If you file late and have a balance owing, the CRA charges a late-filing penalty of 5% of the balance owing, plus 1% for each complete month the return is late, up to a maximum of 12 months. If you have been charged a late-filing penalty in any of the three previous tax years, the penalty increases to 10% of the balance owing, plus 2% per complete month, up to 20 months. Interest compounds daily on any unpaid balance starting May 1. If you are owed a refund and file late, there is no late-filing penalty — but your refund is delayed, and GST/HST credits or Canada Child Benefit payments tied to your filed return may also be delayed.

CPA Insight: Interest on unpaid taxes compounds daily at prescribed CRA rates. Filing on time — even if you cannot pay in full — stops the late-filing penalty from applying. A payment arrangement can address the balance.

You must report all income from all sources, including: employment income (T4 slips), self-employment and business income, investment income including interest, dividends, and capital gains, rental income, Employment Insurance benefits, Canada Pension Plan and Old Age Security benefits, RRSP withdrawals, and foreign income. Common misconceptions: lottery winnings are generally not taxable in Canada. Gifts and inheritances received from Canadian sources are generally not taxable income.
However, investment income earned on those gifts or inheritances is taxable. The CRA receives copies of your T-slips directly from employers and financial institutions and will match them against your return.

CPA Insight: We frequently see clients who forget to report T5 investment slips, out-of-province rental income, or foreign income from accounts held abroad. The CRA’s matching program will find discrepancies.

Deductions reduce your taxable income before tax is calculated. Common deductions include RRSP contributions (within your available room), union or professional dues, child care expenses, moving expenses (if you moved at least 40 kilometres closer to a new work or school location), carrying charges on investments, and employment expenses for those required to use their own funds for work. Tax credits reduce your actual tax owing after it is calculated. Common credits include the basic personal amount, medical expenses (amounts above the lesser of $2,759 or 3% of your net income for 2025), charitable donations, tuition (for students and transfer amounts to a parent or grandparent), the disability tax credit, and the Canada caregiver credit. Alberta has no provincial sales tax, meaning Albertans do not receive a provincial PST credit that residents of other provinces receive.

CPA Insight: The difference between a deduction and a credit matters significantly. A deduction at your marginal rate saves more for higher-income earners. Credits are calculated at a fixed rate. Understanding which you qualify for — and claiming them correctly — is where a CPA adds the most
value on a personal return.

A contribution to a Registered Retirement Savings Plan (RRSP) is deducted from your taxable income in the year you claim it, reducing the income tax you owe for that year. Your available RRSP contribution room for any year is calculated as 18% of your earned income from the previous year, to an annual maximum set by the CRA. For the 2025 tax year, the maximum RRSP contribution limit is $32,490. Unused contribution room from prior years carries forward indefinitely. The contribution deadline for the
2025 tax year was March 2, 2026. Contributions made after that date apply to the 2026 tax year. Overcontributing to your RRSP by more than $2,000 above your available room results in a penalty tax of 1% per month on the excess amount.

CPA Insight: RRSP planning is most effective when done throughout the year rather than as a last- minute February decision. Your Notice of Assessment shows your available room. If you have not checked yours recently, it is worth doing before year-end.

A Tax-Free Savings Account (TFSA) allows Canadians 18 and older to save or invest money and earn returns completely tax-free. Unlike an RRSP, TFSA contributions are not tax-deductible — you contribute after-tax dollars. However, all investment growth and withdrawals are tax-free. For 2025, the annual TFSA contribution limit is $7,000. Unused contribution room from previous years accumulates and carries forward. When you withdraw from a TFSA, that amount is added back to your contribution room in the
following calendar year, allowing you to re-contribute it. TFSA income does not affect income-tested government benefits such as the GST/HST credit or Old Age Security.

CPA Insight: The choice between an RRSP and TFSA depends on your income level, your expected income in retirement, and your immediate goals. As a general principle, RRSPs tend to favour higher-income earners today who expect lower income in retirement. TFSAs are flexible and benefit virtually everyone. Many Albertans benefit from using both strategically.

