The IT Contractor's Year-End Bookkeeping Checklist (Canada)
Why Year-End Prep Matters
If you run a one-person IT corporation in Canada, year-end bookkeeping is not just an accounting exercise. It directly affects how much tax you pay, whether you trigger a CRA review, and how much your accountant charges you.
The corporations that pay the least in accounting fees are the ones that hand over clean, organized records. The ones that pay the most dump a shoebox of receipts on their accountant's desk in March.
Start preparing at least three months before your fiscal year-end. If your year-end is December 31, begin in October. If it is June 30, begin in April.
Month-by-Month Timeline
3 Months Before Year-End
Reconcile all bank and credit card accounts. Go through every transaction for the year and make sure each one is categorized. Flag anything you are unsure about.
- Match every bank transaction to an invoice or expense receipt
- Identify any personal expenses that accidentally went through the business account
- Record any shareholder loans (money you lent the corporation or borrowed from it)
- Verify that all client invoices have been sent and recorded
2 Months Before Year-End
Review revenue recognition and outstanding invoices. Make sure revenue is recorded in the correct fiscal year.
- Follow up on unpaid invoices, especially for December work billed in January
- Decide whether to defer income or accelerate expenses if it benefits your tax position
- Review any prepaid expenses and allocate them to the correct period
- Calculate your home office percentage if you work from home
If you have a large invoice that will push you into a higher tax bracket, discuss timing with your accountant. Sometimes deferring billing by a few weeks can save thousands in taxes.
1 Month Before Year-End
Prepare your records for handoff. This is when you compile everything your accountant will need.
- Export or print your general ledger, trial balance, and chart of accounts
- Organize receipts for all expenses over $100
- Calculate total salary and dividends paid to yourself during the year
- Confirm all payroll remittances (CPP, EI, income tax) are up to date
- Gather T4 and T5 information for any employees or dividend recipients
Year-End Month
Close the books and finalize adjustments.
- Record any last-minute expenses (software subscriptions, equipment purchases)
- Accrue any expenses incurred but not yet paid
- Record depreciation on capital assets (CCA)
- Finalize the shareholder loan balance
- Back up all financial data
What Your Accountant Needs From You
Your accountant will typically request the following documents. Having them ready saves time and money.
Financial Records
- General ledger or accounting software export for the full fiscal year
- Bank statements for all business accounts (every month)
- Credit card statements for all business cards (every month)
- Investment account statements if the corporation holds investments
Income Documentation
- All invoices issued during the year
- List of accounts receivable (unpaid invoices) at year-end
- Any contract agreements for major clients
Expense Documentation
- Receipts for all business expenses, especially meals, travel, and entertainment
- Vehicle log if you claim automobile expenses
- Home office calculation: square footage of office vs. total home, plus utility bills
- Asset purchases: invoices for any equipment, furniture, or technology over $500
Payroll and Shareholder Items
- Payroll records: total salary paid, CPP/EI remitted, T4 summaries
- Dividend declarations: board resolutions and amounts paid
- Shareholder loan ledger: amounts borrowed and repaid during the year
A shareholder loan balance owing to the corporation at year-end can trigger a taxable benefit under Section 15(2) of the Income Tax Act. Make sure any personal withdrawals are properly documented as salary or dividends.
Common Year-End Mistakes
Mixing Personal and Business Expenses
The single most common mistake for solo IT contractors. Every personal charge on a business card needs to be recorded as a shareholder loan debit. Missing even a few creates reconciliation headaches.
Forgetting to Declare Dividends
If you took money out of the corporation beyond your salary, it needs to be classified. Undeclared withdrawals default to shareholder loans, which can create tax problems if not repaid within the required timeframe.
Not Tracking Home Office Expenses
Many IT contractors work from home but forget to claim the deduction. You can claim a proportionate share of rent or mortgage interest, utilities, internet, and property tax based on the percentage of your home used for business.
Ignoring CCA (Depreciation)
Capital assets like computers, monitors, and office furniture are not expensed in full in the year of purchase. They are depreciated over time using CRA's Capital Cost Allowance rates. Missing this means overpaying taxes now and losing the deduction entirely.
Late Payroll Remittances
If you pay yourself a salary, payroll remittances to the CRA are due by the 15th of the month following the pay period. Late remittances attract penalties and interest that are not deductible.
Key Deadlines for Canadian Corporations
| Deadline | What Is Due |
|---|---|
| 2 months after year-end | Corporate tax payment (T2) |
| 6 months after year-end | Corporate tax return filing (T2) |
| February 28 | T4 and T5 slips to employees/shareholders |
| March 31 | T4 and T5 summary filing with CRA |
| GST/HST filing | Depends on your filing frequency |
Even though the T2 return is not due for six months, the tax payment is due in two months. Filing late and paying late are penalized separately.
How ledg Helps
ledg keeps your transactions categorized throughout the year so that year-end is not a scramble. Export a clean general ledger at any time, track shareholder loans automatically, and generate the summaries your accountant needs in one click.
This article is for informational purposes only and does not constitute tax advice. Consult a qualified accountant for your specific situation.
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