Self Employed Tax Filing FAQs

May 17, 2021

Self-employed entrepreneurs thrive in their independence and self-starting success, but the uncertainty attached to filing your self-employed tax return for the first time can be stressful. Racolta Jensen LLP is here to boost your confidence. We’ve compiled a list of frequently asked questions with answers about taxes from the sole proprietor point of view.

When do I need to file my taxes?

If your business is owned by sole proprietorship, which is how many freelance entrepreneurs operate, then your personal tax filing date is also your business filing date – in fact, these will be one complete file. In Canada personal fiscal years follow the calendar year (January 1st – December 31st), and the last day to file personal taxes is June 15th of the following year, although your taxes must be paid by April 30th. If your business is incorporated then you may have a different year end than December 31st. Refer to your incorporation documents for clarity.

What information do I need to include?

Outside of your traditional personal tax documentation you need to provide your total gross income and you need to have proof of those earnings documented. Invoicing programs for small business and Taxes Headachefreelancers simplify your data collection of invoices, bills, and expenses throughout the year. QuickBooks, Sage 50 (Simply Accounting), and Wave are just a few options. Bills may include phone and internet, whereas expenses may include vehicle maintenance, fuel, even your coffee receipt if you took a business meeting at a café.

A note about write-offs:

Expenses that are “written off” don’t disappear. The company – your company, and if you’re a freelancer that means you, personally – still has to pay the bill in full. The advantage is that at tax time you may be able to deduct a percentage of your expenses from the grand total tax that your company owes the government. A write off is not a refund.

How do I remit HST?

If your gross self-employed income is greater than $30,000 over 4 consecutive quarters, then you have to register and collect HST. You can remit it quarterly or in a lump sum after you’ve filed your taxes. With that in mind, put the HST you collect out of reach so that it’s there when you have to pay up!

How long do I have to hold on to documentation?

At least 6 years for audit purposes, but for your own business integrity as well as to calculate growth projections accurately you may want to hold on to it indefinitely.

What is the likelihood CRA will request an audit?

You have as much chance of being audited being self-employed as you do filing personal taxes, which is to say you just never know. This is why it’s a good idea to hire an accountant to ensure you’re submitting and tracking documentation properly every step of the way so that should an audit request arise you’ve already got your completed file at hand.

Racolta Jensen LLP is a full-service accounting firm in Cambridge, Ontario dedicated to assisting self-employed and small to medium-sized businesses navigate tax season successfully. Whether you’re gearing up for the April 30th deadline or could use professional advice, call us at (519) 622-1485 or visit our Contact.