Saturday, May 22, 2010

Tax Rules For The Self-Employed

There are many of us that have decided to leave the 9 - 5 jobs, start a business and become our own bosses. There are deadlins and rules that we must follow and thanks to John Scholl, some of those questions are answered here in this article.

Self-employed? You are different when it comes to tax deadlines and rules. As a self-employed person, there are key differences in when and how you should pay your taxes – and knowing those differences can bring some significant tax savings. Here is what you need to know.

Tax deadlines

Most Canadians must file their personal tax return by April 30 -- yours is due on June 15.
- Tax owing on the personal tax return must be paid by the April 30 deadline. If the return is not filed by June 15, interest and penalties will apply.
- Generally, if you qualify as ‘self-employed’ for tax purposes, you are required to pay taxes in instalments based on your reported income in the previous taxation year. The Canada Revenue Agency (CRA) will send you a notice with the amounts you have to pay. Instalment payments for 2010 are due March 15, June 15, September 15, and December 15. If you don’t pay by the due dates, you may face instalment interest and penalties. You can pay by selecting one of three methods:
1. The schedule set out in the instalment payment notice you will receive from the
Canada Revenue Agency (CRA).
2. Last year’s tax payable.
3. The estimated tax payable for the current year.

Tax tips

You may qualify for these deductions:
- Home office – if you use your home office as your principal place of business, you may be able to claim a portion of your housing costs including rent (if you are a tenant),mortgage interest, property taxes, utilities and home insurance.
- Capital assets – the furniture and equipment acquired for your business can be written off gradually by claiming the capital cost allowance (CCA) each year.
- Business expenses – claim reasonable expenses related to earning your income.
- Goods and Services Tax/Harmonized Sales Tax – if you charge these taxes to your clients/customers and remit them to the Canada Revenue Agency, you’re entitled to
GST/HST refund on business purchases.
- Health and/or Dental Insurance Premiums – these may be deductible for you and your family and deducting them as a business expense usually delivers a better tax benefit
than claiming them as a medical expense. The reimbursement of medical and dental expenses would still be received tax-free!

New: Employment Insurance (EI) benefits

- Beginning in January 2011, self-employed Canadians have the option to access EI benefits in four categories – maternity, parental, sickness and compassionate care
benefits. Twelve months of EI premiums must be made in order to qualify for any benefits but for the first year, if contributions start by April 2010, payments can start January 2011. Remember once in the program, premiums are required for life. The choice to participate in the EI program depends on your personal circumstances.

There are many other tax savings strategies available to self-employed persons. Your professional advisor can help you identify the ones that will work best for you – and make sure you save on interest and penalties by hitting all your tax deadlines.

John Scholl CLU,CGA, B. Mathematics,
Consultant - Investors Group Financial Services Inc.
& Investors Group Insurances Services Inc.
200 - 24 Queen Street East,
Brampton, Ontario L6V 1A3
Wealth Management & Financial Planning
Phone: (905) 450-2891 X529
Toll Free: 1 (866) 799-2223 x529
Cell (416) 731-3660
Fax: (905) 450-9747

I strive to continually improve my wealth management practice to be worthy of the referrals received. I build my business one introduction at a time, and would consider it a great compliment to be introduced to one of your business associates, friends or family.

Thank you, John, for providing this information to customers who may be interested in the purchase of a home and need some professional advice about their investment and finances.

Betty Bartusevicius, Sales Representative
Re/Max Realty Specialists Inc., Brokerage
Homes In The Nine Oh Five

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