Freelance Taxes for Canadians
If you’re a freelancer, entrepreneur, or small business owner, filing your taxes for the first time – or anytime – can be intimidating. The reality is that freelance taxes for Canadians is more complicated compared to someone who has a regular job. That’s because you must worry about taxes owed, expenses, and other information that the Canadian Revenue Agency (CRA) may want.
The good news is that Canada’s tax system isn’t that complicated, and the CRA website has resources that are designed for freelancers. That said, there’s a lot to take in, so this post will go over some of the basics to help you with any fears or concerns that you may have.
Should I be filing taxes as a freelancer?
As a freelancer, you are obligated to report any income earned from your side hustle to the CRA. Regardless of the amount, even if it’s just a few hundred dollars, reporting is essential. If you don’t file your taxes, it’s tax evasion. In addition, by filing your taxes, you may become eligible for certain grants and government incentives.
To be clear, even if you have a full-time job, you still need to file your taxes for any income you’ve made on the side. Some people think you must register your business first, but that’s irrelevant as any money made is taxable.
If you invoice under your name, you are not legally obligated to register your business. However, if you prefer to invoice under a business name, you are required to register your business name in your province.
Tax Deadlines for Freelancers
Generally, the tax deadlines are as follows each year:
- March 1: RRSP contributions deadline
- May 1: Tax filing deadline for most individuals
- May 1: Deadline for any tax balance owing
- June 15: Tax deadline for self-employed tax returns
If any of those dates fall on a weekend, then the deadline is moved to the following Monday. Also, on leap years, the RRSP deadline gets moved back to February 29.
Knowing these deadlines is essential since if you miss any of them, you may be charged fees and interest. Even if you don’t have the money to pay any taxes owed, you should file your taxes on time to avoid any fees.
GST/HST Registration
Freelance taxes remain relatively simple when your income is less than $30,000 since you’re still considered a small supplier. However, you must register for a GST/HST number as soon as you pass that threshold. The CRA isn’t keeping tabs on you. It’s totally on you to keep track of your income and register when necessary. You also don’t need to wait until you make $30,000 in side income. You can register whenever you want, but once you register, you must collect taxes.
To be clear, the $30,000 threshold only applies to freelance income. It doesn’t matter if you’re making more than that from your regular job, you only need to get an GST/HST number if you make $30,000+ in freelance income.
When you’re ready to file your GST/HST, you can choose the quick method when it comes to reporting the taxes you’ve collected. This method mainly benefits service-based freelancers since it’ll simplify things when you do your taxes. Regular small businesses may want to stick to the traditional methods to maximize their credits.
Also, note that if you owe more than $3,000 in taxes in a year, the CRA will require you to start paying your taxes on a quarterly basis. Here’s a detailed guide I wrote on how to get an HST number in Canada.
Canadians with clients outside of Canada
According to the CRA, companies based outside of Canada are zero-rated, so you don’t need to charge them taxes. However, any income you earn from those clients must still be reported.
Since GST/HST registration applies to your income, you must still register for a tax number once you reach $30,000 in income, even if all of your clients are outside of Canada.
When you file your taxes, there will be a section asking how much of your income came from outside of Canada. You should report that separately from your Canadian-based income. The CRA likely won’t ask why you haven’t collected must GST/HST as they’ll be able to see that you had income coming from outside of Canada.
How much tax to set aside
Unlike full-time employees, freelancers are responsible for paying their own taxes. As a general rule, you should always set aside 25% of your income for taxes. However, you must set aside more if you’re in a higher tax bracket. Check your provincial tax brackets, so you have a rough idea of how much you’ll end up owing.
In addition, freelancers need to pay both employer and employee contributions to the Canadian Pension Plan (CPP), so that’s another expense or tax you need to factor in.
Anyone who collects GST/HST will eventually need to pay that back. The good news is that any GST/HST you’ve paid to your expenses will offset what you owe. In other words, you should have detailed records of your business expenses.
Eligible expenses for freelancers
The CRA website has a full list of expenses you can claim, but generally speaking, you can deduct any reasonable expenses related to the cost of your business. For casual freelancers, the following are things you’ll want to claim as expenses.
- Advertising
- Cellphone and internet bill
- Meals and entertainment
- Office supplies
- Travel
- Insurance
- Rent
Keep in mind that only the business-related portion of these expenses can be claimed. For example, if your home internet usage is 20% for freelance work and 80% for personal, you can only deduct 20% of your bills.
