For the self-employed the deadline this year is June 16th. Usually this occurs on the 15th of June but that is a Sunday this year. So guess what? You have extra time to get your receipts sorted and organize all of your records. Small business owners rejoice for this small gift.
Of course your celebration may be short lived if you owe money to the taxman. Oh oh, then you will be paying interest from May 5th. At least you can avoid any late filing penalties by filing by June 16th deadline.
Self employed but unincorporated? You should claim your reasonable business expenses. You know, the ones that were incurred to earn your business income? Fill out the T2125 form so that you include all of your business expenses and income. Remember that actual receipts are required, not monthly credit card bills. Some advertising and start up costs are also allowed. When in doubt: check with the CRA. They are a much better judge of what is allowable than is your uncle Benny.
Using your vehicle for business use? Be sure that you keep a log book and detail your personal and business use, noting the KM for each purpose. This is rule one. Always record detailed usage.
Got a spiffy home office? Congratulations. Be sure to appropriate a reasonable amount for business space. Most commonly that figure is around 10%.
Remember that self-employed Canadians are now eligible to opt into the EI (Employment Insurance) program. And also remember you will pay both ends, employer and employee portions of the CPP (Canada Pension Plan) if earning more than $3,500.
Had a loss for 2013? You still should file the T2125 form. You are showing an active business and some of the loss can offset employment income. Actually showing a profit in the first year of operation is not expected. But don’t expect to turn your hobby into a money loosing business to obtain some write offs. The CRA frowns on that and you must have a reasonable expectation of profitability to avoid issues.
The date draws near! Have you got your records ready? Sorted that shoe box of receipts? You haven’t? I know you are going to start tomorrow.
If you are an Incorporated business then do not make the mistake of using the T2125 form. You must file a T2 return. You can declare your tax year on your first T2 return after incorporation. Make sure the financial statements you attach to the return match the tax year of the return. On your first T2 return after incorporation, use the date of incorporation as the tax year start. Your year end can be any date in the year of incorporation. For all subsequent returns, your tax year start will be the day after your tax year-end. File your return no later than six months after the end of each tax year. When the corporation’s tax year ends on the last day of a month, file the return by the last day of the sixth month after the end of the tax year. When the last day of the tax year is not the last day of a month, file the return by the same day of the sixth month after the end of the tax year.
Remember TaxTron T2 software is readily available for download. Or if you are in an area serviced by Softron Tax bring your shoebox into your local location and they will be happy to complete the T2 for you.