Special to the Financial Independence Hub
With more than half a million Canadians entering the ranks of self-employment each year according to Statistics Canada, the self employed are truly a (work) force to be reckoned with. As such, they should also be reminded their tax return deadline is just around the corner, on June 15th.
If you carried on a business in 2016 [sole proprietorship with a December 31st year-end: see Editor’s Note at the end of this blog], you should file by that date to avoid a late-filing penalty. 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 ranks of self-employment 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 the self-employed 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 Canada Revenue Agency.
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.
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 for some reason, keep in mind you will be charged a late-filing penalty equal to 5% of the balance owing, plus another 1% for every month you are late to a maximum of 12 months. I’m sure nobody wants to deal with late-filing penalties so be sure to mark Thursday, June 15th in your calendar to you’re not caught off guard.
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.
If you have any questions about which credits and benefits you’re eligible for or need help filing your taxes, you can always visit us at H&R Block or visit HRBlock.ca. We’re happy to help!
Tax season doesn’t have to be a stressful or negative experience for Canadians. Making sure you file by the June 15th deadline –- and filing correctly –- will ensure you have peace of mind to focus on your customers, your work and your business goals instead of having to deal with the CRA for longer than you need to.
Editor’s Note: The Hub clarified with the writer that the June 15th deadline is for individual sole proprietors, not corporations. Sole proprietors have no choice in their fiscal year-end: it’s always December 31st. Business owners that are incorporated may choose a different fiscal year-end that may not be the calendar year: in that case, the tax-filing deadline for incorporated business owners is six months after their year-end.
Lisa Gittens joined H&R Block as a tax professional in February 1993, then left to pursue a degree in Business Administration & Marketing. She has worked in areas of Hospitality, Education, Healthcare, and Not-For-Profit. Now in Toronto, she has stepped back into her role as tax professional and been steadily promoted within her district. She is actively engaged as an office leader, tax instructor and H&R Block`s national spokesperson.