How you keep track of these expenses is entirely up to you. For the longest time, I tracked everything manually in Excel, but that’s because I happen to like spreadsheets. One digital option available is QuickBooks Self-Employed.
If these deductions are making your head spin, don’t worry. TurboTax solutions for Self-Employed walks you through the tax filing process while prompting you with self-employment questions. This ensures you get every business deduction you’re entitled to, which in turn means more money in your pocket. Here are some ways you can save money on your taxes.
Using a business credit card
A common question freelancers and small business owners ask me is whether they should get a business credit card. It’s a personal preference, but it also depends on your situation.
If you’re a freelancer making limited income and having few expenses, you can use a personal credit card. You’ll just need to manually separate your personal expenses from your business ones when doing your taxes. Hopefully, you have one of the best travel credit cards in Canada or one of the best cash back credit cards so you can rack up those points.
For those who have frequent business expenses or just want things completely separate from their personal lives, a business credit card can make a lot of sense. Business cards typically give you a higher credit limit and a longer interest-free period. You also get detailed reports on your spending, which will be helpful when you do your taxes.
Best business credit cards in Canada
I have a detailed list of the best business credit cards in Canada, but here are a few to help you get started.
- Best welcome bonus: American Express Business Gold Card
- Best for travel rewards: American Express Business Platinum Card
- Best for no foreign transaction fees: Scotiabank Passport Visa Infinite Business Card
How to file your taxes as a Canadian freelancer
When you’re ready to file your taxes, you’ll fill out the T2125 form. This form is a statement of your business activities, covering your income and expenses. Even though you can still file your taxes by hand, most people tend to use other methods.
Using tax software
Freelance taxes for Canadians is easy if you’re using tax software. Which software you use is up to you, but I’ve been using TurboTax for a few years now since I like their suite of products, which includes:
- TurboTax Assist & Review Self-Employed
- TurboTax Full Service Self-Employed
- TurboTax Live Full Service
TurboTax is the only Canadian tax preparation software designed specifically for self-employed individuals. With TurboTax Assist & Review Self-Employed, you file your taxes online, but you have access to an expert who knows all about self-employment issues. What I mean is you can ask one of TurboTax’s experts questions while you’re filing your taxes. They’ll even review your taxes for you before you hit submit.
If you’re still intimidated by filing your personal tax return, use TurboTax Full Service Self-Employed. You can have an expert file your taxes for you. This is all done virtually, so there’s no need to leave your home.
Hiring an accountant
Hiring an account is a great idea if you’re uncomfortable doing things on your own or you haven’t filed your taxes in years. Even though accountants will cost you more than tax software, think of them as an expert that you have access to in case you have any questions. If you do plan on going the accountant route, be sure to look for one before tax season begins as they’re more likely to accept new cleints.
Final thoughts
This post is meant to be a taxes for freelancers quick guide. Handling your freelance taxes can become complicated pretty quickly which is why I recommend hiring a professional to help you with them. A good accountant won’t cost you that much and there’s a pretty good chance that the money they save you on taxes, will cover the fee you’re charged.
Most freelancers don’t get a tax refund, but that’s arguably a good thing since you haven’t loaned the government money for free. It doesn’t matter if you’re a content creator on OnlyFans, or you’re an Uber driver, doing your taxes is a must.
Frequently Asked Questions
What can freelancers in Canada deduct from their income?
As a freelancer in Canada, you can deduct various expenses related to your work, such as:
- Office supplies and equipment
- Business-related phone and internet expenses
- Advertising and marketing costs
- Travel expenses for work purposes
- Professional development and educational expenses
How do Canadian freelancers determine their tax liabilities?
To determine your tax liabilities as a Canadian freelancer, you must:
- Calculate your total income from freelancing and any other sources.
- Subtract any applicable deductions.
Remember to account for any necessary GST/HST and CPP payments. You can also use an online income tax estimator.
What should freelancers with another job in Canada be aware of tax-wise?
If you have a side hustle in addition to your regular job, you should be aware that:
- Your combined income from all sources will determine your tax bracket.
- You may need to set aside a higher percentage of your freelance income for taxes.
- You can claim any expenses related to your business to lower your tax burden.
- RRSP contributions will also help lower your tax obligations.
Is it necessary for Canadian freelancers to register their businesses?
Freelancers in Canada are not required to register their business unless their annual revenue exceeds $30,000, in which case they must register for a GST/HST account.
