning is delayed, records are incomplete, or decisions are made without financial context.

Using a start-of-year tax checklist helps ensure your business is compliant, efficient, and positioned to make smart financial decisions all year long.

If you’d like help reviewing this checklist or creating a tax strategy tailored to your business, Koroll & Company is here to support you with accounting, tax planning, bookkeeping, and business advisory services.