Catch-up
Self-employed and behind on taxes in Ontario. Where do you start?
2026-10-26 · 7 min read · Tax Everyday, Vaughan
Self-employed people in Ontario file a T1 with a form T2125 for the business. The return-filing deadline is 15 June, but any tax owing was due 30 April. That gap is why so many sole props are “not that late” on the form and already late on the money. Interest runs from the April date. The late-filing penalty applies if the return is filed after 15 June and tax is owing: 5% plus 1% for each full month, up to 12 months.
CPP on self-employment earnings is part of the same T1 balance. There is no separate CRA bill you can ignore while you “just do the income tax.” If you also crossed $30,000 of taxable supplies, HST registration is a second problem sitting underneath the T1. Deal with that on its own note, but do not leave it out of the first conversation.
Rebuild the year from deposits, not from memory
A year behind is usually a year with a bank account and a bag of receipts. The T2125 needs income and a defensible expense total. It does not need a novel.
- Income: deposits, invoices, e-transfer reports, and any T4A a platform issued.
- Expenses CRA actually allows: supplies, advertising, professional fees, and the business portion of phone, vehicle, and home office. Personal draws are not expenses.
- Vehicle and home-office claims need a basis: kilometres, rooms or square footage, and the bills. A round percentage with no log is how reviews start.
- Instalments: if last year’s net tax was over $3,000, CRA may already be charging instalment interest.
- A ready self-employed year at Tax Everyday is $650 plus HST. A year that is three bank accounts and no totals is quoted.
File the oldest owing year you can document
If five years are open, do not wait until every receipt from the oldest year is found. Document the years you can, flag the gaps, and get the returns moving. An arbitrary assessment on a T4A gross amount, with no expenses, is almost always worse than a careful T2125.
Drop the bank statements and a simple spreadsheet if you have one. If you do not, say so. Book a time and we will tell you whether the year is a $650 file or a rebuild. The office is open every day, 8 to 8.
Short answers
I spent everything I made. Do I still owe tax?+
Often yes. Tax and CPP are calculated on profit, not on what was left in the account after personal spending. Personal spending is not a business expense. The return still has to be filed.
Can I incorporate now and skip the old sole-prop years?+
No. Incorporation does not close the years you operated personally. Those T1s and any HST still have to be filed. A new corporation starts its own T2 clock. It does not inherit a pardon.
Want this applied to your file?
These notes are general. A return is prepared only after we see your slips.