What differentiates freelancing and self-employment for tax purposes in Canada?
In Canada, freelancers are considered self-employed for tax purposes. The terms are often used interchangeably.
Any good Accountants you might recommend that are not “breaking the bank” expensive? Looking for a new one.
Any accountant that doesn’t work for H&R Block will probably be fine.
Hi I recently became a freelancer graphic designer. I havent made much income and I make money through commissions. So how do I file my taxes even if I barely make any money? And two how can I keep track of my commissions if I get paid through money transfer apps like PayPal? Do I need to have it as a business account or personal account?
If let’s say I dont make $30K by the year is done so what do I do then?
Hi I recently became a freelancer graphic designer. I havent made much income and I make money through commissions. So how do I file my taxes even if I barely make any money? And two how can I keep track of my commissions if I get paid through money transfer apps like PayPal? Do I need to have it as a business account or personal account?
If let’s say I dont make $30K by the year is done so what do I do then?
Hi Terrence,
You file your taxes using form T2125, state your business and state that you earn commission income (there should be a box to tick off).
Per your revenue, it is always good to keep an excel document to track all revenue (dates and amounts) that you receive. You should screenshot your payments on Paypal to keep for your records in case CRA ever asks for proof.
If you look on CRA website there is a section dedicated to expenses you can deduct as a person earning commission income.
Hi Julian, I have a similar situation as Terrence.
So if I am not making more than 30K per year I don’t need to get a business license and things like that?
I just need to take note of all expenses and all payments received and fill a T2125 form to submit my taxes, right?
Will,
If you’re making less than $30K in side income, you don’t need a GST/HST number. You’re correct, you just fill out the T2125 form and claim all relevant expenses when you file your taxes.
Would an Uber driver count as a freelancer?
Yes, and you would have to report any income.
http://www.cbc.ca/news/business/taxes/tax-time-2016-uber-drivers-1.3462006
For keeping track of income and expenses, linking to bank accounts automatically, reporting ability, receipt handling (imaging via an app), I wholeheartedly recommend Wave Accounting ( https://www.waveapps.com/ ). Browser based, Canadian and FREE. It also has excellent customer service.
I also forgot to add that SimpleTax.ca is an excellent browser based application for personla tax returns. Easy to use, intuitive, helpful. They make no charge but do accept voluntary donations. I used it for the first time this year and it is excellent.
I second this. It’s an amazing tool – super simple and well designed! Have been using it since I started working.
Good post. You cover the whole range of business (not just taxes). A couple of notes. Meals and entertainment – you can only claim 50% of the expense and you can’t claim any expenses for your own “lunch on the run”. So those Mcdonalds and Timmy receipts can be problematic. And entertainment includes giving away sporting tickets or bottles of wine. 50% is what you can claim.
As for GST/HST sometimes registering before you hit $30K is a good PR move. If you are not registered then your customer knows you make less than $30K (or your a crook) and that may not be the message you want to send a customer.
Susan,
I actually do a lot of my business meetings at McDonald’s where me and a client just have a coffee or snack while discussing business so I believe that counts as a business expense. Now if I were just getting a big mac on my own for lunch, that totally wouldn’t be cool by the CRA. Interesting point about registering before $30K as a PR move, makes sense.
Can I confirm I understand correctly? If you make under $30,000 you do not need to register for an HST or GST number. And you should therefore, not charge sales tax on your invoice? Thanks for your post.
Does the fact that you’re doing many unrelated jobs change anything for a freelancer? I’m thinking about doing editing services, personal training and make up artistry, and I’m assuming that would still be a combined income for tax rules, but I don’t know if I’d need to report expenses separately. Thanks!
Hi Kaylee,
You’re correct, you can combine everything but there are a few examples when it comes to things you can deduct as an expense. For example, you could claim makeup as a business expenses for your make up artistry but not for say personal training. You could also combine some expenses e.g. if you need a new laptop for all of your freelance side hustles, you could claim a reasonable portion for all 3.
Oh okay awesome, thank you!
Hello:) im a graphic designer and i want to start working as a freelancer.
Im in montreal and i have a 20 hours per week permit.
I would love to know how can i invoice to my clients and how much do i need to give to the government.
I would love the help cause i want to do everything in the correct way.
Hi Gabriela,
I’m assuming you’re on a student visa which is why you’re only allowed to work 20 hours.
