5 Tax Tips to Conquer Self-Employed Taxes

Conquer Self-Employed Taxes! 5 Tax Tips for Freelancers:

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1. Managing Self-Employed Taxes: Preserve Your Earnings

As a self-employed individual, it's crucial to set aside money for your taxes. Since your income may fluctuate, it's particularly important to calculate the amount you owe accurately.

For a rough estimate, consider using a tax calculator. Utilize your financial resources wisely to stay on top of your tax obligations.

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2. Maintain Receipts

Retain all significant receipts and invoices for a minimum of six years. These receipts serve as evidence for legitimate deductions. The CRA mandates that you retain a receipt for each deduction.

On the back of each receipt, jot down its purpose. This practice aids in recalling the reason for each receipt.

If feasible, utilize a separate credit card or bank account for business transactions. This approach enhances your ability to monitor business expenses effectively.

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3. Home Office Expense Deduction

Working freelance from your residence may qualify you for a home office expense deduction. This deduction allows you to claim a portion of your household expenses if it is your principal place of business, or you use the space to earn business income

The percentage you can deduct depends on the size of your home office.  To calculate the part you can deduct, use a reasonable basis, such as the area of the workspace divided by the total area of your home.

If you use part of your home for both your business and personal living, calculate how many hours in the day you use the rooms for your business, and then divide that amount by 24 hours. Multiply the result by the business part of your total home expenses.

The expenses you can deduct include electricity, water, phone, property taxes, mortgage interest, and home insurance. Almost any resource you use for your self-employment is eligible for deduction.

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4. Stay Aware of Deadlines

Meeting tax deadlines can prevent penalties and fines.

Keep track of important tax dates on a calendar. For example, January 31st is the deadline for quarterly tax payments, and February 20th is the earliest date for online tax filing.

June 15th is the deadline for full-time self-employed taxes in Canada. Avoid waiting until the last minute to file your taxes. Paying early can benefit you in the long run.

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5. Opt for More Frequent Tax Payments

Paying taxes on a quarterly or monthly basis reduces the stress of a large, one-time payment.

To arrange monthly payments, visit the CRA website and set up the CRA as an online vendor in your online banking system.

Remember: Set aside money for taxes each month, especially if your income varies.

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Stay Calm and File Your Taxes

Approximately 2.5 million Canadians are self-employed. Understanding self-employed taxes is essential for every freelancer.

Around 15% of Canada’s population chooses self-employment. Fortunately, the advantages of being self-employed outweigh the challenges of tax obligations.

Consider hiring a professional accountant to ensure your taxes are done correctly. You'll be surprised by the results.