If you’re self-employed or running a small business as a sole proprietor, getting organized before tax season can make preparing your personal tax return much easier.

Unlike an incorporated business, a sole proprietorship generally reports its business income and expenses as part of the owner’s personal income tax return. For many sole proprietors, this means gathering an entire year of business activity and making sure income and expenses are properly categorized before the return can be prepared.

Here are a few things to keep in mind as you get ready for your 2026 tax return, filed in 2027.

Keep Your Business Records Together

Your business bank and credit card statements provide an important record of your activity throughout the year.

Keeping business and personal transactions separate wherever possible can make year-end preparation much simpler. You should also retain invoices, receipts and other supporting documents for your business expenses.

Know Your Business Expenses

Throughout the year, you may have expenses related to operating your business, such as:

  • Advertising and promotion.
  • Office expenses and supplies.
  • Professional fees.
  • Business insurance.
  • Telephone and internet costs.
  • Vehicle and travel expenses, where applicable.
  • Other costs directly related to earning business income.

Not every expense is treated the same way for tax purposes, which is why proper categorization and review are important.

Don’t Forget About GST/HST

If your business is registered for GST/HST, your annual tax preparation may also involve preparing a GST/HST return.

Keeping track of the GST/HST collected on your sales and the GST/HST paid on eligible business expenses can help make this process easier at year-end.

Common Sole Proprietor Tax Mistakes to Avoid

A little organization throughout the year can prevent headaches when it comes time to prepare your return. Some common issues we see include:

Mixing personal and business transactions. Using the same bank account or credit card for both personal and business purchases can make it more difficult to identify your business activity. Keeping them separate wherever possible makes year-end preparation much easier.

Not keeping receipts and supporting documents. Bank and credit card statements show that a transaction occurred, but they do not always provide enough information about what was purchased or why it was a business expense. Keep your receipts, invoices and other supporting documentation.

Assuming every vehicle expense is fully deductible. If you use a vehicle for both business and personal purposes, only the business-use portion of eligible expenses may generally be claimed. Keeping an accurate record of your business kilometres and total kilometres can be important when determining the business-use percentage.

Missing GST/HST information. If you are registered for GST/HST, keeping track of the GST/HST you collect and the tax paid on eligible business purchases throughout the year can make preparing your return much easier.

Waiting until tax season to organize everything. Trying to reconstruct an entire year of business activity at the last minute can lead to missing information and unnecessary delays. Keeping your records organized throughout the year can make tax preparation much smoother.

A Simpler Option for the 2026 Tax Year

For the 2026 tax year, Virtual Heights Accounting is offering a limited fixed-fee package for eligible sole proprietors.

Your 2026 bookkeeping and personal tax return, completed for $1,500 + GST.

The package includes:

  • Preparation of an annual income and expense summary from business bank and credit card statements, up to 2,000 transactions.
  • Transaction categorization, accountant review, and adjustments required for tax preparation.
  • An Excel transaction report and PDF summary.
  • Your 2026 personal T1 tax return with one sole proprietorship/T2125.
  • One annual GST/HST return, if applicable.

The package is designed for sole proprietors who need help organizing their annual business activity and preparing their personal tax return without ongoing monthly bookkeeping.

It does not include formal account reconciliation, ongoing monthly bookkeeping, or maintenance of a Xero or QuickBooks file.

Is the Package Right for You?

We’ll review your records and personal tax situation before accepting the engagement to make sure the package is a good fit.

Limited spots are available for the 2026 tax year, with personal tax returns filed in spring 2027.

 

How to Sign Up

Interested in our 2026 personal tax return and bookkeeping package? Get in touch to discuss your business and confirm whether the package is right for you.

Book an introductory call: https://calendly.com/alissab/introcall_virtualheightsaccounting

Or email us: info@vhaccounting.ca and ask about our 2026 personal tax return and bookkeeping package.

Limited spots available. Eligibility will be confirmed before acceptance.