5 tax tips for Self-employed

Tax and Estate Planning Advocate Doug Carroll explains some of the tax breaks available to self-employed.

If you are self-employed, there are a few differences in how and when you pay your taxes, as well as some definite tax advantages. Make the most out of them with our handy tax tips.

1.      Tax filing due date for self-employed

Hint: It isn’t the same as the personal tax filing date.

Rather than the usual tax filing date of April 30, if you were self-employed, your tax return filing due date is June 15 for you and your spouse or common-law partner. Keep in mind that if you owe taxes, you must submit the payment by April 30 (but you still don’t have to file the return until June 15).

2.      Paying taxes by instalment

Tax instalments are simply income tax payments you make quarterly to the Government of Canada to cover the taxes you would normally pay with your return in April.

If you earn income on which no or insufficient tax has been withheld, you will likely have to pay instalments in the future. In addition, you are obligated to pay instalments if your net tax owing when filing is over $3,000 (or $1,800 if you live in Quebec). Instalments are due on  March 15, June 15, September 15, and December 15. 

3.      Home office and utilities

You may be able to deduct expenses for business use of your home, including utilities, property tax and mortgage interest. Use a reasonable basis, such as the percentage of space use for work, divided by the total home area.

You can also deduce capital cost allowance, which is the depreciation on a building, furniture or equipment used in your business.

4.      Automotive log

You can deduct expenses for the percentage of your automobile mileage used to earn business income. This includes licensing, fuel, oil, insurance, maintenance and interest on money borrowed to buy a vehicle. You must keep a logbook to make this claim.

5.      Keeping records

Keeping good business records is not just good practice; it is a legal requirement for you to support your income and expense claims. You don’t need to send any of those records when you file your tax return, but you will have to produce them if the Canada Revenue Agency asks to see them later. And you must keep those records and supporting documents for six years from the end of the last tax year they relate to.

To fully understand your tax obligations, refer to the Government of Canada website or download the Government’s Guide.