You would need a Social Insurance Number which you likely will be able to apply for on campus.
You invoice your clients based on your rate, but just make sure your work does not exceed 20 hours a week. Since you’re in Quebec, you wouldn’t need to apply for a GST number unless you make more than $30,000 in a year.
As for taxes, you would file a return like everyone else, you just need to keep track of your income and expenses. I recommend setting aside 25% of your income for your eventual tax bill.
It’s also worth seeking out the services of an accountant when you’re ready to file your taxes.
Perfect!! Thanks for everything Barri, youre amazing!!
Last question, what about the SIN number?? Do i need to have one to do my taxes at the beggining of each year?? Let me know.
The SIN number allows you to legally work in Canada.
April 30th is traditionally the due date for the previous year’s taxes. So April 30, 2018 would be the due date for your taxes from the 2017 calendar year.
In your case, any work done in 2018 wouldn’t need to be reported until the due date of April 30, 2019.
“You don’t need to charge companies based outside of Canada any taxes since they are zero-rated according to the CRA”
Thank you, you wouldnt believe how hard it is to get an answer to something like this. I have alot of clients who are outside of Canada. If I had to charge them 15% GST it would make me very uncomptetative on the freelance market. Thanks for clarifying.
Hello!
I am a college student, and during the summer of 2017 I did some freelance work. I made less than $500 during this time period, but donated all of the money to charity. The problem is that the charities are american, and this makes the tax deductible donations part really confusing, so I’m not sure if I should report the donations for simplicity’s sake.
I did earn at least half of the revenue from US clients, though.
I’m just wondering if I need to report income for freelancing this year, because I didn’t earn any revenue myself? I can’t even set aside 25% of the money I earned because I donated it. (I also read somewhere that if your expenses exceed your revenue on hobby income, you don’t need to report the tax.)
Thank you so much!!
Hi Annie,
Generally speaking with charitable donations, you would need a receipt to be able to claim that on your expenses. In other words, you shouldn’t report it.
You should still report the income, but since it sounds like you didn’t earn much of an income, the odds are that it won’t affect your taxes much.
Hi Barry!
Thank you so much for the quick answer!!
I have 1 more question, if it’s alright: if I do have the donation receipts, would I be able to file them as an expense?
Hi Annie,
There’s a section when filing your taxes where you would input your donations. If it was in USD, just check the exchange rate for the date the receipt was issued. Historical exchange rates are available on xe.com
Thank you for such an amazing article.
I am filing for the first time and I was told that even my income still doesn’t qualify for paying income tax, I still need to pay for the CPP( Canada pension plan) as I am considered self-employed.
Does that apply for freelancers? Or did I get the wrong advice?
Thanks.
Mamdouh,
CPP Payments are based on an income range. You’ll be prompted when you start filing and the software you use will do all the math on the backend so you don’t need to worry.
https://turbotax.intuit.ca/tips/can-i-get-a-pension-on-self-employment-6404
Barry,
Thank you so much for the super quick response to my comment.
I tried to do that and it showed that I have to pay a couple of hundred dollars for CPP, so I just wanted to be sure I am doing the right thing.
I wasn’t sure if it applied to freelancers as well.
So, basically a freelancer is treated exactly as a self-employed, with no differences. Is that correct?
Mamdouh,
Correct, freelancers and self-employed are the same thing so what you owe in CPP is accurate.
Thank you.
Much appreciated.
I wrote an app that is available on Google play. I plan to make money from it (in app purchases). The money I get will not come from any particular customer but from Google which keeps a cut of all sales and handles sales taxes for each country as needed. Any insights on how I would declare this income?
Michael,
Hmm, this goes beyond what I know, I recommend seeking the advice from an accountant.
Thanks for this amazingly informative article! I too have an irrational fear of taxes but I’m trying to learn as much as I can in the hopes that one day, this will no longer incite fear in me.
I have a bit of a unique situation/question: I have a full-time job from which I work from home, and then I have a side hustle from which I also work from home. If I am partially reimbursed for cellphone and internet through my full-time job, do I still claim a portion through the side hustle? What about other home office related expenses? I.e. workspace, supplies, etc… do I only claim once (through my full-time job), or do I claim two percentages (i.e. 50% full-time job, 10% side hustle) and leave 40% unclaimed for personal use? Thanks so much in advance!
