Self-employed – Tips for tax return filing

There are many of us out there who are self-employed/contractors, but only a small percentage of us are fully prepared when it comes to the differing complexities of filing our tax return as self-employed/contractor come year end. There is a large group of workers who are forced to be contractors, as opposed to employees, which often leads to a lack of awareness when claiming all expenses for tax filing.

Declare all income

As someone who is self-employed/contractor, you are required to declare your income yourself, unlike someone who is an employee and receives a T4 stating their total employment income. It is your responsibility to declare ALL your self-employed income on your tax return. If CRA discover that there is missing income from your tax return, you will be hit with severe ‘failure to report’ penalties.

Claim all allowable expenses on your tax return

As a contractor your taxable income is reduced by the amount of your expenses. In short, the more expenses you claim, the lower your tax bill for the year. In order to reduce your taxable income as much as possible, you will want to claim every expense that applies to you. The types of expenses you can claim will vary depending on your type of work, however there are some common expenses which can be claimed by the majority of contractors on their tax return:

  • Office use of home
  • Vehicle expenses
  • Cell phone expenses
  • Meals & Entertainment
  • Professional fees

To maximize your expenses claimed on your tax return, you should research which expenses apply to you!

Be aware of GST and how it affects you

If you are going to earn over $30k in self-employed/contractor income within a 12-month period, it is very probable that you should be charging GST on the services that you are providing. If you believe you will earn more than $30k in a 12-month period you should research if charging GST on services applies to you, ensuring you are GST compliant.

If you charge GST you will need to file a GST return with CRA as well as an income tax return.

File your tax return on time to avoid penalties

As the vast majority of contractors will owe money to CRA at year end when filing their tax return, it is important that the returns are filed on time, and that the balance owing is settled before the deadline. Failure to file and pay on time will lead to penalties and interest charges being incurred from CRA. The date at which balances owing to CRA must be paid is April 30th. The deadline to file your tax return is June 15th.

If in doubt, seek help from a professional

If you are unsure about filing your self-employed tax return, or any other requirements or compliancy issues surrounding your tax return, it may be wise to contact a professional. Failure to be fully compliant with declaring income and GST charged can lead to an expensive fix with CRA, a professional will be able to help you navigate these hurdles. Claiming all possible expenses on your return will ensure you keep more of your hard-earned money.

If you have any questions surrounding your self-employed/contractor tax return, please get in contact with the jackstaxback team today. We will be more than happy to offer advice and help easy any reservations you may have. Tax doesn’t have to be taxing.