As December 31 approaches, many Canadian business owners believe tax planning is already off the table. In reality, several important decisions can still be made before year-end that directly affect how much tax your business pays and how smoothly your filings go with the CRA.

Year-end tax planning is not about shortcuts or aggressive tactics. It’s about reviewing your numbers, fixing gaps, and making informed decisions while there is still time. Even small adjustments — when done correctly — can reduce taxable income, improve compliance, and prevent problems during tax season.

This guide covers practical last-minute tax moves Canadian business owners can still make before December 31, focusing on actions that are realistic, compliant, and relevant for corporations and small businesses across Canada.

1. Review and Record All Outstanding Business Expenses

One of the most common year-end issues is incomplete expense records. Many businesses incur expenses throughout the year that never make it into the books, especially during busy months.

Before December 31, review your records to ensure all eligible 2025 expenses are properly recorded. This includes expenses you’ve already paid for as well as invoices received but not yet entered into your accounting system.

Examples include:

  • Office supplies and software subscriptions
  • Business-use portion of phone, internet, and vehicle costs
  • Professional fees such as accounting, legal, and consulting services
  • Marketing, advertising, and online tools

Accurately recording expenses reduces taxable income and prevents overpayment. However, expenses must be reasonable, business-related, and supported by documentation. Poorly categorized or unsupported expenses increase CRA audit risk.

2. Make the Right Owner Compensation Decision Before Year-End

For incorporated businesses, how you pay yourself matters just as much as how much you earn.

December is often the final opportunity to decide whether paying yourself through salary, bonus, or dividends makes sense for the current tax year. Each option has different tax consequences at both the corporate and personal level.

Key factors to review include:

  • Your personal tax bracket
  • Corporate taxable income
  • CPP contribution requirements
  • Cash flow availability

A bonus declared before December 31 may still be deductible to the corporation, even if paid shortly after year-end, provided it is structured correctly. Making this decision late — or not at all — often results in missed planning opportunities or higher overall taxes.

3. Write Off Uncollectible Accounts Receivable

If your business invoiced customers in 2025 and there is little chance of collecting payment, you may be able to deduct those amounts as bad debts.

Before year-end, review your accounts receivable aging report and identify invoices that are genuinely uncollectible. The CRA expects businesses to make reasonable efforts to collect outstanding amounts before claiming a bad debt.

Writing off bad debts:

  • Reduces taxable income
  • Keeps financial statements accurate
  • Prevents overstated revenue

Failing to address uncollectible receivables can inflate profits and lead to unnecessary tax payments.

4. Review GST/HST Accuracy Before Closing the Books

GST/HST mistakes are one of the most common triggers for CRA reviews. December is the right time to identify and correct issues before filings are finalized.

A proper year-end GST/HST review should include:

  • Matching GST/HST collected to sales records
  • Verifying tax rates applied correctly
  • Identifying missed input tax credits (ITCs)
  • Correcting posting or classification errors

Fixing errors before year-end is far easier than responding to CRA notices later. This step is especially important for businesses with high transaction volumes or multiple revenue streams.

5. Consider Capital Asset Purchases With Business Purpose

If your business genuinely needs equipment or technology, purchasing it before December 31 may allow you to start claiming capital cost allowance (CCA) sooner.

Common examples include:

  • Computers and office equipment
  • Machinery and tools
  • Business-use vehicles

While tax deductions can be helpful, purchases should never be made solely for tax savings. The asset must serve a real business purpose and align with your operational needs.

6. Clean Up Bookkeeping Before Year-End

Disorganized books create problems long after December ends. Inaccurate records lead to higher accounting costs, filing delays, and increased CRA risk.

Before year-end, businesses should:

  • Reconcile bank and credit card accounts
  • Review uncategorized or suspense transactions
  • Separate personal and business expenses
  • Ensure revenue is recorded in the correct period

Clean books make tax planning more effective and reduce the likelihood of adjustments later. This step is critical for businesses planning to grow or seek financing in the coming year.

7. Review Payroll and Source Deduction Compliance

Payroll errors are costly and often discovered too late.

Before December 31, confirm that:

  • Employees and contractors are classified correctly
  • CPP and EI deductions are accurate
  • Owner payroll is recorded properly
  • Payroll records align with remittance filings

Errors in payroll reporting can lead to penalties, interest, and CRA scrutiny — even when mistakes are unintentional. Addressing issues now prevents problems during T4 and T4A preparation.

8. Assess Income Timing and Deferral Options

In some cases, it may be possible to defer income into the next tax year, depending on your accounting method and business structure.

This may involve:

  • Reviewing invoicing timing
  • Confirming revenue recognition policies
  • Ensuring compliance with CRA rules

Income deferral must be handled carefully. Improper deferral can result in reassessments and penalties, so professional review is strongly recommended.

9. Confirm Losses and Credits Are Properly Tracked

If your business has non-capital losses, capital losses, or unused tax credits, year-end is the right time to confirm they are recorded accurately.

These amounts can significantly reduce future tax obligations, but only if they are tracked and applied correctly. Missing or misreported losses often go unused, resulting in higher taxes down the line.

10. Get Professional Review Before December 31

The biggest mistake business owners make is waiting until tax season to ask questions. By then, most year-end planning opportunities are gone.

Working with a professional before December 31 allows time to:

  • Identify missed deductions
  • Correct reporting issues
  • Structure owner compensation properly
  • Reduce CRA compliance risk

GTA Accounting supports Canadian businesses with year-end accounting, tax planning, bookkeeping, and payroll review to ensure decisions are accurate and compliant. In many cases, even a short review before year-end can prevent costly mistakes later.

Final Thoughts

Year-end tax planning is about preparation, not pressure. What you review — or ignore — before December 31 directly affects your tax position and compliance in 2026.

If your expenses are incomplete, your books are not reconciled, or your owner compensation has not been reviewed, there may still be time to fix it — but the window is closing.

Acting now puts your business in a stronger position for the year ahead.

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