If you’re self-employed or own your own small business, tax time can be stressful, but it doesn’t have to be. There are some extra steps you have to follow if you consider yourself an independent contractor or business owner than if you’re an employee.
Filing your taxes is something you should be preparing for all year by saving all the correct documents. If you’re organized and ready to submit, there are some things to remember.
We’ll go over all you need to know if you’re filing taxes for your business or are self-employed.
#1 Fill Out the Correct Form
For small businesses or self-employment, different types of tax forms must be filled out. In Canada, which type to complete depends on your business structure.
In the case that you co-own a place and have a partnership, you can fill out the business’s income on a T1 personal income form for taxes. However, when you are the only owner, there’s a different form. You will also need to fill out a T2125 Form.
You can file your taxes online through software. Also, you can complete the form in person and mail it in. If you want to be 100% accurate, then you can always use an accountant, who is an expert in Tax Law Canada.
You want to make sure that you fill out the forms correctly to avoid getting audited or be accused of tax evasion. If you are questioned by Canadian officials, it could be a lot of extra work and expenses, and overall hurt your small business.
#2 Deductible Costs
There are a lot of things you can legally deduct from your taxes. Anything that’s needed or assists you in performing your job is considered deductable.
When your business is mostly run online, you can deduct some of your internet costs. Also, if a phone is used a lot for business purposes, you can subtract some of your phone bill costs. When you have to travel a lot for work with your car, gas, mileage, oil changes, and other maintenance expenses can be written off.
Any equipment such as a computer, printer, scanner, or job-specific tools, as well as trucks and safety equipment, is all deductable. Licenses or permits that are required to keep your business running legally can be taken off. Also, in the case that you have travel expenses like hotels, renting a car, airplane rides, or meals for work purposes, these can be subtracted as well.
The most important thing when it comes to deductions is keeping all records and receipts of transactions. If you don’t have the record, it can’t be subtracted. When you do write things off that are undocumented, it’s possible you will get audited and fined.
#3 Your Employees
When your small business has employees, there are taxes you have to pay for them, and also, they must pay taxes. This is called payroll tax, which is your responsibility as the employer to take out of their paychecks.
Along with federal income tax, you can withhold other funds as well. Some things that can be taken out of their paycheck is health care, life insurance, state income tax, retirement savings, and union dues.
These will be determined when your employee begins work and fills out the tax form.
The Bottom Line
Owning your own business can be a great way to make an income and do what you love. Many people like the idea of being their own boss, which requires some extra work.
You don’t want to have legal issues when it comes to filing taxes, so it’s essential to understand fully what you need to do and what can be subtracted. It’s always a good idea to ask a professional if you’re feeling confused or stressed about filing.
When you keep in mind all these things to know about taxes for small businesses, you’ll be on the right track to the filing on time and correctly!