Self-employed? Make dollars and sense of your income tax return

You may be able to deduct set-up costs and any other reasonable expenses you paid to earn income

Tax Information for self-employed Individuals — kingjon/istock/thinkstock photo

You left your corporate life to branch out on your own and chase your dreams. Now you call the shots and answer to only one person—yourself. Whether you’re a freelance graphic designer or you run a nail salon from your home, being self-employed is more than just having a good idea and the drive to make it happen. You also have to balance the books and fulfill your tax obligations with the Canada Revenue Agency (CRA).

You have the entrepreneurial spirit, but do you know how to get the most from your income tax and benefit return?

Getting your new business off the ground was no small expense. From furnishing your office space to the new website and advertising, is your wallet feeling a little light these days? There’s good news! You may be able to deduct these and any other reasonable expenses you paid to earn income, leaving more money in your pocket to reinvest in your business.

Being self-employed, you often work well into the evening in your home office—responding to emails, updating your books and records, and preparing for meetings with clients. When you use part of your home for business, you may be able to deduct part of your maintenance costs such as heat, home insurance, electricity and cleaning materials. If you rent your home, you may be able to deduct part of your rent and any expenses for your workspace. To find out more, go to www.cra.gc.ca/smallbusiness and select "Business expenses."

Not sure if you need a goods and services tax/harmonized sales tax (GST/HST) account? Go to www.cra.gc.ca/gsthst and fill out a short questionnaire to see if you need to register for one. Even if you don't have to, registering could let you claim input tax credits on the GST/HST you paid on your business purchases and expenses. 

Most Canadian income tax and benefit returns for 2015 are due on April 30, 2016. However, since this date is a Saturday, the CRA will consider your return as filed on time and your payment to be made on time if it receives your submission or it is postmarked by midnight on May 2, 2016. Self-employed individuals and their spouses or common-law partners have until June 15, 2016, to file their income tax and benefit returns, but any balance owing is still due no later than May 2, 2016.

Filing online is easy and secure, and it allows the CRA to process your return much faster. And if you're entitled to a refund, you can enjoy your money in as little as eight business days by combining online filing with direct deposit.

For a list of software and Web applications, including some that are free, go to www.cra.gc.ca/netfilesoftware. Also, new this year, the CRA’s Auto-fill my return service is available through some NETFILE-certified software. This secure service automatically fills in certain parts of your income tax and benefit return. To use Auto-fill my return, you must be fully registered for My Account at www.cra.gc.ca/myaccount.

If you owe tax or have to pay tax by instalments, take advantage of pre-authorized debit to set up your payments in advance. To learn more about your payment options, go to www.cra.gc.ca/payments.

You can also sign up for the new CRA Business Tax Reminders app, available free on Apple iOS, Google Android and BlackBerry mobile platforms. Get your info on the go—the app lets you create reminders and alerts for key CRA due dates for things such as instalment payments, returns, remittances and other tax-related matters so you avoid penalties and interest. With all these services available online (and on your mobile!), it's easy to stay on top of your tax affairs year-round.

You can also stay up-to-date by receiving your notice of assessment online! Register for online mail through the CRA's My Account or My Business Account at www.cra.gc.ca/loginservices.

The CRA has dedicated web pages for small businesses and they include tax scenarios that may affect you. Go to www.cra.gc.ca/smallbusiness to find out everything you need to know about your tax obligations as a small business owner—from reporting your income and expenses to registering for GST/HST and payroll accounts. The CRA also has a series of videos for small businesses at www.cra.gc.ca/videogallery. If you've gone through the website and still need help, you can call 1-800-959-5525 to speak with a CRA agent.

Don't miss the latest CRA news or tax tips—follow the CRA on Twitter: @CanRevAgency