The Ultimate 2026 Corporate Tax Checklist for Entrepreneurs: Save More and Stay Audit-Proof

As Canada’s business environment evolves, corporate tax compliance has become more complex. Entrepreneurs now face tighter CRA reporting requirements, mandatory digital disclosures, and stricter rules for the Small Business Deduction (SBD). However, the Income Tax Act (ITA) still provides significant opportunities to reduce tax when businesses plan ahead and file accurately. Mackisen’s CPA auditors and tax-law specialists have developed this 2026 corporate tax checklist to help business owners save money, reduce risk, and stay prepared for a CRA audit.

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The Legal Framework

Corporate taxation in Canada is governed by the Income Tax Act (ITA) and CRA interpretation bulletins. Entrepreneurs benefit most from understanding the following key sections:

section 9 — income from business or property
section 18(1)(a) — deductibility of expenses incurred to earn income
section 85(1) — tax-deferred transfers of assets
section 110.6 — lifetime capital gains exemption (LCGE)
section 125 — small business deduction (SBD)
section 112(1) — intercorporate dividends
section 129(3) — refundable dividend tax on hand (RDTOH)

To stay compliant, corporations can review the CRA corporate tax filing requirements on the official Government of Canada website:
https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/corporations/corporation-income-tax-return.html

In the case of Canderel Ltd. v. Canada (1998 SCC 88), the Supreme Court confirmed that business income may be calculated using any method that fairly reflects income, providing flexibility in legal tax planning.

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Mackisen’s 2026 Corporate Tax Checklist

1. Verify Your Corporate Structure

Confirm CCPC status under section 125(7) to ensure eligibility for the small business tax rate.
Record shareholder transactions and ownership changes in the minute book.
Update any section 85 elections for asset transfers to avoid unexpected capital gains.

2. Optimize the Small Business Deduction (SBD)

Track passive investment income and ensure it does not exceed the $50,000 limit under section 125(5.1).
Allocate the $500,000 SBD limit correctly between associated companies (Form T2SCH23).
Ensure that revenue qualifies as active business income. Personal services business income is excluded under section 125(7).

3. Claim All Deductible Expenses

Expenses must be reasonable and incurred to earn income under section 18(1)(a). Deductions may include:
• Professional fees such as accounting, advisory, and legal
• Advertising, travel, and vehicle costs
• Salaries, bonuses, and subcontractor payments (T4/T4A required)
• Office rent, utilities, and equipment leases
• Interest on business loans under section 20(1)(c)

Proper receipts and payment evidence are required. The CRA may deny claims without documentation.

4. Manage Salaries, Dividends and Bonuses

Strategically balance salaries, dividends and bonuses to minimize total taxes.
Salary reduces taxable corporate income under section 5.
Dividends use the gross-up and credit system under sections 82 and 121.
Bonuses declared before year-end and paid within 180 days remain deductible under section 78(4).

5. Claim Available Credits

• Scientific Research and Experimental Development (SR&ED) under sections 37 and 127(9)
• Investment Tax Credits (ITC) for clean energy and technology
• Apprenticeship Job Creation Credit for eligible trades

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Year-End Planning Essentials

1. Capital Assets and Depreciation (CCA)

Apply CCA classes under Regulation 1100:
• Class 50: Computer equipment (55%)
• Class 43.1: Energy-efficient equipment (30%)
The half-year rule applies in the year of acquisition.

2. Loss Carryforwards and Carrybacks

Non-capital losses can be carried back three years or carried forward up to 20 years under section 111(1).
More details are available here:
https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/corporations/reporting-losses.html

3. Shareholder Loans

Loans to shareholders must be repaid within one year of fiscal year-end under section 15(2) to avoid taxable benefits.

4. Filing Elections and Returns

Section 85(1) rollovers require Form T2057.
GST/HST reporting follows the Excise Tax Act sections 123–169.
T4 and T5 slips must be filed before the end of February.
Late filing penalties apply under section 162 with interest under section 161.

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CRA Audit Preparation

1. Documentation Requirements

Maintain invoices, receipts, bank statements, and contracts for six years under section 230.

2. Reconciliations

Ensure T2 corporate returns align with CRA-filed payroll and investment slips.

3. CRA-Compliant Bookkeeping

Use audit-ready software that properly tracks GST/HST, payroll and expense allocations.

The CRA may charge 5 percent plus 1 percent per month for late payments under section 280 of the Excise Tax Act.
Gross negligence penalties may apply under section 163(2) of the ITA.

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Real Client Experience

A construction client had a $300,000 reassessment due to missing T4 filings and unclaimed CCA. Mackisen resolved the issues, reducing the amount to $45,000.
A technology consulting client reduced taxable income by $110,000 through deferred bonuses and R&D credits.

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Frequently Asked Questions

Q1. What is the corporate tax filing deadline for 2026?
A1. Six months after the corporation’s fiscal year-end. For most businesses with a December 31 year-end, the deadline is June 30, 2026.

Q2. Can home office expenses be deducted through a corporation?
A2. Yes, under section 18(12), if the workspace meets usage criteria.

Q3. How often should corporate tax plans be reviewed?
A3. At least once per year or after significant business or ownership changes.

Q4. What triggers CRA audits?
A4. Unusual deductions, inconsistent filings, or multiple associated corporations.

Q5. Can the CRA deny deductions after filing?
A5. Yes. Section 230 requires recordkeeping for all expenses and claims.

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Authorship

Written and reviewed by Mackisen Consultation Inc., corporate tax compliance specialists in sections 9, 18, 67, 85, 110.6, 112, 125 and 129 of the Income Tax Act.

Authority and Backlinks

This article is referenced by CPA Canada, the Canadian Federation of Independent Business and corporate governance associations, supporting Mackisen’s authority in small business tax planning and CRA compliance.