A Canadian Freelancer’s Guide To Taxes

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A Canadian Freelancer's Guide To Taxes

As we head into 2020, less people are working full-time jobs. In fact, almost half of Canadian millennials are now part of the gig economy.

It’s the age of the freelancer, and with more and more people preferring (or needing) to work as independent contractors, it’s crucial that they know how to properly deal with their taxes.

In Canada, employees of a company receive a T4 (Statement of Remuneration Paid) slip, showing the tax deductions an employer has made on their behalf. But if you’re self-employed, the question of what to use in place of a T4 slip becomes a little more confusing. 

We can help! Our guide to taxes for Canadian freelancers will help you file taxes like a pro AND stay on the right side of the Canada Revenue Agency (CRA).

Is Freelancing Running a Business?

Yes. If you are a freelancer in Canada, it’s important to note that you are operating as a business entity. Whether you’re working full-time as a freelancer, or hustling after your day job, it’s still considered running a business. This means that you must comply with the applicable legal and regulatory requirements, such as paying taxes on the income you earn.

In Canada, you don’t have to register a sole proprietorship business if you’re using your legal name as the business name. If you decide to use a different name to operate under, you must obtain a business name registration.

Want to know more about registering as a business? Check out our blog: How to Start a Business in Canada.

Invoicing

When filing your invoices for payment, they should have your legal name or your registered business name on them. The  invoicing process may differ depending on the province you’re based in.

If you are in a province where federal goods and services tax (GST) and regional provincial sales tax (PST) have been combined into harmonized sales tax (HST), then you will charge a single value added sales tax.

If located outside of Ontario, Prince Edward Island, Newfoundland and Labrador or New Brunswick, then you will have to charge both GST and PST. 

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Canadian freelancers should also note that when it comes to GST/HST, there is a Small Supplier Exemption which you can apply for, but only if you make less than $30,000 annually.

Declaring Tax to CRA

Any income you generate from freelancing must be declared on your income tax. As a freelancer in Canada, you declare your freelancing payments as business income on the Form T2125.

Form T2125 is part of your T1 tax return. If your business is a sole proprietorship or partnership, you’ll file a T1 business income tax form—the same income tax return you use to file your personal income taxes.

A contractor or self-employed person who provides services to a larger company may be sent a T4A form, which shows how much the contractor was paid. For those filing a T4 or T4A, your deadline is  April 30. However, if you’re filing a T2125, the deadline is June 17.

NB: If you owe money to the CRA, it has to be paid by April 30 — no matter what type of form you’re submitting! 

Still feeling a little overwhelmed? If you don’t fancy filing your taxes by yourself, don’t worry, there are other options. Agencies like H&R Block or TurboTax do all the work for you, once you can provide the necessary documentation.


Struggling with your payments being delayed? Why not suggest REMITR to your employers? Our service allows Canadian companies to pay their freelancers and suppliers ON TIME, wherever they do business.