Tax season can be an overwhelming time for self-employed workers. From understanding how much you owe, identifying what deductions you’re eligible for, untangling integrated business and personal expenses, to staying on top of your record keeping in order to put away enough money throughout the year to cover your tax obligations, the whole process can feel like a moving target.
If you’ve spent this tax season procrastinating, don’t panic. There’s still time (but very little). With the self-employed tax deadline less than two weeks away, here are a few last-minute tips you should keep in mind as you file your return.
Be aware of the most common mistakes – and how to avoid them
One of the most common mistake is not filing your return out of fear of owing taxes you can’t afford to pay. This is especially true if you’re newly self-employed and it’s your first time filing. Regardless if you owe a balance you can’t pay right away, it important to file your return on time anyway to avoid late-filing penalties. Yes, you will be subject to interest, but it will be less painful than facing stiff penalties, especially if you’re a chronic late-filer.
Also ensure you’re claiming the correct amount when it comes to income. If you have more than one source of self-employed income, separating your different kinds of self-employment income and expenses by type is a great place to start. According to the Canada Revenue Agency, you may have self-employment income from a business, profession, commissions, farming or fishing.
Claim often overlooked expenses to maximize your return
Understanding where you invested into your business and the expenses you can claim are vital to squeezing every penny from your return. For example, did you know that if you have a home office, you can deduct its cost? You can also deduct the rent and any ancillary expenses if you rent an office, which includes if you rent space from places like WeWork, Centre for Social Innovation or similar facilities.
If you have a vehicle you use exclusively for your business, you can deduct gas, insurance, repair costs and parking fees related to that vehicle. If you use your vehicle for both business and personal use, you can deduct a percentage of those costs based on how often you use your car for business.
Other little-known expenses include interest on vehicle payments, cleaning supplies for your home office and deductions for bad debts and/or the cost of recovering balances owing to you.
Tech is Here to Help
Technology has made tax-time easier than ever before. If you’re a CRA “My Account” holder, your tax information can be automatically imported directly from CRA to your tax return software with just a few clicks, while CRA’s “Autofill My Return” service can populate everything from tax slips to RRSP contributions directly in your return. There are also online tools to make it simple, fast and economical to file within your busy schedule. For example, TurboTax Self-Employed provides you with step-by-step guidance on how to report your income, as well as how you can claim all possible business expenses.
Finally, when it comes to keeping track of your expense, many entrepreneurs have chosen to go digital. Apps like QuickBooks Self-Employed can help you stay in control of your business finances and prepare for tax time while on the go, with easy sales tax, expense, mileage and invoice tracking all in one place.
Tax time doesn’t have to be a four-letter word, especially if you keep common mistakes in mind, claim every last one of your expenses and use technology to save you time and money.