Tax time was easy before I became self-employed. The “payroll nannies” in my company’s HR department calculated my income and deductions for me and afterwards I submitted a simple CRA claim.
But when I filed my first tax claim as a freelancer, it was like searching for papayas in the arctic. There were no nannies to call and my lonely voice echoed against my frigid yurt. After scrutinizing my finances, I was clueless if incidentals like the cute shoes I wore to a press conference were write-offs but I eventually figured it out.
Here are some tax tips to avoid financial fluster when you are starting at You Inc. (also known as self-employment).
Maybe you can score a refund to pay for a sunny holiday where papayas are plentiful:
1. Hire an accountant. I did and it was one of the best decisions ever. Her services were pricey (a basic corporate tax return costs about $300) but her tax tips saved me way more money than she cost me and saved lots of anxiety and stress. If you’re self-employed, contact Chartered Professional Accountants and find someone who knows your industry well. Some accountants specialize so that they can really help you out with appropriate write-offs if you work in entertainment, for example, over agriculture or tech.
2. Leave a paper trail: Scan every expense receipt, paid invoice and file originals. You’ll pay for less of your accountant’s time if you’re highly organized. Accounting software can help you keep ducks in a row
3. Don’t make the tax reaper grim: If you earn $30,000 annually or more you may need to charge clients GST/HST. If so, request a GST/HST number from CRA and remit tax you amass monthly. You can research details about GST/HST online. It’s best to ask a CRA agent though about your precise obligations.
4. You Ltd.? Consider incorporating. You’ll pay $350 to incorporate provincially and $200 to incorporate federally. However, your business assets will have liability protection if you claim bankruptcy. Your brand will also be protected as you must register a unique business name. Corporations also have special tax advantages. For instance, your corporation can circumvent steeper taxes if you hire family members or pay them dividends. Speak to a cheery employee at Corporations Canada to learn more.