Some errors may seem harmless at first, but can lead to unpleasant surprises when filing tax returns — or a few years later during an audit or transaction.

Here are 5 common tax mistakes made by Quebec entrepreneurs and, more importantly, why it's best to avoid them.

1. Mix personal and business expenses

Having a company does not make all your expenses deductible.

Generally, an expense must be incurred for the purpose of earning business income and be reasonable to be deductible. Personal expenses, therefore, do not become deductible simply because they were paid for with a company credit card.

This distinction is particularly important for expenses that can have both personal and professional uses: vehicle, telephone, meals, travel, home office, etc.

When a company pays certain personal expenses of a shareholder, rules regarding shareholder benefits may also apply.

The right approach: separate personal and business transactions as much as possible, and keep a clear justification for expenses claimed.

2. Claiming expenses without keeping supporting documents

An expense may be perfectly legitimate… but you still have to be able to demonstrate it.

The Canada Revenue Agency specifies that business expenses must be supported by documents such as invoices, receipts, contracts or other supporting documents.

Good bookkeeping is therefore not just an administrative task.

It helps to justify the expenses claimed, to better monitor the profitability of the company and to considerably facilitate the preparation of tax returns.

Waiting until the end of the year to try to reconstruct several months of transactions unnecessarily increases the risk of errors.

3. Withdrawing money from the company without checking how the withdrawal will be processed

The bank account of an incorporated company is not simply an extension of its shareholder's personal account.

Money withdrawn from a company can be paid out in the form of remuneration, dividends or, in certain circumstances, recorded as an amount owed by the shareholder.

However, loans or debts from a shareholder to their company are subject to specific tax rules. Depending on the circumstances, the amount of the loan or certain related benefits may have tax implications for the shareholder.

Dividends also have their own tax treatment and constitute income from shares held in a company.

Before withdrawing a large sum from your company, it is therefore best to know how this withdrawal will be structured and declared.

4. Forgetting to plan for provisional payments

A profitable company may have to pay tax even before its annual tax return is filed.

In Quebec, a company may have to make provisional payments when the tax and certain taxes in question exceed the prescribed thresholds.

Revenu Québec indicates that a company must generally make provisional payments if the total of the income tax and capital tax payable for the current year and that of the previous year each exceed $3,000.

Failing to include these sums in the company's cash reserves can create unnecessary financial pressure.

A company can be profitable on paper but find itself short of cash when tax payments, duties or advance payments arrive.

Taxation should therefore be included in cash flow forecasts, and not considered only at the end of the year.

5. Wait until a transaction is imminent before doing tax planning

This is probably one of the most costly mistakes.

An entrepreneur sometimes consults a tax specialist only when a business sale, acquisition, transfer, or reorganization is practically complete.

At that point, some options may be limited.

Planning done in advance allows for the evaluation of different possibilities before important decisions are made.

This can be particularly relevant when considering a sale of a business, the integration of a new shareholder, a corporate reorganization, a transfer to the next generation, or an acquisition.

In taxation, the best strategy is often the one that can be put in place before the transaction is signed.

Taxation should not be a year-end issue.

Good tax planning is not simply about looking for deductions a few weeks before filing returns.

It should evolve with the company.

Growth, new investments, accumulation of liquidity, change in shareholding, acquisition of a building or planned sale: each of these events can be a good opportunity to review the tax structure.

The goal is not just to comply with tax obligations.

It is also about ensuring that the company structure continues to align with the entrepreneur's objectives.

Are you questioning your corporate structure or the tax implications of an important decision?

Partenariat Fiscal supports entrepreneurs throughout Quebec in their tax planning, reorganizations and transactions.

Sources

Canada Revenue Agency — Business Expenses and Record Keeping: General Rules Regarding Reasonable Expenses Incurred to Earn Income and Supporting Documents to Retain.

Canada Revenue Agency — Shareholder Benefits and Loans: Tax Treatment of Certain Benefits, Loans and Debts Given Because of Shareholder Status.

Revenu Québec — Corporate Income Tax: Information concerning provisional payments and corporate tax obligations.

The information presented in this article is general in nature and provided for informational purposes only. It does not constitute tax, accounting, or legal advice. Each situation must be analyzed based on its specific facts.

Last updated: August 2026