Tips For Filing Your First Canadian Self-Employed Tax Return
Whether you are a newcomer to Canada, or are filing a self-employed tax return for the first time and need some help and advice, we have some pointers for you.
Firstly, it is essential to fully research your self-employed tax return before filing, as this can be the difference between you owing a small amount of money, compared to a large balance owing.
Tip 1: Understanding your eligible expenses
One of the most critical points of doing a self-employed tax return, is understanding what expenses you are eligible to claim.
There is no quick way to establish your eligible expenses, with the two main options either being to take the time to thoroughly research what areas you are able to claim, such as office use of your home, vehicle use and supplies, or using an experienced tax return company.
The other option would be to use a professional tax return company to help file your self-employed tax return, in order to find out the most effective way of utilizing your expenses and reduce your amount payable. Failure to apply all available expenses can result in you owing a substantially larger amount of tax to CRA, in excess of what you should be paying.
Tip 2: Claiming capital cost allowance (CCA)
Following on from eligible expenses, capital cost allowance is perhaps the most important area to understand, in order to get the best result possible with your Canadian self-employed tax return.
Capital cost allowance (CCA) refers to assets that were purchased in order to help carry out your business or self-employed work activities, and can be claimed on your tax return. This can be carried forwarded to future years, for the financial life of the asset.
The purchase of a work laptop, for example, can be used in a number of subsequent years when filing a tax return, once the depreciation of it has been applied. This can help greatly reduce the amount of your tax payable and is a necessity for getting the best result possible.
Tip 3: Importance of invoicing
If you fail to report income, whether this is deliberately or non-deliberately, you can be hit with a 20% penalty for your undeclared amount. This can add up to a huge sum of money, making invoicing and declaring earnings very important.
One of the best ways to remain compliant, is to ensure you are keeping a tidy invoicing schedule, along with a suitable track of your earnings.
Tip 4: Understand GST (goods and service tax)
Depending on the service that you offer, along with the amount of income you earn, or are expecting to earn, will determine if you need to be charging GST.
GST is a 5% goods and service tax that is added to your invoiced subtotal, with your total amount from the year being required to be remitted to CRA. For those who expect to be earning over $30,000 a year, a GST number is a requirement. Failing to charge your clients GST can result in CRA forcing you to pay this amount yourself. This can be a very costly mistake to make, so ensure you are in the know with your GST obligations.
In addition to providing self-employed tax return services, we also provide a GST filing service, to assist with your GST remittance obligations. Please note GST remittance is entirely separate from your tax return, and for this service we charge a very reasonable $30 per year, if applicable to you.
Getting professional insight and advice with your self-employed tax return
Filing a self-employed tax return for the first time in Canada, can be a daunting experience.
We offer a free consultation for any self-employed or contractors that are filing their Canadian tax return, whether this is their first year or not. If you wish to file we charge a flat fee of $150, with no hidden charges or fees.
If you have any questions don’t hesitate to get in contact with the team today, and we’ll do our best to assist.