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How to File Self-Employed Taxes in Canada

As a self-employed individual, you are required to wear all the hats of your business, from customer service and inventory management to accounting and tax preparation. We understand that it can be a little overwhelming at times to cover all those responsibilities.

That’s why we have put together a how-to guide to help individuals file their self-employed taxes in Canada for the upcoming tax season.

Business owners can also check out this guide for filing small business taxes.

Back: What are Self-Employed Taxes?

Next: Common Self-Employed Tax Deductions?

What You Will Need to File Self-Employed Taxes

To begin filing your self-employment income tax return with the Canada Revenue Agency (CRA) and Revenu Québec (if you are in Québec), you will want to make sure you have gathered all of the required information and financial figures to help you complete your tax forms.

Download this free self-employed tax checklist to help ensure you have everything you need when it comes time to file your self-employed tax return.

If you are in Québec, visit Revenu Québec's website for self-employed persons, for more details.

Once you have collected all the required financial and business information, what comes next in the filing process?

Register GST/HST Number

If you are a self-employed individual in Canada with an income greater than $30,000, you will need to register for a GST or HST number. If you make less than that, the Government of Canada considers you a small supplier, which does not need a registered GST or HST number. The GST/HST account number is part of the business number.

To register for a self-employed GST number, you will need:

  • Date of registration: Typically, the date when you surpass $30,000 in income and are no longer considered a small supplier. If you request a number before you pass that threshold, your date of registration will be the date your request.
  • The fiscal year for GST/HST purposes: Generally, the fiscal year for GST/HST purposes is the same as your tax year for income tax purposes, which is the calendar year.
  • Total annual revenue: This includes revenue from taxable sales, leases, and other supplies, as well as taxable supplies of all your associates. If you are just starting a business, you can provide a reasonable estimate of future income for the year.
  • Basic information: You will need your personal information, including social insurance number, date of birth, and personal postal code. You will also need your business information, including business name, business number (if you already have one), type of business, name and SIN of all owners, physical address, mailing address (if different from physical address), and a description of primary business activity.

Once you have this information, you can register for the GST/HST number with the CRA by mail or fax, telephone, or online. After you have completed the registration, you are set up to charge and collect GST/HST, file a GST/HST return, and pay your sales taxes online. With the self-employed GST number taken care of, now is the time to move on to your returns.

If you are in Québec, you will also need to remit Québec Sales Tax (QST). To remit taxes in Quebec, you will need to register with Revenu Québec for GST and QST. You will also need to apply for a Québec Enterprise Number (NEQ).

Fill Out the Proper Tax Forms

With all of this personal and business information close at hand, now is the time to fill out the required CRA/Revenu Québec self-employed tax return forms. Here are the income tax return forms you will need to complete when filing your income tax for self-employed purposes.

The T4A Form

As a self-employed individual earning revenue from customers, you should obtain a T4 slip from your clients. This is known as the T4A form, Statement of Pension, Retirement, Annuity, and Other Income. Your clients should be sending you the T4 slip by the end of February the following year, which includes the total dollar amount for each completed job.

The T4A form is not used in Québec. If you are in Québec, you will have to fill out the provincial RL-1 slip and summary instead.

The T2125 Form

The T2125 form, Statement of Business or Professional Activities, is part and parcel of your personal tax return if you are self-employed or a small business owner. This form helps you determine your gross income, which is the total amount of money you earned in the specified tax year. This form also allows individuals to write-off self-employment expenses to lower their total taxable income.

Such business expenses that can be written-off for self-employed individuals on their personal income tax forms include:

  • Office rent and utilities
  • Home office rent and utilities
  • Supplies
  • Work-related travel costs
  • Vehicle expenses
  • Professional and legal fees

Industry Codes

When filling in the T2125 form, you will need to include your industry code, which corresponds to your primary business activity as a self-employed person. If you provide more than one business activity, opt for the code that most closely describes your business operations. Here's the CRA list of industry codes to help you determine which one applies to your business activity.

If you are in Québec, you will also need to fill out and submit the TP-80-V form.

The T1 Return

The T1 return refers to your personal income tax return form. When a person is self-employed, their business income is the same as their personal income. This means you will only need to fill out one return.

If you are in Québec, you will also need to fill out and submit the TP-1-V form.

Self-Employed Québec Taxes

Self-employed persons living in Québec will have a different form and filing system from their other provincial counterparts. Therefore, self-employed individuals in Québec are required to complete and file Form TP-80-V, Business or Professional Income and Expenses. Self-employed Québec filers will also need to register for GST, like other provinces, and QST, the Québec sales tax.

Self-employed taxes for Ontario residents, and all other provinces, not including Québec, are required by the CRA to pay into the CPP or Canada Pension Plan. Self-employed Quebec residents have their provincial program, in which individuals pay into the Québec Pension Plan.

Learn more about the tax forms and obligations for self-employed persons in Québec.

File Online

Filing self-employment taxes has never been easier, thanks to the CRA’s online portals. Your income tax returns can now be filed through the internet using the CRA login services. This is where you can register and sign onto My Account to file your returns accordingly. You can also use NETFILE to file your returns online when you use accounting software.

If you are in Québec, you can check Revenu Québec's website to know more about filing your income tax return online.

File by Mail

The CRA (and Revenu Québec, if in Québec) still accepts self-employed tax return files through the mail if you would rather submit your documents that way. To file by mail, you will need to choose the correct tax centre mailing address based on the province you live in.

If you are in Québec, check the Revenu Québec's website to know more about filing your income tax return by mail.

Setting Aside Money to Pay For Taxes

When someone is self-employed, they must be responsible for setting aside part of their income to pay for taxes when that time of year comes around. Those employed by a business will have part of their wages set aside before receiving their paycheque for this purpose. Contrary, self-employed persons will have to do this themselves.

Therefore, ensure you can pay your taxes by setting aside a portion of your income each month. This will help immensely when the time comes to pay the CRA (and Revenu Québec, if in Québec) accordingly. Generally, professional accountants recommend you set aside 15 to 25 % of your gross income for the year to cover tax payments safely.

Meeting Deadlines

You will want to ensure that your income tax for self-employed returns is filed before the CRA/Revenu Québec deadlines. If you fail to file your returns before the due date, then you could be fined and charged by the Government of Canada.

Typically, the CRA (and Revenu Québec) deadline for self-employed taxes is due June 15. Learn more about the applicable deadlines for self-employed taxes.

If you are in Québec, refer to Revenu Québec's website to know more about your filing deadline.

Using Accounting Software to Help

Whether you are self-employed in Québec or self-employed in Ontario or other Canadian provinces, QuickBooks Self-Employed software can assist you with your personal tax forms!

If you require help filing your taxes, consider using QuickBooks Self-Employed accounting software throughout the year to make the filing process easier come tax time. The software can track and categorize your expenses and revenue through the year to create a  tax summary report when you need it most. Try it free today.

Back: What are Self-Employed Taxes?

Next: Common Self-Employed Tax Deductions?

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