Does the Canada Revenue Agency require a separate bank account?

No provision of the Income Tax Act says a sole proprietor must have one. What section 230 requires is records kept in a form that lets the tax payable be determined, and both the CRA and Revenu Québec require those records to be kept six years after the last year they relate to. The separate account is not the rule itself, it is the cheapest way to satisfy the rule. A corporation is a different story: it is its own legal person, the money in the account belongs to it, and the banking has to be in the corporation's name.

I have run everything through one account all year. What should I do now?

Open the second account now rather than waiting for January. The months already mixed still have to be sorted transaction by transaction, and that is ordinary catch-up bookkeeping, but the mixed period stops growing the day you split. Keep the personal statements for those months too: while the business ran through that account, those statements are part of the business record and fall under the same six-year retention rule.

Do I need a separate bank account for my business?

What the law actually asks for

No section of the Income Tax Act tells a sole proprietor to open a business account. Section 230 asks for something else, and something harder to fake: every person carrying on a business has to keep records and books of account, at their place of business or residence in Canada, in a form and containing the information that lets the tax payable be determined. Revenu Québec sets the same expectation on its side, and both administrations require those records to be kept six years after the last year they relate to.

Now read that requirement next to a single account holding a grocery run, a client deposit, a mortgage payment and a tank of gas. The statement, on its own, determines nothing. Someone has to go line by line and decide what each entry was, from memory, months later.

For a corporation, the question is already settled

If you are incorporated, this stops being housekeeping. A corporation is a separate legal person, and the money in its account belongs to it, not to you. Every dollar that leaves it for a personal purpose has to be characterized: salary, dividend, expense reimbursement, or a loan.

The loan is the one that bites. Subsection 15(2) includes a shareholder loan in the shareholder's income for the year. Subsection 15(2.6) is the way out: the inclusion does not apply if the loan is repaid within one year after the end of the corporation's taxation year in which it was made, and the repayment is not part of a series of loans and repayments. That is a real deadline attached to a balance somebody has to be tracking. A mixed corporate account produces dozens of small draws nobody wrote down, and the deadline arrives all the same.

What a mixed account looks like in a review

Here the CRA is explicit. In its own audit publication, the list of what an auditor examines includes your business records, your personal records such as bank statements, mortgage documents and credit card statements, and even the personal or business records of people who are not being audited, a spouse or a family member among them. The same publication states that your personal records are legally considered part of the items that relate to the return under audit.

So the honest version is this. A separate account does not put your personal banking out of reach. What it changes is what the auditor is handed. With two accounts, the business account is the business record and it reads as one. With a single account, your personal statement is the accounting record, and every deposit on it becomes a question you have to answer: revenue, a transfer, a gift, a refund? The answers may all be perfectly innocent. You still have to produce them, one line at a time.

The CRA also notes that how long an audit takes depends on the state of the records. That is not a threat, it is arithmetic.

The cost even when nobody ever looks

Most businesses are never audited, and the split still pays for itself.

A deduction buried among four hundred personal lines is a deduction that gets missed, and a missed expense is tax you did not have to pay.
Sorting is billable. Whoever keeps your books is charging for the hours spent deciding whether a Tuesday purchase was groceries or job-site supplies.
Bank charges on a business account are an ordinary business expense, reported at line 8710 of form T2125 along with your interest. Charges on a personal account that happens to see some business use turn into an allocation nobody wants to defend.

How to actually set it up

Open the second account. For a corporation it must be in the corporation's legal name. A sole proprietor has more latitude, but read the account terms first, because many personal accounts prohibit business use.
Route every dollar of business income into it. Every client payment, every platform payout, no exceptions.
Pay every business expense out of it, using a card attached to that account.
Pay yourself with one scheduled transfer. One line a month explains itself. Sixty scattered ones do not.
When a personal charge lands there by mistake, move it back the same week and note why.

And if your year is already mixed, open the account today rather than on January 1. The months already run together still have to be untangled, but that is a finite job, and it stops getting bigger the day you separate.