Nathalie Hatter is one of those with a new side effect. As a business travel manager planning company outings, she saw her career stall in March 2020. “Once Canada advised Canadians not to travel, companies had to cancel their programs,” said Hatter, who lives in Oakville, Ontario.
Hatter has elderly parents, so she needed a new job that would be socially distant and flexible, such as dog walking. She ordered business cards and distributed them to dog owners in her neighborhood. Soon, Hatter relied on her previous cooking training to bake artisanal dog treats, which she sold at weekend farmers’ markets. Pivot Dog Biscuits was born. “I was sold out every weekend,” she says.
Now, two years later, Hatter is back to work as a travel consultant, running a very successful dog grooming business. She is currently preparing to pay taxes by the federal tax deadline of April 30. (It falls on a Saturday this year, so the Canada Revenue Agency says “on or before May 2” will be considered on time.) Working people (and their spouses) is June 15, but any taxes due will still be due. on April 30 (or May 2 in 2022). “I like being ahead of my taxes,” Hatter says.
Having a side business can generate a lot of extra income. It is critical to keep track of your business expenses and keep the receipts so that you can claim tax deductions. More Considerations When You Are Newly Self-Employed: Your extra income may push you into a higher tax bracket, prompt the Canada Revenue Agency (CRA) to require you to pay tax in installments, and/or require you to register for and start charging GST/HST (more on that below).
These changes may be more than you anticipated when you started your sideline business, but planning ahead, maximizing deductions, and lowering your total income can help you maximize your profits while meeting your tax obligations. Here’s how to make that happen.
Absolutely, unless your side business only makes a few hundred dollars a year (so it’s more of a hobby than a business). Furthermore, all business income is taxable, says Dean Paley, a Chartered Professional Accountant in Burlington, Ont.
To find out how much tax you owe, plug your income into an online tax calculator — Paley recommends Ernst and Young’s. Then add about 10% for Canada Pension Plan (CPP) or Québec Pension Plan (QPP) contributions. If your net self-employment income plus retirement income from employment exceeds $3,500, you must begin contributing to CPP/QPP – and, unlike salaried employees, you must pay both the employer and employee portion for CPP .
Sole proprietors – individuals who own a business that has not been incorporated – must report all business income on their personal income tax return using Form T2125, Statement of Business or Professional Activities. Even if the company isn’t making a profit, you should declare a loss, Paley says. “A loss is deducted from any other income you earned in that year,” he says.
This post Own boss? Here’s How to File Taxes on a Sideshow
was original published at “https://www.moneysense.ca/save/taxes/self-employed-heres-how-to-file-taxes-for-a-side-hustle/”