Tax season can be a nightmare for freelancers and small business owners. But, with proper preparation and a little help, it doesn’t have to be so painful. Here are our tips to help you prepare for smooth sailing all the way through to this year’s tax deadline!
1. Track Your Expenses
The single most important thing you can do as a freelancer to help prepare yourself for tax season, is track, track, track and track some more. From income to expenses, to HST/GST that you charged and HST/GST that you paid, it’s all-important information to have organized and at your fingertips prior to tax season.
There are many ways you can do this. Your first option is to track yourself. You can do this with an excel spreadsheet or accounting software. But, as your business grows it is worth considering hiring an accountant or bookkeeper. This is a great way to ensure that tracking is done properly by a certified professional with experience. Ultimately, it helps make tax season a breeze.
2. Think Ahead
Many freelancers get blindsided by income tax in their first year of business because they weren’t thinking ahead. Avoid this mistake by setting aside about 30% of your revenue into a savings account each month. This will help you slowly chip away at the income taxes you will likely owe come April instead of scrambling to pay them at the last minute.
3. File Your Taxes On Time
Speaking of tax season, don’t forget important deadlines. The standard Canadian tax deadline is April 30th. If you are self-employed the deadline to file your taxes without penalty is June 15th. Keep in mind, however, that you must ensure that you pay any taxes owing by April 30th. Make sure that you abide by these deadlines so you don’t end up paying interest or penalties on what you owe!
4. Invest!
Investing is a great choice for many reasons. Not only will it help you build up a nest egg but, it’s also an efficient way to lower your income tax bill! Income that you invest in an RRSP is sheltered from taxes. It’s a smart decision all around!
5. Hire A CPA.
As your business grows it is a good idea to look into hiring a certified professional accountant or CPA. They can help you discover tax breaks, credits and deductions you didn’t know you were eligible for. They can also help you identify what you can claim as an expense and what you cannot. Finally, they can help you keep everything organized and balanced.
There are lots of ways to ensure that tax season isn’t a nightmare for the self-employed. Of course, our favourite way is Taxvisors!
If you are looking for help with your personal and business taxes please contact us today!