A capital gain arises when you sell a capital property — such as stocks, real estate (other than your principal residence), or other investments — for more than you paid for it. For the 2025 tax year, the capital gains inclusion rate for individuals remains at one-half (50%) of the capital gain, meaning only half of the gain is included in your taxable income. Note: the federal government proposed increasing this inclusion rate for certain gains realized on or after June 25, 2024, but subsequently announced that this
proposed increase was cancelled. For 2025 returns, the 50% inclusion rate applies. Your principal residence is generally exempt from capital gains tax under the Principal Residence Exemption, provided you have designated it as your principal residence for each year of ownership.

CPA Insight: The principal residence exemption is one of the most valuable tax benefits available to Canadians — but it must be claimed correctly. If you have owned multiple properties, rented your home at any point, or are unsure about your eligibility, a conversation with a CPA before you file is
essential.

Yes. All rental income must be reported on your Canadian tax return, including income from residential and commercial properties, short-term rentals such as those listed on platforms like Airbnb, and income
from renting a room in your home. Rental income is reported on Form T776. You can deduct eligible expenses against your rental income, including mortgage interest (not principal), property taxes, insurance, repairs and maintenance, advertising, and management fees. Capital improvements are generally not fully deductible in the year paid — they are added to the adjusted cost base of the property or claimed through capital cost allowance. As of January 1, 2024, short-term rental operators must comply with all applicable provincial and municipal registration and licensing requirements to deduct rental expenses.

CPA Insight: Rental income is one of the most audited areas of personal taxation. Clear records, proper expense categorization, and understanding the distinction between repairs (deductible) and capital improvements (not immediately deductible) make a significant difference at filing time.

After decades of experience preparing personal returns, the most consistent mistakes we see are: (1) Missing T-slips — especially T5 investment income slips, foreign income, and RRSP contribution receipts.
The CRA receives copies of all T-slips and will identify discrepancies. (2) Not claiming all eligible deductions — union dues, child care expenses, medical expenses above the threshold, and moving expenses are frequently overlooked. (3) Misunderstanding the self-employed payment deadline — those with a June 15 filing extension still owe any balance by April 30. (4) Failing to report foreign income or foreign assets — Canadians are taxable on worldwide income. (5) Incorrectly claiming the principal residence exemption — particularly relevant for those who have rented their home or owned multiple properties.

CPA Insight: The CRA’s matching program is highly effective. It is far better to report all income accurately upfront than to face a reassessment with interest charges and potential penalties.

Do not ignore it. The CRA issues various types of correspondence, including requests for information, proposed adjustments, and formal reassessments. You have the right to object to a reassessment within
90 days of the notice date by filing a Notice of Objection. If you receive a request for supporting documents, respond within the timeframe given — typically 30 days — with clear, organized documentation. Interest continues to accrue on any amounts owing during a dispute, though in some cases the CRA may waive penalties and interest under the taxpayer relief provisions if there were circumstances beyond your control.

CPA Insight: We recommend bringing any CRA correspondence to a CPA before responding. A poorly worded reply or missing documentation can complicate what might otherwise be straightforward to resolve. Acting quickly is more important than acting perfectly — timelines matter.

Self-employed Canadians have several key obligations: (1) Filing deadline is June 15, 2026 for 2025 returns, but payment is due April 30, 2026. (2) CPP contributions: self-employed individuals pay both the employee and employer share of Canada Pension Plan contributions. For 2025, the CPP contribution rate is 5.95% on eligible earnings between the basic exemption and the Year’s Maximum Pensionable Earnings of $71,300. The CPP2 rate of 4% applies to earnings between $71,300 and the Year's
Additional Maximum Pensionable Earnings of $81,200. (3) GST/HST registration is required once your worldwide taxable supplies exceed $30,000 in a calendar quarter or in the last four consecutive calendar
quarters. (4) Tax instalments may be required if your net tax owing exceeds $3,000 in the current or either of the two previous tax years.

CPA Insight: Many self-employed Albertans are caught off guard by the CPP self-employment contribution — paying both sides is a meaningful additional cost that should be factored into financial planning from the beginning of the business.

 A corporation must file a T2 Corporation Income Tax Return with the CRA within six months of its fiscal year-end. For example, if your fiscal year ends on December 31, your T2 is due June 30 of the following year. For Alberta, the corporate income tax return (AT1) is also due within six months of year-end and is filed separately with the Government of Alberta’s Tax and Revenue Administration. The balance owing is
due at a different time: for CCPCs that have claimed the small business deduction and whose taxable income is below a threshold, the balance is due two months after the fiscal year-end. For most other corporations, the balance is due three months after year-end. Beginning April 1, 2026, Alberta’s TRA will use online mail through TRACS as the default for corporate tax correspondence.

