Intuit recently conducted a study that revealed more than half (55 per cent) of Canadian entrepreneurs are running their companies from a smartphone (much higher than in the U.S. at 43 per cent), and are using mobile apps to do so effectively.
As life becomes increasingly mobile, there is an uptick in the number of Canadians who start and manage small businesses without brick and mortar locations. Another significant shift is that more and more people are freelancing and earning money from the sharing economy.
No matter how mobile or field-based entrepreneurs earn their income, it's important to understand how these modern business endeavours impact your taxes. Here's an overview of what you need to know before you file:
Do you qualify for a tax break?
The definition of "self-employed" isn't as straightforward as it used to be. While a freelance writer or the sole proprietor of a small business are fairly recognizable examples, those earning money in the sharing economy through apps like Uber or Airbnb, for instance, may be wondering what they have to report on their income taxes.
If your work isn't being run commercially and what you're doing is simply a hobby, you should not consider yourself self-employed. In this case you don't have to report any income when you file your taxes. However, if your profession or trade has a reasonable expectation of making a profit, as with the scenarios noted above, the Canada Revenue Agency (CRA) will consider it a business and all income you receive will need to be reported on your personal tax return.
According to a 2015 report from the Ontario Chamber of Commerce, 40 per cent of young Ontarians (ages 18-34) are consumers of the sharing economy, and global revenue generated by these companies is expected to grow to $335 billion by 2025. It's big money, and if you're part of it, you can claim a number of business expenses.
What counts as a business expense?
As a sole proprietor, you can deduct all reasonable business expenses that you've incurred to earn an income. Did you know that if your home is your main place of business (i.e. where you meet clients or where you do the bulk of your work), you can deduct home office expenses? While there are a few exceptions, capital property - like furniture, your car and any computer equipment used for business purposes - can be written off over time as capital cost allowance (CCA).
In order to stay on top of your expenses, make a point of keeping all of your receipts and records in one place so you can track and back up any claims made when filing your taxes. Financial management tools like QuickBooks Online make it easy to track expenses on the go. Also, remember that your filing deadline is a little later if you're self-employed: June 15, 2016 is the date you'll want to mark in your calendar, however any tax owing must be paid by April 30.
Further, because the income you're earning does not have tax withheld at source (like a traditional employee), you may have to pay in instalments. These are due quarterly on March 15, June 15, September 15, and December 15, and the CRA will have notified you if you need to make payments.
What's the easiest filing option?
There are a number of tax-filing options available, but why not choose one that best suits your mobile, on-demand lifestyle? While you may already be accustomed to setting up an appointment with a specialist, there's no need to attempt to squeeze another meeting into your calendar. Reliable software like TurboTax lets you file when and how it's convenient for you - on the go, day or night. TurboTax Free gives the option to file from your smartphone or tablet, and the ability to start, stop and continue your return across multiple devices seamlessly. Or, if you're looking for added guidance including step-by-step directions and tips for filing your small business taxes, TurboTax Home and Business has you covered.
When you're running your own business, it's important to save time and money wherever you can, so why not leverage products and resources that will make life easier? As an entrepreneur, you're likely the kind of person who enjoys being in the driver's seat. With secure and user-friendly tools at your fingertips, as well as access to trusted professional advisors and accountants when you need them, there's no reason why you can't take control of your taxes as well.
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