Jo,
You would claim the two percentages assuming they are separate. You can’t claim the same thing twice. Let’s for argument’s sake, your work buys you printer cartridges and they reimburse you at 100%. Well, you couldn’t then say you use your printer for side hustle purposes and claim 10% again. Does that make sense?
Thanks for the reply, Barry! That definitely makes sense that you couldn’t claim a total of more than 100% for your supplies. I was more referring to the business-use-of-space claims like utilities and internet charges. I believe it’s calculated by percentage based on the amount of physical space your home office takes up in your home… but if you use that same home office for a full time job as employee, as well as part-time self-employed, I think it makes sense that you could claim those separately based on the percentage of time the space is used for various types of work… right?
Jo,
Yeah the CRA is a bit weird, you technically need to measure your space, but it’s not like anyone really expects you to bust out your measuring tape. Let’s say your company is just reimbursing you for supplies but not your working space which is 10% of your home. You could still claim the full 10% as a home office space since that’s what you’re actually using it for. Now if your company is reimbursing you for that space, then don’t claim it on your own.
At least that’s the way I understand it.
I don’t think this is completely correct. Line 104 is for employment income where no T4 is issued. This means you are employed by a company in some capacity, are considered an employee, and they deduct any applicable taxes, CPP, etc from your earnings if you earn enough.
Self-employment must be entered on the applicable Lines 135-143 (and gross self-employment income on lines 162-170).
I have done casual contract work for a company for many years now. The company sets the hours, provides the materials, sets the hourly pay rate, dictates the processes that must be used and recently started sending me a T4A slip each year. I have no control over anything except how well I perform the work. To me, this did not mean self-employment since I had no control over any of this and could not increase my earnings or hours of work.
I was entering this income each year on Line 104. CRA deemed this work is considered independent contracting and is self-employment since the employer does not deduct any tax or CPP and I do not have any other benefits from the company.
CRA advised me that those earnings cannot be entered on Line 104 but must be entered on Lines 135-143 as self-employment. (The box on the T4A slip has changed names over the years and is currently called Fees for Services. The slip and the tax return guidebook both state that this must be entered under self-employment income.) I was informed by CRA that any income received for work performed is classified as either employment or self-eimployment. If I do not have a signed agreement to be employed as an employee, then any contract or casual work I do for them is self-employment.
Donna,
Thanks for this, I’ve updated the article with the relevant line numbers.
Thanks, Barry. The rest of the article offered correct information and will be helpful for readers. I spent a number of years using Line 104 and getting a run around with CRA on where that casual contract income should go before they finally dictated that any money earned for work is either employment income or self-employment income and in their view, this was the latter.
I recently came across your blog and find the articles very helpful and interesting. Thanks for doing this.
I have a question…
If I do freelance work within Canada, but the company that is hiring me is a Dutch based company, do I bill HST, or is it considered 0% as the company hiring me is based outside of Canada? All payments made to me for the contract work are handled by the Dutch company and paid in Euro’s
Terry,
Since they’re based outside of Canada, no HST is charged as they’re are considered zero rated.
Note that if you pay any exchange or wire fees when they pay you, that amount can be deducted.
Thanks Barry. That really helps. Didn’t know about the exchange or wire fees being deductible. That is really good to know.
Is this still holds true as of today? I have foreign income and being sent to me via wire transfer. So my receiving bank is deducting wire transfer fee from those payments. Where in my tax form should I declare this? or can I just deduct the wire transfer fees from my total foreign income?
Romeo,
Yes it still applies. The easiest way is o just deduct the fee from your payments.
Hello Barry,
I’m in this kind of situation too. So, need I to pay my taxes, when the foreign company that hired me, already paying my income taxes?
Thank You
Hi Arsen,
You should only be paying taxes based on your residence, but it also depends on where the company is based. That country may or may not have a tax agreement with Canada. You’d still have to pay taxes in Canada, but double taxation may not apply.
The company is based in Armenia, which one have tax agreement with Canada. At the same time, I am permanent resident in Canada.
So, I should pay income taxes in Canada too?
Thanks in advance!
Arsen,
Do you reside in Canada? If so, you should be paying taxes here, not Armenia. Canada does have a tax treaty with them.
https://www.canada.ca/en/department-finance/programs/tax-policy/tax-treaties/country/armenia-convention-2004.html
Also, are you an employee of the company or an independent contractor? That can affect things.
You man want to contact an accountant for advice.
I’m an employee of the company, and I’ll reside in Canada.
