Practice Knowledge Academy

You don't need to know every answer. You need to know (1) whether the question has a simple or a risky answer, and (2) exactly which government page holds the current rule. Clients pay for judgment and calm — not for memorized trivia.

• Marginal system: moving into a higher bracket never makes you poorer — only the dollars above the line are taxed higher. 2025 federal brackets: 14.5% to $57,375 → 20.5% → 26% → 29% → 33% above $253,414. BC adds its own ladder (5.06% to 20.5%).
• Deadlines: file & pay by April 30; self-employed file June 15 but still pay April 30. Late filing = 5% of balance + 1%/month; interest compounds daily.
• Most-missed deductions: employment expenses with a signed T2200 (detailed method only — the $2/day flat rate died in 2022), moving expenses (new home ≥40 km closer to work), medical (best on the lower-income spouse), donations (pool spouses, carry forward 5 years), BC renter's tax credit $400 (income-tested).
• File every return, even zero-income spouses — otherwise CCB, GST credit and CWB stop.
• Carbon rebates are over — final payments were April 2025. Expect confused questions this year.

• RRSP: new room = 18% of prior-year earned income, max $32,490 (2025) / $33,810 (2026); deadline March 2, 2026 for the 2025 deduction. Over-contribution buffer is only $2,000 — beyond that, 1%/month penalty.
• TFSA: $7,000/year; cumulative $102,000 (2025). Withdrawals restore room on January 1 of the next year — re-depositing in-year is the classic 1%/month trap.
• FHSA: $8,000/year, $40,000 lifetime, room only starts accruing once the account is opened — tell every renter client under 40 to open one with $1 today. Deductible like RRSP, tax-free like TFSA when buying a first home.
• RRSP vs TFSA: RRSP wins when today's marginal rate > retirement rate; TFSA wins for low-income years and emergency funds.
• Legal income splitting: pension income splitting (T1032, up to 50%, both spouses elect), spousal RRSP (mind the 3-year attribution rule), gifts to a spouse's TFSA.
• TOSI — what to avoid: dividends from a related business to passive family members are taxed at the top rate. Safe harbours: genuinely active family (avg 20 hrs/week), "excluded shares", spouses 65+. Salary for real work is fine.

• T2125 reports business revenue and expenses inside the T1; one form per business; file June 15 / pay April 30; self-employed pay both halves of CPP.
• Meals & entertainment: 50% limit (exceptions: all-employee parties up to 6/year, meals billed to clients).
• Vehicle: business % of actual costs; the mileage logbook is the audit shield (after a base year, a 3-month sample log works if usage stays within 10%).
• Home office: deductible if principal place of business, or used exclusively + regularly to meet clients; workspace % of rent, utilities, insurance, property tax — but it cannot create or increase a business loss (carries forward).
• GST registration: mandatory once worldwide sales exceed $30,000 in a single quarter (charge GST on the crossing sale!) or over rolling 4 quarters (register within 29 days). Voluntary early registration makes sense with heavy startup costs or B2B clients.
• Instalments kick in when net tax > $3,000 in the current year and one of the prior two.
• When to incorporate: rule of thumb — when profits consistently exceed personal spending needs (≈$80–100k+ retained), for liability, or to set up a future LCGE-eligible share sale.

• Deductible: mortgage interest (never principal), property tax, insurance, strata, repairs, management fees. Your own labour is not deductible.
• Current vs capital: repainting = current; new roof/addition = capital (CCA only). Misclassification is a top audit trigger.
• CCA (Class 1, 4%): cannot create/increase a rental loss — and on sale it's recaptured as fully taxable income. In appreciating BC markets, often skip CCA deliberately.
• Airbnb: since 2024 (ITA s.67.7), expenses are denied for days a short-term rental is non-compliant (no licence / municipal prohibition). BC requires provincial STR registration; Vancouver requires a business licence. STRs are GST-taxable; long-term residential rent is exempt.
• BC Speculation & Vacancy Tax (declare annually; 2025: 0.5% Canadian / 2% foreign; 2026: 1%/3%) and Vancouver Empty Homes Tax 3% — tenanted 6+ months generally exempt, but the declaration must still be filed.
• Renting part of your home keeps the principal residence exemption safe if the portion is small, no structural changes, and no CCA claimed on the home.

