Updated Checked by the Tax-Services.ca editorial team How we check
If you have claimed incorrect business deductions, fix the return as soon as you find the mistake. You can change a filed return online through “Change my return” in your CRA account, and the CRA lists about two weeks. Correcting it yourself before the CRA writes to you usually gets a better result than waiting for a review.
How do you correct a return you’ve already filed?
There are two routes, both described on the CRA’s page on changing a tax return (dated October 30, 2026). The quick one is “Change my return” in your CRA account, or the ReFILE feature in certified tax software, and the CRA lists about two weeks for those. The slow one is Form T1-ADJ by mail, and the CRA lists about 20 weeks from when it receives the form. Requests with several returns, a bankruptcy, a deceased taxpayer or a carryback can take up to 36 weeks. Our page on fixing a tax filing error walks through the steps.
Both routes cover amounts you already reported, and a self-employed return is no exception. Elections and personal details aren’t part of it.
Once it’s processed, a notice of reassessment shows what changed. If part of the request is refused, a letter says why. Keep whatever you sent. The CRA may ask for it.
A refund can’t be issued for a change requested more than 10 calendar years after the tax year ended. That limit is about refunds. It doesn’t stop the CRA from reviewing what you owe.
What do incorrect business deductions cost?
More than the tax on the expense, once the extras show up. Take a sole proprietor in Ontario who reports $80,000 of net business income, then finds $4,000 of personal costs mixed into the expenses. Corrected, the net income becomes $84,000.
In our engine that adds $1,091.12 of federal and Ontario income tax, and because the extra income falls in the second CPP tier it also adds $320 of self-employed CPP, which brings the total to $1,411.12 before any interest. Ouch.
The self-employed tax calculator lets you run your own version. One caveat: that tool lowers income tax when you type in deductions but doesn’t lower CPP, so enter your net income directly for a fair comparison.
Which mistakes show up most often?
Personal costs run through the business are the classic. A family phone plan, groceries bought on the business card, a gym membership. A second group is mixed-use items where you claimed 100% and should have claimed a share, such as a vehicle or a home office. A third is plain bookkeeping slips, like the same expense entered twice or the wrong year.
Sam in Calgary is a good example. He ran a small design shop and, at tax time, noticed that $600 of a family trip had been coded as “client travel”. It was a slip, not a scheme, and he fixed it with a change request in one afternoon. The sooner you look, the more likely your story is that simple.
Will you be charged a penalty or interest?
Expect interest on the extra tax. For October 1 to December 31, 2026 the CRA’s prescribed rate on overdue tax is 7%, compounded daily, and it changes each quarter. On the $1,411.12 of extra tax in our example, six months at 7% adds about $50. That is our own arithmetic and only an illustration, because the rate in other quarters differs.
A penalty is a different matter. For a knowingly false statement or one made under gross negligence, the CRA’s page on false reporting shows a penalty of the greater of $100 or 50% of the understated tax. On our example, 50% of $1,091.12 is $545.56. An honest mistake that you then fix doesn’t automatically fall into that group, and the CRA has to prove the case on a balance of probabilities.
Slip or argument? It comes down to what you can show. A receipt for a personal item that ended up in the wrong column is a slip. A pattern of them is harder to explain.
When should you use the Voluntary Disclosures Program?
When the mistake is bigger, older or wider than one line on one return. The CRA’s page on the program changes says that from October 1, 2025 there are two tiers. If you come forward before it contacts you, it lists 100% penalty relief and 75% interest relief. If it contacted you first, relief is up to 100% of penalties and 25% of interest. You still pay all the tax.
Some people do not qualify. Anyone under audit or investigation is restricted, and so is anyone whose non-compliance was egregious. Read the program page for the conditions, including how far back it reaches, before you apply.
For a small error on a single recent return, a plain change request is usually the better tool. The program is for the ones you would lose sleep over. If you are unsure what a business can claim in the first place, see our pages on business deductions you can claim and business use of home expenses.
What if the CRA contacts you first?
Answer by the date in the letter, and answer honestly. Send the receipts that support what you claimed, and own up to the lines you can’t support. Asking for a bit more time is reasonable when you need to dig records out, but ask before the deadline passes, not after. Silence is the one reply that always makes things worse.
What should you check before you file the fix?
Start by going through every expense line against your receipts, including the ones you think are fine. Errors tend to travel in groups.
Then work out what the corrected tax looks like. The income tax calculator gives a federal and provincial estimate, and the marginal tax rate calculator shows what each extra dollar of income costs you. If you also owe instalments, the tax instalments calculator shows what your quarterly payments could look like.
If you claimed GST or HST input tax credits on the same expense, the sales tax return needs fixing too. The CRA has a separate VDP route for GST and HST, and we haven’t read its terms in detail.
Where did we check this?
In November 2026 we read the CRA page on changing a return (October 30, 2026), the Voluntary Disclosures Program changes page and its June 2026 tax tip, and the fourth quarter 2026 interest rates notice. The false reporting penalty comes from the CRA page on that penalty, which we read earlier. Our example numbers come from our own income tax engine using 2026 rates, so the amounts for an earlier year would differ. No level of government runs or endorses this site.
Frequently asked questions
How do I change a return with wrong business expenses?
Use Change my return in your CRA account, ReFILE in the tax software you used, or Form T1-ADJ by mail. The CRA lists about two weeks online and about 20 weeks by mail, and up to 36 weeks for complex requests. Do not file a new return. A notice of reassessment shows what changed.
Will the CRA penalize me for a mistake I fix myself?
Not automatically. The penalty of the greater of $100 or 50% of the understated tax applies to knowingly false statements or gross negligence, and the CRA has to show that. Interest on the extra tax still runs. For October to December 2026 the overdue rate is 7%, compounded daily.
How far back can I fix a return?
The CRA will not issue a refund for a change requested more than 10 calendar years after the tax year ended. That limit is about refunds and does not stop the CRA from reviewing what you owe. Online, Change my return covers the 2016 to 2025 tax years, and ReFILE cannot change returns before 2021.
What is the Voluntary Disclosures Program?
A CRA program for correcting mistakes. Since October 1, 2025 an unprompted application is listed with 100% penalty relief and 75% interest relief, and a prompted one with up to 100% penalty relief and 25% interest relief. People under audit or investigation are restricted, so read the program page first.
Do I still pay the tax I missed?
Yes. Neither a change request nor the Voluntary Disclosures Program cancels the tax owing. The program can reduce penalties and part of the interest. In our example, $4,000 of personal costs wrongly deducted by an Ontario sole proprietor adds $1,411.12 of income tax and CPP before interest.
- Self-employed taxes in Canada: income, CPP and GST
How tax works when you are self-employed in Canada: reporting income and expenses, paying both halves of CPP, instalments and when to register for GST