Thousands of self-employed workers, contractors and sole-proprietors lose out on some of their hard-earned dollars by failing to file their Canadian tax returns correctly. We have provided several simple tips you can follow to ensure that you don’t over pay the tax man.
Understand your expenses
The easiest way to reduce your taxable earnings is by applying as many allowable expenses as possible against your self-employed / contractor / sole-proprietor income. It sounds simple, the lower your taxable income, the lower your tax balance to CRA
Lesser known expenses
Make sure you are well aware of the long list of expenses which can be entered onto your Canadian tax return. Please note that the list of allowable expenses varies from other countries in which you may have previously files a tax return. A couple of the most commonly missed expenses, or incorrectly claimed expenses are the office use of your home and vehicle use expenses.
It is important to make sure that you have receipts for all of the expenses claimed on your Canadian tax return. By filing or organizing your receipts throughout the year you will be in a great position to have your tax return correctly filed at year end. Many expenses can be missed if receipts are misplaced or lost. Each receipt lost for an allowable expense is going to result in a higher tax balance owing to CRA.
Prepare for an audit
There is always the possibility that CRA will audit your Canadian tax return. The most common type of audit will be a request to produce receipts for an expense type. Ie – Gas (for vehicle use). In which case you will be required to send copies of your gas receipts which were used to make your ‘Gas’ claim on your tax return. Failure to produce these receipts will result in your tax return being re-assessed, and the ‘gas’ claims being removed from the return.
The majority of contractors, self-employed and sole-proprietors will be providing goods and/or services through their work. If you earn over $30k in a 12-month period providing a service or goods, you will be required to charge GST on your services/goods and remit the GST collected to CRA. Failing to be GST compliant can result in hefty fines and penalties. If you will earn under $30k in a 12-month period you will not need to worry about GST.
Benefits of using a tax return specialist
When using a tax return specialist to prepare and file your tax return you will be in safe hands. They will ensure that as many allowable expenses as possible are applied against your income, and provide you with the best tax return result possible. Some tax return specialists, ourselves included, will also assist their clients if they are presented with a CRA audit. If you wish to enquire about our services at Jackstaxback we offer a free consultation for self-employed, contractors and sole-proprietors looking to file their Canadian tax return.
If you have any questions or queries about your contractor/self-employed tax return, please do not hesitate to shoot us a message. Our experienced team will be more than happy to answer your questions. Tax returns don’t have to be taxing