• Capital gains: 50% inclusion for everyone — the proposed 2/3 rate was cancelled March 21, 2025. You will be asked about this constantly.
• Dividends: eligible gross-up 38% / non-eligible 15%, offset by the dividend tax credit; interest is fully taxable (report even without a slip — T5s start at $50).
• Net capital losses carry back 3 years (T1A) or forward forever (line 25300).
• Superficial loss: a loss is denied if you — or your spouse, your own RRSP/TFSA, or a company you control — rebuys the same security within 30 days either side. Wait 31+ days; beware DRIPs and robo auto-buys.
• Crypto: property. Every disposition is taxable — selling, crypto-to-crypto swaps, spending, gifting. Occasional investor = 50%; business-like trading = 100%. Foreign-exchange custody may count toward T1135.

• Tax residency ≠ immigration status. It turns on residential ties (home, spouse, dependants in Canada). Worldwide taxation starts at the date of entry — pre-arrival income is never taxed in Canada. Unclear cases → Form NR74 (entering) / NR73 (leaving).
• First-year return: due April 30; file even with zero income. Before the first return, newcomers apply directly for benefits: GST/HST credit (Form RC151) and CCB (RC66 + RC66SCH world-income schedule). Temporary residents qualify for CCB only after 18 months with a valid permit.
• T1135 foreign asset reporting: required when total cost (not value!) of "specified foreign property" exceeds $100,000 CAD at any time in the year. Counts: foreign bank accounts, foreign shares, foreign rental real estate. Excluded: personal-use property (the unrented flat in Riga), registered accounts. Newcomers are exempt for their first tax year of residency. Penalties: $25/day (min $100, max $2,500/yr); gross negligence $500/month up to $12,000.
• Treaty alert — Russia: the Canada–Russia tax treaty is SUSPENDED (Canada's notice effective Nov 18, 2024). No treaty relief; rely on foreign tax credits only. Ukraine (1996), Latvia (1995), Kazakhstan, Israel (2016) treaties remain in force.
• Foreign pensions (Russian, Latvian) are taxable on line 11500 — and do not qualify for pension income splitting or the $2,000 pension amount.
• Gifts and inheritances from abroad are not taxable — but document the source (gift letter, sale contracts) and remember: income earned after inheriting is taxable, and the asset may trigger T1135.
• Assets owned at immigration get a deemed cost = FMV at entry date — only post-arrival growth is taxed on a later sale. Tell clients to get valuations on arrival.
• Voluntary Disclosures Program (new rules Oct 1, 2025): unprompted applications get 100% penalty relief + 75% interest relief; prompted (after a CRA letter) still get up to 100% penalties + 25% interest. Form RC199; 10 years for foreign issues.

• Review ≠ audit. Most letters are routine pre- or post-assessment reviews (proof of a credit, a slip mismatch) — answer on time and they close. An audit is deeper (books and records).
• Process: letter with a deadline (usually 30 days) → respond with organized documents through CRA's secure upload ("Submit documents online" — never email) → either "no adjustment" or a proposal letter (30 days to respond) → reassessment → 90 days for a Notice of Objection.
• Authorization: file a RepID/authorization (Represent a Client) so CRA talks to you, not the client.
• Normal reassessment window: 3 years (individuals/CCPCs) from the initial assessment; unlimited if misrepresentation is alleged.
• Records: 6 years from the end of the tax year — tell clients before they shred.
• Common personal triggers: moving expenses, employment expenses, large donations, rental losses, tuition transfers, benefit overpayments, foreign income mismatches.

