It is important to figure out how much tax a Self-Employed owes and which tax forms are required to be filed with CRA. As a Self-Employed, it is necessary to prepare for tax season throughout the year by keeping detailed logs of income, expenses and tax deductions.
The moment you start trading goods or services for money without an employer, the federal government of Canada considers you a sole proprietor. That is the point where you are required to report all your income and file your own taxes with CRA. The income will be reported as part of your personal income on your Personal Tax Return (T1).
As a self-employed, your business income and your personal income are the same. There is no separate income tax rate for the income that you make from your self-employed business. Apart from the income tax, self-employed individuals also need to make Canadian Pension Plan (CPP) contributions and have the option to make Employment Insurance (EI) contributions as well. Therefore, the total of their tax obligations would be Income Tax plus CPP and/or EI.
When you file your taxes as Self-Employed, all your business income will be treated as personal income and that will be reported on your personal income tax return i.e. Form T2125 (Statement of Business or Professional Activities) will be used to report all deductible business expenses. Lastly, you need to know how much revenue you earned from each client and in total, so you should expect to have T4A Slips from every client that you worked with during the year.
If your business income exceeds $30,000, you need to get HST Number and start collecting HST on your sales income. Once you get an HST Number, the CRA sets you up with a payment plan and you are required to remit the HST after making an input tax adjustment to the CRA.
Being self-employed and managing, your business alone requires a great deal of effort and commitment. In Gesbey, we will take care of your personal taxes; HST returns and facilitate you in maintaining your financial records appropriately. Gesbey has also equipped themselves with different accounting software and online management tools.
You can put the accounting and tax burden on the shoulders of our Chartered Professional Accountant. They will take care of your taxes and save your precious money that could have ended-up in CRA pocket.