SELF EMPLOYED? YOUR TAX DEADLINE IS COMING
Tax time is getting closer than we think (2013 deadline to file is April 30) and The Nelson Daily, with help from H&R Block, is providing tips to the public leading up to the final day of filing to Revenue Canada.
Today we focus on tax tips for the self employed.
Here are some of the most common questions
• Am I really self employed? – Self-employment is determined by the amount of control you have over your work. If you are in any doubt about your relationship, you can request a ruling from the CRA using Form CPT1, Request for a Ruling as to the Status of a Worker under the Canada Pension Plan and/or the Employment Insurance Act.
• What is the per kilometer rate? – Unless you have already submitted a logbook to the CRA for a previous year, you cannot use a simplified method to calculate your auto expenses. You need to have a detailed logbook for the year to report your expenses correctly.
• Does a sign on my car mean I can claim 100% of my mileage? – You can claim the sign cost as an advertising expense but it does not mean every kilometer you drive is for your business. You still need to record your kilometers in a logbook.
• Can I write off my mortgage? – The answer is no. Self-employed Canadians are allowed to claim a portion of their mortgage interest based on the amount of space used for the business in their home. Mortgage principal is not a deduction.
• Can I claim my home phone? – If you only have one phone line into your home, you cannot claim 100% of the expenses for business. The CRA will expect you to have some personal use so you will need to calculate the percentage used for business and personal. The same applies to your internet connection.
• Are credit card statements enough? – No. The CRA will want to see a receipt with a breakdown of the cost and taxes paid. Self-employed Canadians are more likely to be audited, so make sure you keep your receipts and other documentation to support your business expenses.
• Do I have to make instalments? – If you owe $3,000 or more in taxes in any two of the last three tax years, the Canada Revenue Agency will request that you make quarterly instalments rather than an annual payment. Failing to make instalment payments could incur an interest charge.
• Do I need a GST number? – If your annual revenues are more than $30,000, you have to register for the GST/HST. However, even if your revenues are less than this, it is usually advantageous to register so that you can claim input tax credits for the GST/HST you pay.