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Switching accountants

A generalist accountant and an IT contractor specialist are not the same file

PSB risk, agency HST treatment, owner compensation planning, and shareholder loan reconciliation require contractor-specific knowledge. These are the gaps that appear most often in files that have been handled by a generalist practice.

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Signs the current file has gaps

These situations come up repeatedly in contractor files that were prepared without IT contractor-specific knowledge.

  • Have an accountant but PSB risk has never come up despite a single-client agency contract
  • The HST collected from your agency is being treated as income rather than a remittance obligation
  • Salary and dividend decisions are made at year-end with no planning during the year
  • The shareholder loan account is unreconciled or not being tracked between filings
  • U.S. client income is being reported without a review of exchange rates or GST/HST treatment
  • Questions about incorporation, PSB, or owner compensation are not being answered in depth
  • The current accountant handles many industries and has no specific IT contractor experience

What gets missed in a generalist file

These are the six areas where IT contractor files diverge most from what a generalist practice is set up to review.

PSB risk

A generalist accountant may file a T2 without reviewing whether the corporation is at risk of personal services business classification. For single-client, long-tenure agency arrangements, this is one of the most consequential gaps in a contractor file. CRA does not flag the risk proactively.

Agency HST treatment

HST collected from a staffing agency and deposited into the corporate account must be remitted to CRA. It is not income. Misclassifying this amount inflates revenue, understates the HST liability, and creates a balance owing that compounds across multiple filing periods.

Owner compensation planning

The salary and dividend mix affects personal tax, CPP contributions, RRSP contribution room, and the corporate tax position. A generalist often processes whatever the owner requests without reviewing the annual mix against the full picture.

Shareholder loan tracking

Draws, personal expenses paid through the corporation, and repayments all affect the shareholder loan account. An unreconciled or misunderstood shareholder loan balance can create a taxable benefit or trigger a CRA review of the corporate account.

U.S. client income

USD invoices, exchange-rate conversion, GST/HST zero-rating for export services, and W-8 form context are all specific to cross-border contractor arrangements. Without a review of these facts, the income may be reported inconsistently across the T1, T2, and GST/HST return.

Instalment obligations

Incorporated contractors often owe both corporate instalments and personal instalments depending on how compensation is structured. A generalist focused on annual filing may not track instalment obligations during the year, leaving the contractor with unexpected interest charges.

How the transition works

Switching accountants involves four steps: reviewing what exists, authorizing a new representative with CRA, transferring and organizing the bookkeeping file, and moving into ongoing work.

  1. 01

    Prior year review

    Teplov CPA reviews the prior two to three years of returns, bookkeeping, and GST/HST filings to identify gaps, misclassifications, or unresolved items before taking on ongoing work.

  2. 02

    CRA authorization

    A new representative authorization is submitted to CRA through the AUT-01 form or My Account so Teplov CPA can access your CRA accounts, review filing history, and communicate with CRA on your behalf.

  3. 03

    Bookkeeping transfer

    Your existing Xero or QuickBooks Online file is reviewed, the chart of accounts is adjusted for IT contractor income and expense categories, and any unreconciled periods are brought current before regular work begins.

  4. 04

    Ongoing engagement

    Once the file is organized and prior gaps are addressed, the engagement moves into the standard workflow: monthly bookkeeping, GST/HST filings, quarterly planning, and year-end preparation.

CRA representative authorization is submitted using the AUT-01 form or through CRA My Account. The CRA representative program is described at canada.ca/representatives.

The prior year review

Most contractors who switch accountants have not had a detailed review of prior returns. The prior year review looks at how income was reported, whether GST/HST was filed correctly, how owner compensation was handled, and whether PSB risk was ever assessed.

A prior year review does not automatically mean amendments. It means understanding what the file actually contains before taking on new work. If amendments are warranted, the decision is made based on the amounts involved, the filing period, and whether CRA already has the return on file.

CRA allows adjustments through a T1 adjustment request or T2 amendment for returns within the reassessment period, generally ten years for most items and three years from the date of original assessment for standard reassessments.

Related guides

Detailed breakdowns of the areas most commonly missed in generalist IT contractor files.

Common questions

Q.01 How do I officially switch accountants?
You authorize Teplov CPA as your representative with CRA using the AUT-01 form or through your CRA My Account portal. This replaces or supplements any existing authorization. You do not need to notify your previous accountant before switching, though it is courteous to do so. Teplov CPA handles the authorization process as part of onboarding.
Q.02 Do I need to get my files from my previous accountant?
Yes. Your previous accountant holds working papers and filed returns that belong to your file. You are entitled to copies of your own returns and financial statements. Teplov CPA requests the documents needed for the prior year review during onboarding. The previous accountant is required to provide copies of filed returns.
Q.03 Can errors from prior years be corrected?
CRA allows adjustments to prior year returns through a T1 adjustment request or, for corporations, a T2 amendment. The adjustment period is generally ten years for most items. Whether to amend depends on the nature of the error, the amounts involved, and what CRA already has on file. Teplov CPA reviews prior returns and identifies whether amendments are worth pursuing.
Q.04 What if my books are disorganized or behind?
Switching accountants does not require a clean file as a starting point. Teplov CPA reviews what exists, identifies what is missing, and organizes the records before taking on ongoing work. A disorganized file is one of the most common reasons contractors switch accountants.
Q.05 Will switching cause issues with CRA?
No. Switching accountants is routine and does not trigger any CRA review. The new representative authorization replaces the old one in CRA systems. CRA does not flag a change in representative as a risk indicator.
Q.06 How far back should the prior year review go?
Teplov CPA typically reviews the prior two to three years of returns and bookkeeping during onboarding. If there are specific concerns, such as a PSB risk situation or an HST misclassification that may span multiple periods, the review may go further. CRA can generally reassess returns within three years of the original assessment for most issues.
Switching accountants

Gaps in a contractor file do not close on their own

Share your current setup, what has not been reviewed, and how long the current arrangement has been in place. Teplov CPA responds within one business day.

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