• Every corporation files a T2 every year — even inactive ones. E-filing is mandatory (years starting after 2023; $1,000 penalty otherwise).
• Two deadlines clients always confuse: file 6 months after year-end; pay 2 months after year-end (3 months for most CCPCs claiming the SBD).
• SBD: federal 9% + BC 2% ≈ 11% on the first $500,000 of active business income (general rate ≈27%). The limit is shared across associated corporations (Schedule 23).
• Passive-income grind: every $1 of adjusted aggregate investment income above $50,000 shrinks the business limit by $5 — gone at $150,000. A holdco full of investments can quietly double the opco's tax rate.
• Key schedules: S1 (accounting→taxable income), S8 (CCA), S50 (shareholders), S7/S23 (SBD & associated group). Financial statements attach in GIFI codes (S100/S125/S141).
• Corporate instalments required when tax payable > $3,000 (monthly; quarterly for eligible CCPCs with clean compliance history).

• The product is not data entry — it's reliable numbers. Monthly close: bank + credit card reconciliations, GST/PST coding, payroll entries, loan/shareholder account tracking, fixed asset schedule.
• Stack: QBO or Xero as the ledger; Dext (receipt capture) for source documents; Plooto/Wise for payments. Bank feeds are a starting point, never the final word — duplicates and miscodings are constant.
• Chart of accounts discipline: separate shareholder loan, owner draws, GST payable, payroll liabilities — the accounts that bite at year-end.
• Clean books = cheaper everything: faster T2, cheaper compilation, painless CRA reviews. Messy books multiply every downstream fee.
• Your own review checklist monthly: unreconciled items >90 days, negative expense balances, personal charges in the business account, GST payable vs. GST collected sanity check.

• Open an RP payroll account before the first pay; withhold income tax + CPP + EI; remit employee and employer shares. Source deductions are trust funds — directors are personally liable.
• 2025: CPP 5.95% each on $3,500–$71,300 (max $4,034.10); CPP2 4% each on $71,300–$81,200 (max $396) — new since 2024, often missed. EI 1.64% employee / 2.296% employer up to $65,700. 2026: YMPE $74,600, YAMPE $85,000, EI max insurable $68,900 (1.63%).
• Remitter types: regular (monthly, due the 15th), quarterly (small/new employers with perfect compliance), accelerated T1 (twice monthly) and T2 (within 3 business days of payday) for large remitters. Check each client's assigned type in My Business Account.
• Late-remitting penalties: 3% (1–3 days) → 5% → 7% → 10% (>7 days); up to 20% for repeats.
• Slips: T4 (employees) and T5 (dividends) due the last day of February; T4A for contractors/fees; more than 5 slips of a type must be e-filed.
• Employee vs contractor: control, tools, chance of profit/risk of loss. Misclassification = retroactive CPP/EI both sides + penalties. Owners >40% generally can't pay themselves EI-insurable salary.

• GST registration: mandatory over $30,000 worldwide taxable sales — single-quarter test (immediate) or rolling 4-quarter test (29 days to register). Voluntary registration unlocks Input Tax Credits.
• Filing frequency by revenue: ≤$1.5M annual, $1.5–6M quarterly, >$6M monthly. Annual filers owing >$3,000 pay quarterly instalments. Filing is mandatory even at $0.
• ITCs: recover GST paid on business inputs; 4-year window; no valid invoice = no ITC.
• Quick Method (elect with Form GST74, ≤$400k GST-included sales): remit a flat % of GST-included sales instead of tracking ITCs — BC service businesses remit 3.6% (still charge clients the full 5%); a 1% credit applies on the first $30,000. Low-expense consultants often pocket $1,000+/year this way.
• BC PST is a separate universe: 7% on most goods, software and listed services; register if you sell taxable goods/services in BC; small sellers ≤$10,000 exempt; no input credits (PST is a final cost); file via eTaxBC. Most consulting/professional services are GST-only today — but BC Budget 2026 announced PST expansion to some professional services effective Oct 1, 2026 — watch PST bulletins.
• GST revenue on the T2 must reconcile to GST returns — mismatches are a top audit trigger.

