- Year-end planning happens before the year closes. Once the year is over, most of the useful choices are gone and only the paperwork is left.
- Decide owner pay first. Salary, bonus and dividends each have different tax, CPP and RRSP consequences.
- A bonus accrued at year-end is deductible for the year only if it is paid within 180 days after year-end.
- Clean up the balance sheet before your accountant starts: reconciled accounts, a real inventory count, reviewed receivables and a current shareholder loan schedule.
Most owners meet their accountant after the year has closed. By then the year's profit is fixed, the owner's pay for the year is mostly decided, and the only work left is to report what happened. Year-end planning moves that conversation forward, to the last two or three months of the year, when you can still act.
This checklist is the order our CPA partner follows with owner-managed Ontario corporations. It is written with a December year-end in mind, but the same steps apply to any fiscal year: start roughly 90 days before the year closes and work down the list.
What year-end planning is, and when to start
- Year-end planning
- Year-end planning is the review an owner and accountant do before a fiscal year closes, to make decisions on owner pay, timing, tax and the books while those decisions can still change the result.
Start about 90 days before your year-end. You need closed books for the first nine months to see where profit is heading, and enough runway to act on what you find.
The starting point is a reliable projection of the full year: nine or ten months of actual results from a proper month-end close, plus a realistic estimate of the remaining months.
Step 1: decide how the owners get paid
Owner pay is usually the largest planning decision of the year. An owner of an incorporated business can take salary (including a bonus), dividends, or a mix. Each route has different consequences:
- Salary and bonus are deductible to the corporation, go through payroll with source deductions, and count as employment earnings. That builds RRSP room and CPP pensionable earnings.
- Dividends are paid from after-tax corporate profit, are not deductible to the corporation, and carry no CPP. Because they are not employment earnings, they do not build RRSP room.
- Timing. Salary and dividends are taxed personally in the calendar year you receive them. Paying in late December or early January moves the income between tax years.
Two rules shape the timing. First, a corporation can accrue a bonus at year-end and deduct it for that year, but under CRA's rule on unpaid remuneration the bonus must be paid within 180 days after year-end. If it is paid later, it is deductible only in the year it is paid. Second, a bonus is still payroll: source deductions on it are remitted on your normal schedule when it is paid.
Our salary vs dividend calculator lets you model the mix on 2026 rates before you decide.
Decide owner pay before you decide anything else. It changes corporate taxable income, personal tax, RRSP room and CPP all at once.
Step 2: estimate corporate tax and plan the payments
Once owner pay is settled, estimate the corporation's taxable income and the tax on it. For a Canadian-controlled private corporation, active business income up to the $500,000 small business limit is taxed at the combined small business rate.
Ontario cut its small business rate from 3.2% to 2.2% from 1 July 2026. A tax year that straddles that date gets a blended rate: for a calendar 2026 year the Ontario rate works out to 2.7%, for a combined rate of 11.7% with the 9% federal rate.
| Item | When it is due |
|---|---|
| Balance of corporate tax owing | Two months after year-end; three months for a CCPC that claimed the small business deduction and meets CRA's taxable income conditions |
| T2 corporate income tax return | Six months after year-end (a 31 December year-end files by 30 June) |
| Corporate instalments | Monthly, or quarterly for eligible small CCPCs, due on the last day of each month or quarter |
The payment is due well before the return, so estimate it early and set the cash aside. Our profit vs cash calculator shows why a profitable year can still leave the account short when the tax bill arrives.
Step 3: clean up the balance sheet
A clean balance sheet makes the year-end file faster and surfaces decisions while they can still be made:
- Reconcile everything. Bank, credit cards, payroll liabilities, HST, loans and the shareholder loan, not just the bank.
- Count inventory. Plan a physical count as close to year-end as possible.
- Review receivables. Look at every old balance. Chase what is collectable and discuss with your accountant what is not.
- Document capital purchases. Keep the invoice for every asset bought in the year, coded separately from repairs and supplies.
- Review the shareholder loan. If you have borrowed from the company, CRA rules can add an unpaid shareholder loan to your personal income unless it is repaid within set time limits. Know the balance and talk to your accountant before year-end.
- List accruals. Bills for work done before year-end that have not arrived yet, and revenue earned but not yet invoiced.
If the books are only correct once a year, this step is where that shows. Our bookkeeping services keep these accounts reconciled monthly, so year-end is a review rather than a rebuild.
Step 4: payroll, slips and personal deadlines
Year-end for payroll is always 31 December, whatever your fiscal year. Before the last pay run of the year:
- Confirm every employee's name, address and SIN are current for T4 slips.
- Make sure any taxable benefits for the year are recorded through payroll before the last pay run.
- Decide whether any December bonus is paid in December or January, and remit source deductions on your regular schedule.
- Diary the slip deadline: T4 and T5 information returns are due by the last day of February. When that date falls on a weekend, CRA accepts filings on the next business day.
- Update payroll on 1 January: the CPP, EI and tax tables change every year and the annual maximums reset.
On the personal side, the last instalment of the year for individuals who pay by instalments is due 15 December. Charitable donations count for the year in which you make them. RRSP contributions made in the first 60 days of 2027 can be deducted for 2026; CRA publishes the exact date each year.
The checklist, in order
- 90 days out: project the yearClose the books to date and project the full year's profit and cash, including the corporate tax on it.
- 60 days out: set owner payChoose the salary, bonus and dividend mix for the year, and check the effect on RRSP room and personal tax.
- 45 days out: plan purchases and timingDecide with your accountant whether planned equipment purchases happen before or after year-end, and keep every invoice.
- 30 days out: prepare the balance sheetBook the inventory count, review receivables and the shareholder loan, and list expected accruals.
- Year-end: lock in the decisionsRecord the bonus accrual, any dividends declared, and the final December payroll.
- After year-end: hand over a clean fileGive your accountant reconciled books, the count sheets and the schedules, then diary the tax payment, T4 and T5 deadlines and the T2 due date.
This planning sits between our accounting services and our fractional CFO work: the year-end file on one side, the decisions that shape it on the other. If you want a partner to work through it with you next year, you can get in touch.
Questions
When should a small business start year-end tax planning?
About 90 days before the fiscal year closes. You need closed books for most of the year to project profit accurately, and enough time to act on owner pay, purchases and balance sheet clean-up before the year ends.
Can my corporation deduct a bonus it has not paid by year-end?
Yes, if the bonus is properly accrued and then paid within 180 days after the end of the corporation's tax year. If it is paid later, CRA allows the deduction only in the year it is actually paid.
When is corporate tax due in Canada?
The balance of tax owing is generally due two months after year-end, or three months for a Canadian-controlled private corporation that claimed the small business deduction and meets CRA's conditions. The T2 return itself is due six months after year-end.
This guide is general information for Ontario businesses, not advice for your situation. Rules change; talk to us before acting on it.