Tax season can be a stressful time of year for the self-employed. But you’ve got this! These step-by-step tax filing tips can help you get your taxes done and stay in the CRA’s good books all year round.
TLPL
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Even if you just earn a little side-hustle income, you have to report it on your tax return.
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Just getting started? Let the government know you’re running a business – even if you haven’t earned any income yet.
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Your tax to-dos will change based on how long you’ve been in business and how much you earn. We break it down for you.
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If you earn more than $30,000 in a calendar year, there are a couple of extra steps to take.
4 important tax filing tips for contractors, solopreneurs, side hustlers and freelancers
1. Report all your self-employed income and claim your self-employment expenses
Even if you run a small side gig, if you earned income from business activities, you have to claim it on your tax return. Get tips on how to set up your business the right way from the start. At the same time, don’t leave money on the table! See how to maximize your tax deductions and keep more of your hard-earned money for yourself.
2. You need to file even if your business earned no revenue
If you’re just ramping up your business and have no revenue to claim, you’re still required to include details about your business your tax return — such as your income, expenses and deductions. And, if you spent money on set-up costs but haven’t recouped any of it yet, you may apply the loss to your other income. A worthy consolation.
Important tax filing dates
When you’re self-employed, you have until June 15th (or the next business day if the 15th falls on a weekend) to file your tax return for the previous year. But if you owe anything, the balance must still be paid by April 30th.
If you have self-employment income, it’s a good idea to prepare your tax return well before April 30th to calculate if you have a balance owed.
3. Keep up with your income tax responsibilities as your business evolves
OK, so let’s get into your tax filing responsibilities. They will change with time and as your business grows, so here’s the lowdown.
If this is your first-year reporting business income to CRA
Your first step is to contact the CRA to get a business number (BN). While you may be able to operate without a formal business number and federal/provincial licence(s), it’s a good idea to register for a business number anyway. It can help streamline your tax filings and it’s a must if you earn more than $30,000 per year and start charging taxes on your services.
Note, registering for a BN is different than formally registering your business with your province or territory. When you officially register your business, you’re legally declaring your business’ existence, name, and nature of operations to the government. You would either register as a sole proprietorship, corporation or partnership. If you want your business name to be anything other than your legal name, you’ll need to register. Ownr can help from start to finish.
In your first year of business, you’ll file your tax return by the deadline (April 30th if you owe a balance, June 15th if you don’t).
After year one
If you owe a balance to the CRA after your first year in business, in the years that follow, the CRA will put you on a payment schedule according to the size and nature of your business. Most typically, you will need to make installment payments based on your tax balance from the previous year (i.e., if you owed $10,000 in taxes last year, your schedule may have you pay approximately $2,500 per quarter).
You can use the instalment payment calculator at the CRA’S My Business Account to see your installment due dates online.
4. Did you make > $30,000 in income? Don’t forget about your GST/HST filing — and know when this applies
Beyond income tax filing in the spring, you may also need to file a GST/HST return. It all depends on how much income you earned from your business. Here’s a breakdown of the scenarios:
Scenario A: You made more than $30,000 in business income in the last calendar year
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Once your business earns more than $30,000 gross in a calendar year or within the past four consecutive quarters, you need to register for a GST/HST number within 29 days. Within weeks of registering, you’ll receive a notice from the CRA with a remittance notice and voucher that enables you to pay online or through your financial institution. Learn more at the CRA website.
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After you have registered your GST/HST number, ensure you add GST/HST on all your invoices and point-of-sale transactions with your clients or customers. Once you receive payment, a best practice is to transfer the GST/HST portion into a separate bank account to make sure you don’t spend it.
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In your first year of earning $30,000, you will likely file your GST/HST annually. The CRA may require you to remit quarterly after that.
Scenario B: You made less than $30,000 in business income in the past calendar year but more than $30,000 in previous years:
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Even if you make less than $30,000 in income in subsequent years after charging GST/HST, you must continue to charge GST/HST on your invoices to clients and remit payments to the CRA.
Scenario C: You’ve never made more than $30,000 in a calendar year:
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You don’t have to charge GST/HST on your invoices and therefore don’t have to remit it to the CRA.
Pro Tip: If you expect that your business will eventually earn $30,000+ in revenue, it’s a good idea to register for your CRA business number as you get your business going, so you don’t have to worry about it later.
For new business owners, tax filing can feel overwhelming — even a little intimidating. But the truth is, filing taxes as a freelancer, sole proprietor, contractor, or side-gigger doesn’t have to be much more complex than filing personal taxes. It just involves a few extra steps. The key is to give yourself enough time to work through it and seek help if you need it.
Make the most of your opportunities, own tax season and keep more of your hard-earned cash with these tips:
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