• Three levels: Compilation (no assurance, cheapest — often accepted for small credit lines) → Review (CSRE 2400, limited assurance, mid cost — typical for term loans) → Audit (CAS, reasonable assurance — large credit, bonding, buyers).
• What banks actually ask: it depends on the lender and the loan size — always have the client ask their banker first before paying for more assurance than needed.
• CSRS 4200 mechanics: engagement letter, basis-of-accounting note, intended-user assessment. Clean books from Module 8 are what make this fast and cheap.
• Management reports (not public practice): monthly P&L, cash-flow forecast, margin by job/service line — this is where you add value beyond compliance, no licence required.

• BC vs federal: BC incorporation (~$350) covers BC simply; federal (~$200) gives Canada-wide name protection but then requires BC extra-provincial registration (~$350) — two registries, two annual filings. For a BC-only business, incorporate in BC.
• Numbered vs named: numbered skips name approval; named needs a name request (~$30). BC has no Canadian-residency requirement for directors.
• After incorporating: CRA assigns a Business Number; program accounts attach — RC (corporate tax, automatic), RP (payroll), RT (GST/HST), RM (import/export). Annual BC report due within 2 months of the incorporation anniversary (~$43) — miss it long enough and the registrar dissolves the company.
• When incorporation pays: profits retained beyond living needs (11% inside vs up to 53.5% personal), liability protection, future LCGE (~$1.25M+ lifetime capital gains exemption) on a qualifying share sale, credibility with clients.

• Salary: deductible to the corp, creates RRSP room and CPP, helps mortgage qualification — but needs payroll + T4. Dividends: from after-tax profits, gross-up/DTC on the T1, no RRSP room, no CPP — reported on T5. Most owners blend. (T4/T5 deadline: last day of February.)
• Shareholder loans (s.15(2)): money borrowed from the corp is personal income unless repaid within one year after the end of the corporation's tax year — and "repay Dec 30, re-borrow Jan 5" fails the series-of-loans rule. Exceptions: employee loans for home/vehicle/shares with genuine repayment terms.
• Integration means salary vs dividends is often close — the real planning lever is how much to leave inside the corp at 11%.

• Top triggers: large GST refund claims, payroll exams, vehicle & meals, shareholder loans, cash-heavy businesses, GST-vs-T2 revenue mismatches, repeated losses.
• Process: selection → document request (desk) or visit → proposal letter (30 days) → reassessment → 90 days to object. Related parties' records can be examined. Upload via CRA secure channels — never email.
• VDP (reformed Oct 1, 2025): unprompted = 100% penalty relief + 75% interest relief; prompted = up to 100%/25%. Tax itself always payable. Apply before CRA calls.

• The stack you already named: QuickBooks Online / Xero (ledger) + Dext (receipt capture with AI extraction) + workflow automation (recurring invoices, payment reminders, bank rules). Your differentiator is knowing which automation is safe to run unattended and which needs human review.
• What AI genuinely does well today: document data extraction, transaction categorization suggestions, anomaly flags (duplicate bills, unusual amounts), drafting plain-language summaries of financial reports.
• What it must never do unattended: tax advice, filing decisions, anything that touches CRA. You review; the machine drafts.
• Sell outcomes, not technology: "you'll see your profit monthly, know your tax instalment before CRA reminds you, and never hunt for a receipt again."
• Privacy: client data in cloud tools → PIPEDA obligations; use Canadian data centres where available, 2FA everywhere, and a written privacy policy (you already have one on the site).

1. First hire: part-time admin/bookkeeper (remote OK) — receipts, reconciliation, scheduling. Frees 10–15 hrs/week.
2. Second: junior tax preparer for T1 season under your review (Feb–Apr contract).
3. Ongoing: CPA referral partnership — you send compilation/review/audit work; they send you non-CPA bookkeeping and tax prep. Formalize it with a one-page agreement.
4. Systems before people: document checklists (you have the 2026 Tax Checklist — make internal versions per service), email templates for the 20 most common client questions, a deadline calendar with two reminders per deadline.