Yes, guess I need an accountant for figure out this situation.
Hi Barry,
I live in Ontario and I do some freelancing (consulting services) work for a US based company. They are my only client. They issued me a 1099-Misc. Last year I made over 30k, but I did not charge them HST as I was not aware that I had to do this. Do I have to go back and charge them HST? Can I do this or do I just start charging them HST on all invoices for 2018? I am not sure how to handle. Also, I may not make over 30k in 2018 as my hours vary…how do I handle this situation? I am so confused.
T Luciano,
If the company is based in the US, then you don’t charge them HST since they’re considered zero rated. That being said, as soon as you make over $30K, you need to register for an HST # and charge your Canadian clients tax. I advise speaking to an accountant.
I work as an on call nanny for an agency on the side of my regular job. I pick which jobs I take, but they take a fee from each family that uses their agency and they decide how much I make per hour, based on varying factors. I made less than 3500$ from this last year. I can’t figure out if I should file it under “casual income” or “self employed” and all my googling isn’t helping. What would you say?
Devon,
I’m pretty sure the CRA would consider that self-employed income as I’m assuming they’re not issuing you a T4.
Do you ever see the fee? E.g. You get paid $3,500 total, but after fees you got paid say $3,300? If so, you could deduct those fees on your taxes.
You could also deduct any transportation costs e.g. transit or gas / car maintenance. If the kids are being dropped off at your place, you could technically claim a percentage of your home as a home office.
Hello!
I am a Canadian residing in Europe and will be providing services for a canadian company. How would the invoicing work in that case?
Thank you!
Hi Jennifer,
It really depends on your residency status. This link is a good place to start.
https://travel.gc.ca/travelling/living-abroad/taxation
Thank you Barry.
I will be considered a non-resident. I used to work at this company and I mighht now work for them remotely from Europe on a full-time basis. I am trying to make sense of the whole taxation thing but cannot find many resources on this subject!
This link might help
https://www.canada.ca/en/revenue-agency/services/tax/international-non-residents/individuals-leaving-entering-canada-non-residents/non-residents-canada.html
I believe if you’re working remotely full time, then you would pay taxes in the local country. Of course, you need to be aware of any laws in regards to working in specific countries. E.g. you might not technically be allowed to work in some places. I’d consult an accountant if I were you.
Thank you again for your time! I was looking for a way out of it but accountant it is then …
Hello,
I am Canadian and did some freelance work via Upwork. All of my income was from US clients. No foreign taxes or anything were withheld. Do I report this under both self employment income and foreign income?
Thank you for the great article!
Hi Liz,
It would just be self-employment income.
Thank you!
Hi Barry,
I’m trying to file with Turbo Tax and am a bit confused. I did contract work in 2017 and made around $20k. Above you said “There’s no legal obligation to register your business as long as you’re invoicing under your own name”. I did invoice under my own name; however, I’m not sure how to file my taxes under “self-employment” without being registered as a business. Thanks in advance!
Hi Kyla,
When I say “There’s no legal obligation to register your business as long as you’re invoicing under your own name” I’m referring to incorporating.
Self employment income is self employment income, you don’t need to have a formally registered business to claim that. You can still claim expenses even if you’re not registered.
Hopefully this makes sense.
Thanks Barry! I think I’m following, so would I still file my income and expenses under the “self employment income”, but leave out the parts regarding incorporating (business #, etc.?)
That’s it! The business number also refers to when you register for HST (when you hit $30K in self employment income in one year)
Thanks for the great info, I do have a question though. Does a freelancer need to file taxes for personal AND business separately? Or is it just business expenses done through your personal tax return? ( I’m sure it’s a dumb question, but my mind is mush right now from trying to figure all these taxes out ) I hate taxes as well 🙁
It all falls under personal for self-employment unless you have an incorporated business. It’s just how you’ve structured things from a corporate standpoint
Hi Barry. I am from Ireland but now live in Toronto. I have recently started freelancing, and my clients are based in Ireland. I bill them in Euro and they pay into my Irish bank account. I then transfer the money to my Canadian bank account.
The exchange rate is different on the date that I invoice my client, on the date they pay me, and on the day the money is exchanged in to CAD. So, I am confused about what amount CRA will use to calculate the tax I owe – will it be the exchange rate on the invoice date or the payment date?
I’d really appreciate your help with this! Thanks!
