Filing your income taxes when self-employed can sometimes be a more complicated and involved process than tax filing as an employee in Canada.
For self-employed Canadians, the tax filing process is typically more complex than it may be for traditional employees. This is because filing taxes as a self-employed worker involves ensuring the complete and accurate deduction of different eligible operating expenses from the individual’s earned income.
For clarity, self-employed workers are considered those who work for themselves and operate their own businesses or provide services as independent contractors or freelancers. In other words, rather than being considered an employee (for example, of another person or organization), self-employed workers have control over what work they do, how the work is performed, and they conduct business.
Note: In 2024, June 15 falls on a Saturday. Therefore, self-employed taxpayers have until June 17 to file their tax returns and avoid late-filing penalties.
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Specifically, self-employed Canadians – of which there are more than 600,000 self-employed immigrants across the country according to Canadian government data from 2023 – who complete their own bookkeeping must put in significant time and effort to complete the “Statement of Business Activities” section of their T1.
The complexity of this process comes, in part, from the fact that a T1 not only lists total revenue but also operating expenses. These expenses are also divided into different categories. This means that self-employed Canadians who file their own taxes must independently determine such things as which expenses fall into which category and which expenses are deductible or not.
In addition, self-employment tax returns must be filed while adhering to a specific set of rules outlined by the government. This may be hard for many self-employed people to follow because they are unlikely to have the required level of tax legislation expertise.
What are some common consequences of improperly filing taxes?
As a self-employed worker in Canada, there are two primary consequences of filing taxes improperly.
Leaving money on the table
Filing taxes as a self-employed worker involves largely self-directed bookkeeping. Therefore, tax filers may forget to include all their write-offs or deductions. This will result in the individual paying higher taxes than necessary or, if applicable, receiving a smaller refund.
Higher potential for an audit
Due to the level of complexity involved with tax filing, there is a significant potential risk of making mistakes with improper deductions and write-offs. The consequences of these mistakes are wide-ranging and may result in an audit from the Canada Revenue Agency (CRA). This can have long-lasting impacts on the business operations of self-employed workers in Canada.
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How H&R Block can help self-employed Canadian newcomers
Given the complexity of filing taxes as a self-employed worker in Canada, H&R Block can help unburden Canadian newcomers with their tax preparation expertise.
Specifically, with over 60 years of experience as Canada’s leading tax preparation firm, H&R Block’s experts are ready to handle all tax situations because they understand that self-employed taxes are more complex and time-consuming than traditional taxes.
More: To get a better understanding of tax forms and documents relevant to self-employed workers in Canada, click here.
H&R Block also understands that many self-employed newcomers may not be properly equipped to file their taxes independently.
Therefore, servicing taxpayers with more than 1000 offices across Canada, H&R Block has the expertise required to help Canadian newcomers ensure they make use of all available deductions and file their taxes with full completeness and accuracy, all while avoiding the most common pitfalls of improperly filing a tax return.
Note: It is particularly beneficial for Canadian newcomers to seek professional advice before incorporating their business. This is because there are specific rules to incorporation that apply only to taxpayers who do not have Canadian citizenship or permanent residence.
H&R Block’s dedicated tax experts can help self-employed Canadians with their bookkeeping and payroll*, as well as preparing all types of tax returns, including but not limited to:
Personal
Small business
Corporate
Rental
Estate
US tax returns
*H&R Block’s Bookkeeping and Payroll services are available at participating offices only
This will help Canadians and newcomers from coast to coast keep more money in their pockets, reduce their tax burden and minimize the risk of any future trouble with the CRA.
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