Coming home from Mexico, where it was a balmy 27°C, to an overnight snowfall here in Canada was a bit of a shock to the system. Most people prefer life with as few shocks as possible—and I’m no different. That’s one of the reasons I’m a mostly conservative tax preparer.

Here’s the thing: the CRA accepts most of what Canadians file on their tax returns on the honour system. If they have no solid data to prove otherwise, they generally take you at your word.

When you’re self-employed, that honour system is especially relevant. CRA doesn’t have any up-front records of what you earned or what you spent, so technically, you could plug in just about any numbers you want. The temptation is real—but so is the risk.

Every so often, CRA does spot checks. They might take a look at your return years later and ask for documentation. If they find something they don’t approve of, they can reassess your taxes. The resulting bill (and interest) can feel like a much bigger shock than if you’d just filed a little more conservatively to begin with.

In general, my policy is simple:

  • If you have a business expense that you genuinely believe is legitimate, go ahead and claim it. Don’t hold back just because you’re afraid of what CRA might say.

  • But if you’re making something up, tread carefully.

Think about how much of a risk you’re comfortable taking—and what the impact could be if CRA decides to take a look a few years from now. A little caution now can save you from a very unpleasant “tax shock” later.