Being self-employed, it is essential to know how much tax you owe and what are the tax forms needed to be filed with the CRA. It is vital for self-employed individuals to prepare for the tax season annually, which means keeping a record of the income details, payments, and tax deductions.
You are considered a sole proprietor by the government of Canada, once you start marketing for goods or services without an employer. This is where you must report all your income and file your taxes with the CRA. Your income must be reported as part of your income on your Personal Tax Return (T1) to CRA.
If you are a self-employed individual in Canada, your business income and personal income are the same. You don’t have to pay an extra income tax rate for the earnings that you make from your self-employed business. Besides the income tax, you also need to make both the Canadian Pension Plan (CPP) contributions and Employment Insurance (EI) contributions if you are self-employed. So, the total of your tax charges would be Income Tax plus CPP and EI.
Whatever income you make from your business, all that will be regarded as personal income. Further, that income will be disclosed on your personal income tax return, i.e. Form T2125. This form will be used to describe all valid business expenses. You must also know the details of the income you received from every client. For that, you must have T4A Slips from each client you worked with throughout the year.
You have to start gathering HST on your sales income and get an HST number if your business income goes beyond $30,000. After you get an HST Number, you are set up with a CRA payment plan where you are needed to send the HST after making an input tax regulation to the CRA.
It requires a lot of effort and dedication to manage your business if you are a self-employed person. Filing Taxes is an accounting firm that provides a full suite of accounting services in Canada for self-employed. Here, we will monitor your tax position regularly. We will prepare your personal tax return and HST returns and make beneficial suggestions for the following year. Filing taxes has the experience and uses different tools and accounting software to reach the best solution for you and your business.
You can now relax and put the burden of tax and accounting on our experienced professional accountant. By engaging us as your professional accountant, you benefit from handling your taxes and saving your money.
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