CPA Insight: The two-month versus three-month payment deadline catches many business owners off guard. If your corporation’s balance is due two months after year-end but you wait three, interest starts from month three. Confirming which deadline applies to your corporation is a conversation worth having with your CPA before your year-end.

Yes, most corporations are required to make monthly instalment payments on their estimated tax owing during the tax year rather than paying the full balance at year-end. There are three options for calculating instalment amounts: Option 1 — one-twelfth of the estimated tax payable for the current year; Option 2 — one-twelfth of the prior year’s tax payable; Option 3 — one-twelfth of the tax from the year before last for the first two months, then one-tenth of the difference for the remaining ten months. Eligible small CCPCs may qualify for quarterly rather than monthly instalments. If your federal and provincial tax before refundable credits is $3,000 or less in either the current or prior year, instalment payments may not be required.

CPA Insight: The instalment option that results in the lowest required payments in the first portion of the year is often Option 3. Missing instalment deadlines results in instalment interest charged by both the CRA and the Government of Alberta, which is assessed even if you pay the full balance by year-end.

The small business deduction (SBD) reduces the federal corporate tax rate from 15% to 9% on active business income earned by a CCPC. The maximum amount eligible for the SBD is $500,000 of active business income per year. To qualify, the corporation must be a Canadian-controlled private corporation throughout the tax year. The $500,000 limit must be shared among associated corporations — if your corporation is associated with one or more other corporations, the combined active business income
eligible for the SBD across all associated corporations cannot exceed $500,000. The SBD is also reduced for CCPCs with investment income above $50,000, and is eliminated when investment income reaches $150,000, for the prior year. Alberta applies a parallel small business deduction through its own corporate income tax system, also at the $500,000 threshold.

CPA Insight: Business owners who have multiple corporations should be aware of the association rules. The CRA applies a broad definition of association — if two corporations are controlled by the same person or related group, they are associated and must share the $500,000 SBD limit.

This is one of the most common planning questions for Alberta business owners, and the answer depends on your specific income level, personal needs, and long-term goals. Salary: deductible to the corporation, creating a CPP contribution obligation for both employee and employer portions. Generates RRSP contribution room for the individual. Dividends: paid from after-tax corporate income, no CPP contributions required. Taxed in the hands of the shareholder at dividend tax rates, which are generally lower than employment income rates but do not generate RRSP room. There is a concept called integration built into the Canadian tax system — in theory, the total tax paid on a dollar of income should be roughly the same whether earned personally or through a corporation. In practice, the optimal mix depends on your marginal rates, whether you want to build RRSP room, your corporation’s retained
earnings strategy, and several other factors.

CPA Insight: There is no single right answer. The optimal salary/dividend mix is recalculated annually based on your corporation’s income level and your personal income. This is one of the most concrete ways a CPA adds value for incorporated business owners — getting this mix right year after year has a measurable impact on your overall tax burden.

A corporation can deduct reasonable expenses incurred for the purpose of earning business income. Common deductible expenses include: salaries and wages paid to arm’s-length employees, rent and occupancy costs, office supplies and equipment, professional fees (legal, accounting, consulting), advertising and marketing costs, insurance, vehicle expenses (subject to CRA limits on the eligible capital cost of passenger vehicles), travel expenses, and interest on money borrowed for business purposes. Capital expenditures — assets with a useful life beyond one year — are generally not fully deductible in the year purchased. Instead, they are claimed over time through the Capital Cost Allowance (CCA) system, which assigns different depreciation rates to different classes of assets. Personal expenses are
not deductible, and mixed-use expenses must be apportioned between personal and business use.

CPA Insight: Vehicle expenses are among the most frequently reviewed items in a CRA audit. Maintaining a mileage log that tracks business versus personal use is the simplest way to support your claim. The CRA’s prescribed limits on passenger vehicle deductions and allowances change annually.

