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 Canada Revenue Agency (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.
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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, consider contacting 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. Consider using the SecureKey Concierge service, which allows you to use your Vancity online banking credentials to log in to your personal CRA account (which holds some key documents) without having to keep track of yet another user ID and password.
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 on the CRA website. 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 an employee at Corporations Canada to learn more.