In 2019, there are less and less people working ‘full time’ jobs. Why? Because this is the age of the freelancer, with more and more people preferring to work as independent contractors.
In Canada, employees of a company receive a T4, 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 becomes a little more confusing.
That’s where we want to help you out. Our guide to taxes for Canadian freelancers will show you how to make filing your taxes so much easier – and also ensure you stay out of trouble with 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. Whether you’re working full-time as a freelancer, or are working outside of your regular, full-time employment, you are running a business.
This means that you must comply with the applicable legal and regulatory requirements, such as paying taxes on the extra income.
When filing your invoices for payment, they should have your legal name or a registered business name on them.
In Canada, you don’t have to register a sole proprietorship business if you are 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.
Check out our blog: How To Start A Business In Canada
When it comes to invoicing your work, the process may differ depending on which province you are 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.
Canadian freelancers should note that to take when it comes to GST/HST, there is a Small Supplier Exemption which you can apply for 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.
The 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 receive a T4A from them, which shows how much the contractor was paid. For those filing a T4 or T4A, they must be filed by 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 form you’re submitting!
What Is The Best Way For Canadian Freelancers To Get Paid?
For Canadians wishing to receive payments – from anywhere in the world – there is no better way than using REMITR Collect. Once you register for REMITR Collect, you will receive a free REMITR Global Account.
Receiving payments into this Global Account is completely free!
The REMITR Global Account allows you to collect payments in either Euro or US Dollar, and then withdraw them in CAD to your local bank account. You do not have to worry about selling your USD to get CAD, as REMITR always converts it to CAD at the most optimal Foreign Exchange rates.
Users have the ability to withdraw funds from their Global Account into their local bank account at any time they wish. Funds are transferred to your local bank account within 1 business day of submitting your online withdrawal request.
REMITR is accessible 24/7, thus eliminating the excuse of customers who are using distance and time zones are an acceptable reason to delay your payments.
Sick and tired of paying hefty receiving fees? Of waiting around to access your money? If you’re in need of a payment method you can really trust, get in touch with REMITR today.