Leaving Your Day Job for Entrepreneurship: Tax Changes to Prepare For — CPA Firm Near You, Montreal

Introduction

Leaving a salaried job in Quebec to become a full-time entrepreneur is exciting — but it also changes your entire tax landscape. Without employer withholdings, payroll deductions, and structured T4 income, you must now manage your own taxes, GST/QST obligations, instalments, write-offs, and bookkeeping. Many new entrepreneurs underestimate these shifts and face penalties or reassessments. This guide explains the tax changes to expect when transitioning from employee to entrepreneur — and how a CPA firm near you in Montreal can help you prepare for success.

Legal and Regulatory Framework

Under the Income Tax Act and the Taxation Act of Quebec, once you leave employment and begin operating a business, you must:
• Report all business income as self-employed revenue
• Maintain full books and records
• Register for GST/QST once taxable sales exceed $30,000
• Make your own CPP/QPP and EI (if voluntary) contributions
• Track deductible expenses with receipts
• Ensure proper invoicing with GST/QST where applicable
• File annual T1 self-employment schedules or T2 corporate returns

Common deductible expenses include:
• Home office
• Vehicle use
• Supplies and equipment
• Travel expenses
• Software and technology
• Advertising and marketing
• Meals (50% rule)
• Subcontractors and staff
• Phone and internet (pro-rated)

Key Court Decisions

Courts have ruled that:
• New entrepreneurs must maintain proper records from day one
• Estimated expenses without receipts are denied
• GST/QST must be applied immediately once thresholds are exceeded
• Personal expenses cannot be disguised as business deductions
• Income from multiple platforms (freelance, consulting, e-commerce) must be reported
• Start-up activities demonstrating commercial intent qualify as business expenses

Judges emphasize discipline, documentation, and consistency.

Why CRA and Revenu Québec Target New Entrepreneurs

New business owners are commonly audited because they often:
• Fail to keep proper books
• Mix personal and business expenses
• Miss GST/QST registration
• Underreport income from online and cash sources
• Deduct home-office or vehicle expenses without logs
• Forget to make quarterly instalments
• Misunderstand employee vs contractor rules

Auditors compare bank deposits, platform payouts, invoices, receipts, and mileage logs.

Mackisen Strategy

At Mackisen CPA Montreal, we help new entrepreneurs build strong tax foundations. We:
• Set up bookkeeping systems tailored to your business
• Register GST/QST and prepare remittance schedules
• Track business expenses cleanly and professionally
• Optimize home-office and vehicle deductions
• Prepare quarterly instalment plans
• Advise whether incorporation will save taxes
• Build audit-proof documentation structures
• File annual taxes or corporate returns accurately

Real Client Experience

A Montreal consultant left his day job but continued using personal accounts for business. CRA reassessed expenses for two years. We rebuilt his bookkeeping, separated accounts, and implemented proper procedures. Another entrepreneur missed GST/QST registration for six months; we corrected filings and minimized penalties.

Common Questions

Do I need a business number immediately?

Not necessarily — unless you exceed the GST/QST threshold or choose to register early.

Should I incorporate right away?

Depends on income level, risk, and long-term goals.

Do I need to make instalment payments?

Yes, once prior-year taxes exceed CRA/RQ thresholds.

Can I deduct startup costs?

Yes, with proper documentation, even from before launch.

Why Mackisen

With more than 35 years of combined CPA experience, Mackisen CPA Montreal helps new entrepreneurs transition smoothly, avoid penalties, and optimize tax outcomes. Whether launching a consulting firm, online shop, or trade business, our expert team ensures precision, transparency, and complete compliance.