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In this article, we’re breaking down the most common tax mistakes we see small business owners make, and how to avoid them before they become expensive.

We’ve worked with hundreds of small businesses and see the same patterns repeat over and over again. Most tax problems start with a single root issue. From there, small, everyday decisions compound quietly over time.

So where does it usually start to go wrong?

Let’s break this down!

Treating Tax and Accounting as a Once-a-Year Task

The biggest culprit behind tax mistakes that cost you money is something that’s so simple and obvious, yet often overlooked.

Treating tax as a once-a-year task.

A lot of business owners only look closely at their numbers when a deadline is coming up. By that point, most of the opportunities to lower tax or reduce risk are already gone.

What ends up happening is decisions get made reactively instead of intentionally, and accountants are brought in to submit, not to advise. 

Tax is something you need to keep an eye on throughout the year. That doesn’t mean constant meetings or complicated planning. We know you’re busy.

What it really means is having enough visibility into your numbers to spot changes early. Knowing when revenue is growing faster than expected, when cash is getting tight, or when tax exposure is starting to build.

The simplest way to do that is to keep your books up to date on a consistent basis, whether that’s monthly, quarterly, or whatever cadence makes sense for your business. And if keeping up with that isn’t realistic for you, that’s a good sign it’s time to get help.

When your books are current, you’re not guessing. You can plan ahead and adjust decisions while there’s still time.

Mixing Business and Personal Finances

Another common culprit of problems piling up is mixing business and personal finances.

This usually starts small. A personal card used for a business expense. A business account covering a personal bill. It feels harmless in the moment, especially when you’re busy.

The problem is that mixed finances make everything harder later.

From a tax perspective, it weakens your deductions. Even legitimate business expenses become harder to confidently claim when the paper trail isn’t clean. Untangling that later costs time, money, or both.

From a credibility perspective, it raises questions. If the CRA ever reviews your file, mixed transactions make it much harder to clearly explain what’s business-related and what isn’t.

And from a business performance perspective, it skews your understanding of how the business is actually doing. When money is flowing in and out of the same accounts, it becomes harder to tell how much you’re really making versus how much is going out.

The fix here is simple: keep your business and personal finances separate. Use dedicated business bank accounts and credit cards, and stop mixing transactions, even if it feels convenient in the moment.

We’ve done a on this topic if you want more convincing.The link is in the description below.

Paying Yourself Without a Clear Structure

Another important factor that can cost you far more than you expect is how you pay yourself.

We often see owners taking money out of the business in a few different ways, sometimes without realizing it. A bit through payroll. A transfer when cash is needed. Personal expenses paid directly through the business. And then dividends. 

Individually, none of these are wrong. The problem is when they’re mixed together without a clear structure.

Without a clear owner pay structure, personal and corporate lines blur, and tax issues start to creep in on both sides.

Different ways of paying yourself are taxed differently and come with different reporting requirements. If that isn’t planned intentionally, you can easily end up paying more tax than necessary, or triggering unexpected payroll, CPP, or installment issues.

This is also where year-end surprises tend to show up. The numbers don’t line up, the tax bill is higher than expected, and it’s not obvious why.

The solution isn’t taking less money out. It’s deciding in advance how and when you’ll pay yourself and sticking to that approach consistently. Check out our blog on to learn more. 

Growing Revenue Without Updating Your Tax Planning

Another mistake we see business owners make is not adjusting their tax strategy as revenue grows.

We’ve seen businesses have a strong year with healthy cash flow and growing revenue, but no one steps back to plan while the year is unfolding. The first real look at how well things went often happens at tax time, when the accountant is focused on filing the return, not creating a strategy.

By the time year-end arrives, most of the meaningful planning opportunities are already gone.

Decisions like when income is recognized, how expenses are timed, how you pay yourself, and what to do with growing profits all need to happen during the year. Once the year closes, your options become more limited.

The practical takeaway here is simple. When revenue starts to meaningfully increase, that’s your cue to reassess your tax strategy. And that only works if your books are current. Whether you keep them up to date yourself or work with an accounting team, visibility is what gives you options.

Missing the GST/HST Registration Threshold

Here's one that catches a lot of business owners off guard.

In Canada, once you earn over $30,000 in revenue in any rolling 12-month period, you’re required to register for GST or HST. There’s no reset in January, and the CRA doesn’t notify you when you cross the line.

If you miss it and keep invoicing without charging tax, the CRA can still require you to remit it. In most cases, that means paying it out of pocket because you can’t go back and collect it from customers.

This usually happens during growth. Revenue increases, cash flow feels better, and tax thresholds aren’t top of mind. By the time it’s caught, the exposure has already built up.

The simple takeaway is to watch your revenue on a rolling 12-month basis. If you’re getting close to $30,000, that’s the time to think about GST or HST.

In some cases, registering early can help. You can recover the GST or HST on expenses, and you don’t remit what you collect until your return is due, as long as you set it aside.

If GST or HST feels confusing, we’ve a detailed walkthrough in the description below.

Not Planning for Tax Installments

The next mistake tends to catch business owners off guard more often than you’d think.

That mistake is not planning for tax instalments.

After a larger tax bill, the CRA will often require installments in the following year. Many business owners see this as a penalty or an unexpected demand, but it’s actually a signal that the business has changed. Profitability has increased, and the tax system is adjusting to that.

The problem isn’t the instalments themselves. It’s being unprepared for them.

When instalments aren’t anticipated, they create stress. Payments feel sudden, and if cash is tight when they’re due, things can spiral quickly. We often see owners dipping into operating cash, delaying other obligations, or relying on credit just to keep up.

When instalments are planned for, they’re far less disruptive. They’re built into cash flow expectations, accounted for in spending decisions, and no longer feel like a surprise.

The actionable takeaway here is make sure you’re actually reading your CRA mail. Instalment notices tell you when payments are required and how much, and missing them can create avoidable stress and interest.

If you’re having a strong year, don’t wait for the notice to show up before preparing. Start setting aside money for tax in a separate, high-interest savings account so the cash is there when taxes are due. 

This is also a good moment to loop in your accountant so instalments and cash flow expectations are clear before payments are due.

Waiting Until There’s a Problem to Ask for Help

The last costly mistake we see isn’t about not knowing something is wrong. It’s about knowing, and putting it off for too long.

In other words, waiting until there’s a big problem to ask for help.

There’s almost always a warning phase. The numbers stop being clear. Tax owing jumps unexpectedly. GST starts to feel harder to manage.

It’s a bit like driving with a warning light on your dashboard. You see it, but you’re busy, the car is still running, and you tell yourself you’ll deal with it later.

The problem is that these issues don’t usually resolve on their own. They keep building quietly while you focus on everything else.

Once a CRA letter shows up or a large tax bill hits, options are more limited and fixing things becomes more expensive.

The takeaway here is simple: if something feels off, that’s the moment to deal with it, not when it turns into a crisis.

Running a business is hard, and trying to handle everything yourself for too long is often what turns manageable issues into bigger ones.

Key Takeaway

The key thing to remember here is that most tax problems don’t happen overnight. They build slowly, through small decisions that don’t seem critical at the time.

The good news is that these issues are avoidable when tax and accounting are treated as an ongoing part of running the business, not a once-a-year task.

This is exactly the kind of work we help small and mid-sized businesses with every day.

If you’d like to chat, feel free to reach out on our