7 Common Tax Mistakes Canadian Freelancers Make (and How to Avoid Them)
These seven mistakes cost Canadian freelancers real money every year — through missed deductions, CRA interest charges, and denied claims. Here's how to avoid each one.
Marcus Chen
Tax Specialist
The CRA reassesses hundreds of thousands of self-employed returns every year. Most adjustments are not the result of fraud — they're the result of common, avoidable mistakes. Here are the seven that show up most frequently in audits and reviews.
1. Deducting 100% of Meals and Entertainment
Only 50% of meals and entertainment expenses are deductible under the Income Tax Act — even when the meal is 100% business-related. This is one of the most common audit adjustments. The CRA routinely reduces 100% claims to 50%.
2. Not Keeping Contemporaneous Mileage Records
Reconstructing a mileage logbook from memory or calendar entries at year-end is not a contemporaneous record. The CRA can reject reconstructed logbooks and disallow the entire vehicle expense claim. Track mileage in real time — an app that timestamps each trip automatically is the safest approach.
3. Missing the Tax Instalment Deadlines
If your net tax owing exceeds $3,000, quarterly instalments are required. Missing them triggers daily interest at the prescribed rate — currently 9% annually. The CRA sends instalment reminders, but you're responsible for paying whether or not the reminder arrives.
More Common Mistakes
- Claiming personal expenses as business (e.g., gym membership without a demonstrable business necessity)
- Forgetting to include GST/HST collected as income — it's not yours to keep
- Claiming home office expenses that exceed net business income (not allowed — they carry forward)
- Missing the GST/HST ITC registration: not registering when revenue hits $30,000 means you owe back-taxes and penalties