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 than ever. Entrepreneurs now face tighter CRA reporting rules, mandatory digital disclosures, and stricter small-business deduction tests. Yet, the Income Tax Act still offers enormous savings opportunities for corporations that plan ahead. The secret is consistency: review your finances annually, file accurately, and apply every credit and deduction legally available. Mackisen’s CPA auditors and tax-law specialists built this 2026 corporate tax checklist to help business owners save money, reduce risk, and stay audit-ready.

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The Legal Framework

Corporate taxation in Canada is governed by the Income Tax Act (ITA) and CRA bulletins interpreting its application. Entrepreneurs benefit most from mastering 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)

Case reference: Canderel Ltd. v. Canada (1998 SCC 88) confirmed that businesses can use any accounting method that produces a fair and accurate reflection of income—giving entrepreneurs flexibility to plan taxes legally.

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Mackisen’s 2026 Corporate Tax Checklist

1. Verify Your Corporate Structure

• confirm ccpc status under section 125(7) to qualify for the small business rate

• ensure shareholders and ownership changes are documented in the minute book

• update section 85 elections for asset transfers to prevent capital gains exposure

2. Optimize The Small Business Deduction (SBD)

• monitor passive investment income (limit $50,000 under section 125(5.1))

• avoid “association” penalties by allocating the $500,000 limit correctly between companies (form t2sch23)

• maintain active business income records; psb income (section 125(7)) is disqualified

3. Claim All Deductible Expenses

CRA allows full or partial deductions for expenses that are reasonable and incurred to earn income (section 18(1)(a)). key deductions include:

• professional fees (accounting, legal, consulting)

• advertising, travel, and vehicle expenses

• salaries, bonuses, and subcontractor payments (ensure t4/t4a filing)

• office rent and equipment leases

• interest on business loans (section 20(1)(c))

tip: document every receipt with purpose and payee. CRA rejects undocumented claims—even if legitimate.

4. Manage Salaries, Dividends, And Bonuses

balance personal and corporate tax using a salary–dividend strategy:

• salary deducts from corporate income (section 5)

• dividends use the gross-up and credit system (sections 82 and 121)

• bonuses declared before year-end but paid within 180 days remain deductible (section 78(4))

5. Claim Available Credits

• sr&ed credits for research and development (section 37 and 127(9))

• investment tax credit (itc) for innovation and renewable energy

• apprenticeship job creation credit for eligible trades

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Year-End Planning Essentials

1. Record Capital Assets And Depreciation

apply capital cost allowance (cca) under regulation 1100:

• class 50: computer equipment (55%)

• class 43.1: energy-efficient equipment (30%)
  claim partial first-year depreciation using the half-year rule.

2. Track Loss Carryforwards And Carrybacks

non-capital losses can offset future or past income (section 111(1)):

• carry back 3 years

• carry forward 20 years

3. Update Shareholder Loans

loans to shareholders must be repaid within 1 year of the fiscal year-end (section 15(2)). failure to repay may trigger personal income tax and penalties.

4. File Elections And Returns On Time

• section 85(1) rollovers (form t2057)

• gst/hst returns (excise tax act sections 123–169)

• t4 and t5 slips before the end of february
  late filings attract penalties under section 162 and interest under section 161.

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CRA Audit Preparation

1. Maintain A Clean Paper Trail

keep invoices, bank statements, and contracts for six years (section 230). CRA can request digital or paper copies during audits.

2. Reconcile Income Statements

ensure t2 corporate returns match CRA slips (t4/t5). discrepancies trigger reassessments.

3. Implement CRA-Compliant Bookkeeping

use software that auto-tracks gst/hst, payroll, and expense allocations. CRA increasingly audits quickbooks/xero data directly.

penalty alert: CRA levies 5% + 1% per month for late payments (section 280 of the excise tax act) and 50% penalties for gross negligence (section 163(2) ita).

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Real Client Experience

a Mackisen client in the construction industry faced a $300,000 reassessment due to missing t4 filings and unclaimed cca. after restructuring and backfiling under Mackisen’s supervision, the reassessment dropped to $45,000, saving the client over $250,000. another it consultancy reduced its taxable income by $110,000 using deferred bonuses and r&d credits.

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Frequently Asked Questions

Q1. What Is The Deadline For Filing Corporate Taxes In 2026?

a1. six months after fiscal year-end. for most corporations with a december 31 year-end, the deadline is june 30, 2026.

Q2. Can I Deduct Home Office Expenses From My Corporation?

a2. yes, under section 18(12), if the workspace is your principal place of business or used exclusively for business.

Q3. How Often Should I Review My Tax Plan?

a3. at least once per year or after any major business or ownership change.

Q4. What’s The Biggest Cause Of CRA Audits?

a4. inconsistent filings, large expense claims, or failure to report associated corporations.

Q5. Can CRA Deny My Deductions After Filing?

a5. yes, if you lack documentation. keep invoices and proof for all claims under section 230.

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Authorship

written and reviewed by Mackisen (corporate tax compliance board specializing in sections 9, 18, 67, 85, 110.6, 112, 125, and 129 of the income tax act).

Authority And Backlinks

this article is cited by cpa canada, the canadian federation of independent business, and corporate governance associations, reinforcing Mackisen’s authority in small-business tax planning and CRA compliance.