Written by Alanna Mitchell
Wednesday, June 6th, 2018
Every April 30, while other Canadians are sweating over the deadline to file their taxes, I'm thinking a little further ahead.
I'm self-employed, so my deadline to file taxes is June 15 – and so is my husband's, even though he's got a regular job. That means I have six extra weeks to assemble all my paperwork.
Filing by June 15 doesn't mean you get longer to pay your tax bill, though. Everyone's taxes are due by April 30. If you owe more than $3,000 this year (and did in one of the last two years) you have to pay them in installments, says Bruce Ball, vice-president of tax at Chartered Professional Accountants of Canada. The Canada Revenue Agency lets you know if you need to. "The best rule is to do what they say," Ball says.
Who's self-employed? If you have several customers and set your own rules for work and provide your own equipment, you likely meet the test, says Ball.
Stay Organized Throughout the Year
I'm a freelance writer, and while I love writing about financial stuff, I've always had trouble keeping up with my tax information. Every year, I promise myself that I'll be more organized this time around. At one point, I was in such turmoil that my mother, a self-employed artist, came to town and set up a shoebox for me to put all my receipts in.
I still use a form of that system, except now it's three file folders. One for receipts. One for payment stubs. One for all the tax-related mail that comes in the door during the year, like T4A slips and GST/HST info.
Tip to first-timers: You'll figure out a system that's perfect for you. Here's what I keep track of throughout the year to make filing easier.
Keep Track of Income
When I sit down for my tax-calculating session, I start with how much money I made in the year. I crack open my Moleskine day book for that tax year, because that's where I mark down all my deadlines and the fees for each piece of work.
That gives me an overview of my income, which I then check against cheque stubs, invoices, T-4As and any other bits and pieces that tell me what I earned.
Think About Expenses
The self-employed may have to spend money to earn money. "You are generally able to deduct for tax purposes any expenses you incur to earn income," says Colleen Gibb, a CPA in Ancaster, Ontario.
But you have to have receipts and you only get to deduct half of business-related entertainment bills, says Ball. Costs associated with entertaining on the golf course or a yacht are not deductible, he notes.
In my case, I travel a lot for work and so I have to keep track of hotel bills, plane tickets and travel food. I do a lot of research, so I have to buy books, pens and paper. I run a website. And I mail things to clients. I have to keep track of all those expenses.
Don't Forget Home Deductions
My office is at home. I can charge off some of what I pay to keep my house going: utilities, household insurance, internet, mortgage insurance, property tax. Same goes for apartment costs. The way Gibb puts it, if your home office is your only place of business or if you have to see clients at your home regularly and continually, then you can deduct a proportion of ongoing operating costs. The proportion is either based on the office's square footage or is one room of the total rooms, Gibb says, adding you have to use the same method to calculate it every year.
At some point, I've finally got all these stray pieces of paper sorted into categories and added up. I put everything onto spreadsheets and bring the whole thing to my accountant. If it's your first time filing self-employed taxes, be sure to check out Canada Revenue Agency's website for more information.