Hi Rachel,
You should be using one of the following exchange rates
– The rate in effect on the date of the transaction (to me this means the day you get paid)
– the average annual exchange rate for the taxation year
Amazing, thanks so much for replying Barry!
And just one more thing. By ‘the day you get paid’, would you see that as being the day the money arrives in my Irish bank account, or the day it arrives in my CIBC account after I transfer it across?
Hi Rachel,
Technically speaking it would be the exchange rate the day the money hits your Irish bank account. That being said, note that you can claim any transfer / exchange / wire fees you incur when doing the transfer to your Canadian bank.
Hi Barry. Thank you for your very helpful post!
I am now looking to do some freelance work outside of my full time job.
I make much over 30k a year from my full time job.
So when I charge my client for my freelance work, should I be charging them HST? or does the over 30k income only apply to freelance/self-employed income?
Hi Richard,
You only need to register for an HST number when you make $30k in freelance income in a calendar year. You must register within 30 days after reaching that threshold and start charging HST to clients whenever possible from that date on.
Even if you make $50 the following year, you’d still charge HST since you’re registered.
Ah I see. Thank you for answering my question. I really appreciate your quick response!
Hi there, I just got my first job in Canada and I have to fill the TD1 forms. At the same time, I am receiving a small income (CAD 10,000 more or less per year) as a freelance.
Should I mark the box where says:
More than one employer or payer at the same time: If you have more than one employer or payer at the same time and you have already claimed personal tax credit amounts on another Form TD1 for 2018, you cannot claim them again. If your total income from all sources will be more than the personal tax credits you claimed on another Form TD1, check this box, enter “0” on line 13 and do not fill in lines 2 to 12.
Or this doesn’t apply because I don’t have a second employer?
Thanks, I am a bit confused.
Hi Miguel,
A TD1 form is filled out when you have a new employer. Since you don’t have a second employer (nor have you filled out another Td1), you would not check the box.
Your freelance income gets reported later when you do your 2018 taxes (in 2019)
Thanks Barri, I was just confused of the freelance income was considered as another employer/payer, but is clear now. Then I won’t check the box, and then declare the income as a freelancer on the personal taxes next year.
Thank you!
Hi Barry
Thanks a lot for posting all these information. Really enjoyed your blog!
I am working as a Secretary in a Realty Brokerage and file tax by T4A.
I know I need to register a HST# when I meets $30000 annual income.
For the 13% I need to pay to CRA, does it counts from the 1st dollar I earn after I registered the HST# ?
Someone told me that wages doesn’t need to pay the 13% tax to CRA.
I’m so confused. Please advise, thank you so much !
Hi Yip,
If you’re getting T4A slips it sounds like you’re an independent contractor so you would charge HST. You start charging and collecting HST as soon as you get your HST number (so yes, after your 1st dollar earned after registering).
If you were a regular employee, you would not charge HST.
Note that I’m not an accountant. You should consult with one if you have any concerns.
Barry, thank you for your quick reply.
if you are incorporated and do not do work that attracts HST, but you plan on doing work that may attract HST for work you will do within your corporation, what happens if you then do work not part of your incorporation but you get a T4A issued for, as a side gig doing work that is not related to your professional incorporation? Do you then need to start collecting HST on this T4A issued amount as well? I understand about the 30K threshold limit but does this apply across all professional and self employment (contracted services that issues a T4A) work you may do? What happens if the company you do this work for, personally, not through the Corp, that issues the T4A does not know that they need to pay you HST if all along this threshold has not been met but it may in the coming years based on the fact that the professional incorporation may do work that would generate HST (for being over the 30K annual threshold). This is confusing when its related to income generated both within a corp and also income viewed as self employment income because one is issued a T4A ? The types of work are not related at all and the work done that the t4A is issued is personal, not corporate derived but I don’t know if it would be expected that HST needs to be collected and submitted on this T4A income which would not be more than 7K in a year.
Hi Sue,
You should speak to an accountant since those questions are beyond my scope of knowledge
[…] a rule of thumb, you should set aside around 25% of your income for freelance work taxes if you’re operating in […]
Hi Barry,
Thank you for this really informative article!
I am from the UK and currently am in Canada on a working holiday 2 year visa where I am allowed to work either as an employee or freelancer. The company I used to work for have a North American division who heard I’m over here and employed me to do around 20 hours copywriting on a freelance basis. Now the time is coming for invoicing they have asked me to fill in a W9 form with my US social security and tax numbers; which I obviously don’t have!
