Updated Checked by the Tax-Services.ca editorial team How we check
Digital transformation in accounting is no longer optional for Canadian businesses, and the reason is the CRA, not a software salesperson. For tax years starting after 2023, corporations must file the T2 return electronically, and the CRA charges a $1,000 penalty if a corporation that has to file online doesn’t. Most GST/HST registrants with reporting periods beginning in 2024 or later face the same rule.
What does the CRA now require you to do online?
Three things are mandatory for most businesses. The table shows them with the rule as the CRA words it.
| Obligation | Rule | Who is excused |
|---|---|---|
| T2 corporation return | File electronically for tax years starting after 2023 | Insurance corporations, non-residents, functional currency reporters, tax-exempt entities |
| GST/HST return | File electronically for reporting periods beginning in 2024 or later | Charities, selected listed financial institutions, anyone with an exemption |
| Electronic records | Keep them readable for six years after the year they cover | No general exception |
For GST/HST the CRA lists six ways to file, from your CRA account to third-party accounting software that sends the return for you. Paper by mail carries a penalty unless you’re in the excused group. If you’re a sole proprietor, the T2 rule doesn’t apply to you, but the GST/HST one can.
Picture Dana, who owns a small renovation company in Hamilton. For years her bookkeeper mailed the GST/HST return. Under the current rule she needs a way to file online, whether that’s her CRA account or her accounting software. It’s a one-time setup, and then it’s quicker than the envelope ever was. Nobody misses standing in line at the post office at tax time.
Do you still have to check what the software calculates?
Yes, and it’s quick. Sales tax software is usually right, yet a wrong tax code on one product line can be wrong 500 times before anyone notices. Spot-check with a known answer. In Ontario, $1,000 of taxable sales should show $130 of HST. The GST/HST calculator gives that, and the reverse HST calculator pulls $130 back out of a $1,130 total.
Do the same with payroll. For one Ontario employee on $3,000 every two weeks ($78,000 a year), the payroll remittance calculator gives about $961 to send per pay: roughly $733 withheld from the employee and $228 as your share. If your payroll service shows something far from that, find out why before the CRA does. The tool skips workers’ compensation and other levies, and it’s an annual estimate divided by pay periods, so small differences are normal.
That’s the real value of a cross-check: it catches a mapping mistake, not a rounding cent.
What should digital records look like?
The CRA’s electronic records guidance sets the bar. Records must be kept in Canada, in English or French, unless the CRA authorizes otherwise. You keep them six years after the end of the year they relate to, in a format the CRA can read on its equipment. If your data sits in a proprietary or encrypted backup, it has to be restorable into a usable state. The CRA’s page on acceptable format, imaging paper documents and backing up electronic files says to ensure the file backup can be restored in a format that is usable and accessible by the CRA.
The CRA also expects documented backup procedures: backups that are actually written correctly, earlier periods that aren’t overwritten, labelled media, and a periodic test that a restore works. Most small businesses have the first one and skip the test.
And cloud providers? If you outsource your books to a third party, the responsibility stays with you. Ask where the servers are. We haven’t found a simpler answer than that, and we won’t pretend there is one.
Can you throw out paper once you’ve scanned it?
Only if the images meet the latest national standard for imaging and stay legible at commercial quality. A phone photo of a crumpled receipt probably won’t pass. A scanner that produces clean, complete pages, used every week, is how owners get to an empty filing cabinet without worry. Until you’ve confirmed your process meets the standard, keep the originals.
Is automation worth it for a small business?
That comes down to volume. Bank feeds and automatic categorization save the most time when you have hundreds of transactions a month. With thirty, a spreadsheet and a disciplined Friday afternoon do fine, and you avoid a monthly fee. We can’t put a price or a time-saving figure on any product, and any page that does is selling something.
Whatever you pick, check that it exports your data in a standard format and that it can file GST/HST to the CRA or at least give you the figures to enter. Then use the profit margin calculator on your monthly numbers. Faster books only help if you read them.
What goes wrong most often?
Filing late because nobody has the login. Put the CRA account access in writing with a named backup person. Next: a bookkeeper who has full access to your files but isn’t authorized in your CRA account, so the CRA won’t talk to them. Finally, old software that still runs on a retired laptop with the only copy of last year’s data.
A good first step is a short list of what you file and where: which return, which due date, which login, who has the password. Ten lines on one page, stored somewhere two people can reach. It sounds like nothing, and it’s what saves a missed deadline when the usual person is away.
One more habit worth stealing from bigger firms: once a quarter, ask who else could do your filings if you were off for two weeks. If the honest answer is nobody, set up the backup person now, while nothing is on fire. A late return costs real money, and a late return because the one person who knew the password was on holiday is the most avoidable kind.
How we checked the figures
The T2 rule and $1,000 penalty come from the CRA‘s page on completing your T2 return (September 2025). The GST/HST rule and filing methods come from the CRA’s page on how to file your GST/HST return (June 2025). Record rules come from the CRA’s electronic records guidance. Examples use our 2026 calculators. This site isn’t the CRA and has no tie to any government.
Frequently asked questions
Must a corporation file its T2 return online?
For tax years starting after 2023, yes, apart from insurance corporations, non-residents, functional currency reporters and tax-exempt entities. The CRA lists a $1,000 penalty for not doing so.
Is electronic GST/HST filing mandatory?
For most registrants with reporting periods beginning in 2024 or later, yes. Charities and selected listed financial institutions are excused.
How long must electronic records be kept?
Six years after the end of the year they relate to, in a readable format that can be restored.
Can I store my books on servers outside Canada?
The CRA says records must be kept in Canada unless it authorizes otherwise. Ask your software provider where the data sits.
Can I shred paper after scanning?
Only if the images meet the latest national standard for imaging and stay legible. Confirm your process before you destroy originals.
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