Tax returns for Self Employed Individuals

Declaring your income from self-employment:

Self-employed income is that which you earn from your own business, whether it is a sole proprietorship or a partnership.

Sometimes the status of the individual is questionable. Are you an employee or are you self-employed. The government has a very simple formula for discerning your status. According to the CRA you would be classified as an employee if:

  • The employer decides where and how you work
  • The employer dictates your work schedule
  • The employer establishes your salary
  • The employer directly supervises your work, your style of work, and the quality of your work

You are considered to be self employed when:

  • You set the time, the location, and the style in which you work
  • You supply your own equipment
  • Fit the client’s work into your own schedule to accommodate other clients

If you are self-employed, the individual must keep accurate records of their income and expenses and must fill out a form to be attached to their personal income tax return detailing these amounts. There is a long list of allowable expenses, and it is important to note that not all are deductable at 100%.

Rebates, Grants, or other forms of assistance that you have received to start or operate your business also have to be included in the calculations. If you are working as a professional under your own name you may also be eligible for the same deductions as you would operating a business. You will have to fill in the same type of Statement of Income and Expenses to claim your deductions.

There is no definitive guide as to what all the allowable deductions are for each type of business. For example, an importer could not deduct what appear to be personal expenses, but an actor can deduct clothes, makeup, hairstylists, etc., as they impact on their craft. Certain expenses, such as deductions for a home office are limited to the amount of the earned income from the business, but other losses can be carried over on the tax return to reduce other taxable income.

The professionals at ATS can help you sort out your income and expense reports, and minimize your tax exposure.

But they can’t do their best work unless you provide them with all the relevant documents. Make sure you bring all your paperwork with you.