Filing Freelance: Tax Tips For Self-Employed Workers


With the new year, comes the approach of the dreaded tax season. However, there is no need to fear! For those who are self-employed or freelance workers, tax season can not only be overwhelming, but it can also be incredibly confusing. Let’s take a look at a few easy steps all self-employed and freelance workers should take to ensure their taxes are filed correctly and on time.

Work With A Professional

A big mistake self-employed workers make is skipping ahead and using either computer software to do their taxes, or they attempt it themselves. The issue with this approach is that they often don’t understand exactly what they are or aren’t entitled to deduct or are required to pay, which as everyone knows, can lead to financial hot water. The best way to ensure everything is accounted for properly and legally is to sit down with a trained professional accountant and go over each aspect step-by-step.

Know What You Need to Pay

The beauty of working with an accountant is that they can easily sort out and explain to you what you are required to pay and exactly how much. Things such as Canadian Pension Plans and Employment Insurance are all costs which freelance workers often have trouble calculating into their total owed taxes. Since major costs are automatically deducted by an employer, it can be a sticky situation to crunch the numbers to specifics when you work for yourself.

Pay Your Estimated Taxes Quarterly

Just like an employer would deduct your taxes with each paycheck, you should be doing the same. And just like the Canadian Revenue Agency wants those taxes throughout the year, it is suggested that you pay your estimated taxes quarterly to avoid any hiccups come income tax season. On top of that, paying your estimated taxes throughout the year can help alleviate the financial burden of paying it all in one lump sum.

Be Sure Your Accountant Understands Your Business

Once you’ve put the trust of your taxes in the hands of a professional, it is important to know that they fully understand how your business operates. Everything from what days you work, where you work from and even what do you day to day can have a huge impact on your taxes and deductions. For example, if your job is being a freelance restaurant reviewer, you would be entitled to write off a portion, if not all, of those meal costs as a business expense. Hence why it is very important to disclose all necessary information to your accountant and to keep the lines of communication open.

Keep All Receipts

As a self-employed worker, one of the biggest rules of thumb to remember is to keep track of absolutely everything. Since it’s your butt on the line, it is strongly encouraged to always keep all receipts from purchases, expenses, and payments. While things such as gas station receipts or even a casual trip to Staples may seem unimportant, these types of costs can actually have an effect on your taxes, often in your favour! Even more preferably, keep a record of all receipts in a digital format, therefore alleviating the mess of storing and organizing them, while also lowering the chances of losing any vital information.

A vital piece of the puzzle when it comes time to make business claims when you’re self-employed is your vehicle. While things like mileage, maintenance and gas can all be tax deductions for business owners, it is not without the proper paperwork. Be sure to keep an accurate and up to date log of all miles driven for business purpose vs. personal use, along with keeping gas receipts and receipts for any repairs towards the vehicle you use for your business. Don’t forget, your receipts act as proof of purchase of your business expenses, so the more accurate they are, the better chances you have of a deduction.

If You Can’t Pay, Speak Up

A major issue with people who are self-employed or that work freelance is that they start to panic when they can’t pay their taxes, which believe it or not, leads to people avoiding filing all together. While you can try to run for cover, avoiding paying and filing your taxes has never done anybody any good. The best way to approach it is to contact the CRA and explain the situation. What most people find surprising are the alternative options they offer, from payment plans to extensions. Always be up front if you come up short because it will catch up with you down the road guaranteed.

Filing your annual income taxes can be hard enough for a business, but for somebody who is self-employed, it can be an overwhelming experience. At Cal Accounting, we are always happy to help you better understand your taxes, deductions, and payments to keep you and your business in sound financial standing. If you have any questions about your taxes as a freelance worker, self-employed business owner or sole proprietor, don’t hesitate to give us a call at 705-728-6469.

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