According to Statistics Canada, more than half a million Canadians enter the ranks of self-employment each year, with reports expecting freelancers, independent contractors and on-demand workers to make up 45 per cent of the Canadian workforce by 2020. The Canadian sharing economy has also grown significantly, with 2.7 million Canadian adults participating in it between November 2015 and October 2016.
Self-employed Canadians, you are truly a (work) force to be reckoned with and, as such, should also be reminded that your tax return deadline is just around the corner, on June 15th. That means that if you carried on a business in 2016, you should file by that date to avoid a late-filing penalty -- who wants penalties, anyway? And although penalties can be avoided if you file on time, it's important to note that interest will still be charged on any balance due from May 1st 2017.
If you've recently joined the self-employed team or have been self-employed for many years, here are a few pointers that can help you file this tax season:
Are you self-employed?
Although most people know if they are self-employed, generally speaking, you fall under this category if you retain control of how and when you do the work, supply your own tools to get the work done and run a financial risk if the venture is unsuccessful. Examples of self-employed Canadians include Uber drivers, freelancers and small-business owners.
Some employers, however, treat their employees as self-employed when they should not be classified as such in order to avoid payroll taxes. If you are unsure of your status, be sure to request a ruling from the Canadian Revenue Agency.
Claiming business expenses
If you are self-employed, you can claim reasonable expenses incurred to earn your business income. However, you must keep a proper record of your income and expenses and prove your expenses with receipts -- be sure not to toss them! Receipts must include a description of the goods or services purchased, so you need more than just the electronic transaction record or credit card slip.
If you are using a vehicle for both personal and business purposes, you can only claim expenses relating to your business use. For this reason, you must keep a detailed log in case your get audited by the CRA.
Missing the deadline has its consequences
Hopefully by reading this article you'll avoid missing the filing deadline altogether. If you do end up missing it, you will be charged a late-filing penalty equal to five per cent of the balance owing, plus another one per cent for every month you are late to a maximum of 12 months. Do you really want that?
When to claim GST/HST
If you are in business, you are required to register for the GST/HST and start collecting it from your customers if your gross revenues exceed $30,000 in the last four calendar quarters or in any single calendar quarter. Keep in mind that registering for the GST/HST is beneficial to you since you can then get back the GST/HST you pay on your expenses in the form of input tax credits.
All in all, tax season doesn't have to be a stressful or negative experience for Canadians and making sure you file by the June 15th deadline -- and filing correctly -- will ensure you have peace of mind to go about your life and your business without unnecessary headaches down the line.
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