GST (Goods and Services Tax) is a federal tax of 5% applied to most goods and services sold in Canada. Alberta has no provincial sales tax, meaning businesses in Alberta collect only GST, not a harmonized sales tax (HST). Your business is required to register for a GST account and collect GST from customers once your total taxable worldwide supplies exceed $30,000 in a single calendar quarter, or in the last four consecutive calendar quarters. Small suppliers below this threshold may register voluntarily. Once
registered, you collect GST on taxable supplies and remit the net amount to the CRA — meaning you remit the GST you collected minus the input tax credits (ITCs) you are entitled to claim for GST paid on your business purchases. GST returns are filed monthly, quarterly, or annually depending on your reporting period, which is generally based on your annual taxable supplies.

CPA Insight: The $30,000 threshold catches growing businesses off guard. Once you cross it — even mid-quarter — you are required to register. Collecting GST without being registered, or failing to register when required, can result in the CRA holding you liable for the uncollected amounts.

If your corporation pays salaries or wages to employees, including the owner-manager, it has payroll obligations that include: deducting and remitting income tax at source based on the employee’s TD1 form, deducting and remitting Canada Pension Plan (CPP) contributions — both the employee and employer portions — and deducting and remitting Employment Insurance (EI) premiums. Remittances to the CRA are due on different schedules depending on the size of your payroll (monthly, twice monthly, or accelerated). At year-end, you must prepare T4 slips for all employees and file a T4 Summary with the CRA by the last day of February. Corporations that pay dividends to shareholders also issue T5 slips and file a T5 Summary by the last day of February. Penalties for late remittances are assessed immediately and can be significant.

CPA Insight: Payroll remittance penalties apply even for a single day’s delay. If your business has grown and your remittance schedule has changed from monthly to accelerated, missing the updated deadline is a costly and common mistake.

Based on our experience working with small and medium-sized businesses across Alberta, the most consequential and consistent mistakes are:

(1) Mixing personal and business expenses — paying personal expenses through the corporation is a shareholder benefit and is taxable to the shareholder. The CRA looks for this specifically.

(2) Misclassifying employees as independent contractors — the CRA
applies its own tests for employment versus self-employment, and misclassification can result in significant back-assessments for payroll deductions.

(3) Missing instalment payment deadlines — interest is charged whether or not you pay the full balance at year-end.

(4) Ignoring the associated corporation rules — sharing the $500,000 SBD limit incorrectly among associated corporations is a common and
expensive error.

(5) Inadequate record keeping — the CRA requires corporations to retain records for six years from the end of the last tax year to which they relate.

CPA Insight: The shareholder benefit rules are broadly applied and frequently misunderstood. Any personal benefit provided through a corporation — personal vehicle use, personal travel, home expenses — must be carefully tracked and reported. The exposure on a corporate audit for unreported shareholder benefits can be substantial.

The CRA requires corporations to keep all records and supporting documents necessary to determine their tax obligations and entitlements. This includes financial statements, bank statements and cancelled cheques, invoices and receipts for all expenses claimed, payroll records, shareholder records, and records supporting any deductions, credits, or elections claimed on the return. The general retention
period is six years from the end of the last tax year to which the records relate. If you file an objection or appeal, you must keep related records until the matter is resolved and the six-year period has expired. The Alberta TRA has parallel record-keeping requirements under the Alberta Corporate Tax Act. Records may be kept electronically, provided the format allows for review by the CRA or TRA and the original records are readable and complete.

CPA Insight: Six years from the end of the last tax year to which they relate means longer than most business owners expect. For example, a receipt from 2018 that supports a 2019 capital cost allowance claim that was still active in 2022 would need to be kept until 2028. When in doubt, keep it.

Nguyen Scott LLP is a locally owned Chartered Professional Accounting firm with over 24 years of experience serving individuals, families, and small and medium-sized businesses across the Greater Edmonton Area.

We operate three convenient Alberta locations: St. Albert (203 — 12 Perron Street), Leduc (5220 — 50 Street), and Drayton Valley (5610 — 50 Avenue).

Our partners — Jovy Nguyen CPA, CA and Vincein Scott CPA — lead a dedicated team committed to providing expert, personalized service that treats every client as more than a number.

Our services include personal tax, corporate tax, bookkeeping, financial statements (Notice to Reader, Review, and Audit), trusts and estates, advisory, and business valuations. We work with clients in construction, oil and gas, agriculture, real estate, medical practices, transportation, retail, and not-for- profit sectors.

We offer a free 30-minute consultation for new clients — personal or corporate.

Contact us at nsllp.ca/contact-us/
Phone: 780-458-5479