Top Five Things You Don’t Want To Do If You Want To Stay on CRA’s Good Side

There’s no cheat code to avoid CRA scrutiny but there are definitely things that will raise red flags. Here are five habits that can get you into trouble fast.

If there’s one thing I tell all my small business clients in Ottawa: CRA isn’t out to get you, but if you give them a reason to dig, they absolutely will.

Over the years, I’ve seen audit letters fly out over the smallest errors. And it’s rarely some big fraud scheme. Usually, it's just sloppy bookkeeping or carelessness that escalates into penalties or reassessments.

Here are the top five things you don't want to do if you’re trying to stay on CRA’s good side.

1. Don’t Mix Business and Personal Transactions

This is a classic rookie move.

You’ve got one chequing account or credit card and use it for everything. (groceries, office supplies, client dinners, family dinners) all mixed in.

What happens? If CRA audits you and sees personal spending in your business records, they’ll question everything. And I mean everything.

Tip: Open a separate business account and credit card. Keep a clean paper trail.

2. Don’t Pay Payroll Taxes Late

If you have employees, payroll remittances are serious business.

When you deduct income tax, CPP, and EI from an employee’s pay, that money doesn’t belong to you. It’s CRA’s, and they expect it on time.

Late payroll? CRA sees that as misuse of government funds. Penalties are harsh, and interest racks up quickly.

3. Don’t Delay Paying Your HST

Same deal as payroll. If you collect HST/GST from your customers, it’s not your money.

I’ve seen business owners collect tens of thousands in HST over the year, use the cash for shopping, then panic when the payment deadline rolls around.

No cash left = no HST payment = audit risk + penalties.

Tip: Set that HST money aside in a separate savings account and don’t touch it.

4. Don’t Throw Out Receipts or Pay in Cash Without Proof

No receipt? No write-off.

I’ve had clients try to deduct cash expenses for tools, equipment, or repairs. But with no receipt or invoice, CRA simply denies it.

And if you’re withdrawing cash from your account to pay for things? You’d better have proof of what it was for. Otherwise, CRA might label it a personal expense.

Tip: Use a cloud receipt app or even just take photos. Keep backups.

5. Don’t Forget to Track Your Mileage

If you’re using your car for business, you need a mileage log. No exceptions.

You can’t just guess that you drove “about 10,000 km” for business last year. CRA wants dates, destinations, and distance. Without a proper logbook, your car claim gets tossed or reduced.

Tip: Apps like MileIQ or QuickBooks Self-Employed can automate this. But even a paper logbook works if you stay consistent.

Final Thoughts

CRA doesn’t expect you to be perfect. But they do expect you to be organized and honest.

If you’re sloppy with your records or blur the lines between business and personal, you’re raising your own audit risk. Keep it clean, track everything, and don’t treat government money like it’s yours.

Need help setting up better systems or cleaning up your books? That’s what I do.

Let’s keep CRA off your back.

--

This is not legally binding tax advice. This is educational analysis. Say hello if you need help.

hello@taxesmadesimple.ca

WhatsApp - 613.600.4194

‍