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Tax seasons is fast approaching. If you are a first time owner of a small business in Canada, you may not have expected the taxes that come along with your company to be so overwhelming. If you are having a hard time getting everything organized for your tax return, the team at S&W Chartered Professional Accountants is here to help you get a head start.

Most small businesses are either a sole proprietorship or incorporated, so we will focus on how to file taxes for these types of businesses.

Sole Proprietorship

For this type of small business, you will have to report your business income on your T1 personal income tax form. In basic terms, since you are a sole proprietor, your business is you. The T1 income tax return includes a statement of business or professional activities section (Form T2125). You will use this form to report your business income. If your small business is a partnership, you will also file your taxes this way.


If you are an incorporated small business, you will be required to report your income made through your business on a T2 corporate income tax return. Your incorporated small business is its own entity, so legally it needs to file and complete its own Canadian income tax return. It should go without saying, but you yourself are also a separate entity, so you will also need to complete a T1 personal income tax return to go along with your businesses T2.

What expenses can you legally deduct through your business

Before you even think about completing your Canadian income tax return, it’s really important to know which business expenses you can and can’t deduct from your tax return. For example, you can deduct business taxes, and other dues, memberships, and subscriptions that are business related. You can also deduct management and administration business expenses (including bank charges), and the supplies you buy for your office. If you have a company vehicle that you only use for business related purposes, or if you travel for business, there are ways to deduct the fuel costs, license and registration fees, insurance, and repair costs.

If you run your small business out of your home, there are a few things that you will be allowed to deduct. This includes deductions by having any home maintenance or home ownership that are business related. The CRA states that you can deduct any reasonable current expense you incur to earn business income. Some examples of this are heat, lighting, water, internet, cellphone, cleaning materials, etc.

How S&W Chartered Professional Accountants can help file your next small business tax return

Whether you are incorporated or a sole proprietor, the experienced team at S&W Chartered Professional Accountants will love to help you out. We have been filing tax returns since 1979 and we have been providing a friendly service, honest advice and helpful solutions ever since. We can help you figure out what business related expenses you can deduct to help you save more money! Call us today at 416-979-7444 to inquire about how we can optimize your tax return, to learn more about our small business accounting services, or to book your free 30-minute consultation!