So my question is, how would taxes work if I’m being paid for a one off job from a company based in the US with a value of about $800? I thought I would need to pay taxes in Canada but not the US but can’t seem to find a complete answer anywhere. Thanks in advance!
Hi Clare,
Since you’re working in Canada, you do not need to fill out W9. What they should have asked you to fill out is a W8BEN (if even that).
Since the income has a value of $800, it’s simply added to your income in Canada. You do indeed pay taxes in Canada, not the U.S.
Hi Barry.
I just got hired by a medical transcription firm in the US as an independent contractor. Do I need to have a PST number and pay PST from what they pay me or can I just pay regular income tax? I have a friend who does the same kind of work and she only pays income tax, but my CRA instructed me to get a PST number. Please help.
Kristy,
If you make more than $30K a year, you’d need a PST number. If that’s what the CRA told you, I would advise doing so. You could also speak with an accountant for more advice.
Thanks Barry
Hi Barry,
I have a full time job over 35K a year. I was offered to do a upholstery job on my own time that will cost less than 15K. Do I have to register a company for this or HTS #? I’d be using my own tools,space, etc. Can I declare it a self employment income? I’m a bit confused. Is my client OK to issue cheques under my name? should I account for the recommended 25% in my quote for the job?
thank you for your reply
Hi Louisa,
HST registration only applies to income of $30K+ on your side hustle. In your case, you do not need to register, nor do you need to charge HST.
Any income you make from your side hustle is added as additional income and would be taxed accordingly. Saving 25% for taxes is a general rule, if you’re already in the highest tax bracket, you may need to save 30-40%.
Note that you can claim your materials and parts of your workspace as self-employment expenses.
Hi Barry,
You seem extremely knowledgable so I was wondering if you could answer my question. I am self- employed and also do freelance/ consulting work. I realized last year that I claimed the consulting income with the small business but in fact it should, I assume, be reported separately?
I work as a counsellor, so the self-employment is seeing client under my registered business. The consultant work is under different companies where I see their clients however I am not given a T4 at the end of the year.
Any advice would be greatly appreciated.
Hi Paitra,
I’m not an accountant, but since you’re self-employed, I believe everything gets claimed together regardless unless you have a separate business registered. For example, I’m a writer, brand ambassador, and journalist, but I report all my income under my business of being self-employed.
It sounds like your consultant and counsellor income is self-employed either way which is why I think it counts all under the same thing. As such, you can also claim any relevant expenses.
Hi Barry,
I’m considering working for a business that’s based out of the US. The job posting is for transcription and the work is considered freelance (at least that’s what the title says). As a Canadian, would I have to pay taxes to both Revenue Canada and the IRS? I’m trying to determine whether it is worth applying to these types of jobs but if I have to navigate the US tax system in addition to our own then I’m not sure it is. Any advice would be appreciated.
Thank you,
Brandy
Hi Brandy,
You get taxed based on the country you’re living in. I’m assuming you’re Canadian, so you would only pay the CRA taxes on any income earned. You would not have to charge any international clients GST/HST since they are exempt.
You may have to fill out a W8Ben to show your foreign status, but that depends on the employer.
[…] self-employed. Although I prepared things as best I could by getting my finances in order and being on top of my taxes, I’m still surprised at how many challenges I’ve come […]
Hi Barry,
First of all great work on the article! It is very informative and insightful regarding taxes for self-employment/independent contracting. I just recently moved to Canada as a PR last June 2018 and looking into a couple of IT consulting contract opportunities one in particular for a client in BC. I have always been a permanent employee before so I am not particular aware of the complexities of independent contracting. I have a couple of questions: 1.) Do I need to register for an HST/GST number before starting the contract work or do I wait until I reach the 30K limit? My quoted hourly rate for the contract will definitely make me go over the 30K threshold limit but not sure if I should apply now or until after. 1.a.) If I don’t apply now do I need to charge HST/GST for duration I didn’t start charging yet once I get my registration number? 2.) Do you recommend using an invoicing tool/service or can you simply just create your own invoice from a template? 3.) Is the payer obliged to provide me a T4A slip or do I need to request this explicitly? I plan to consult an accountant as well but just wondering about your thoughts first so I have a baseline understanding. Thanks!
Hi Angelo,
Technically speaking, you don’t need to register for HST/GST until you reach that $30K mark. You do NOT need to collect HST until that point which means you only start collecting at $30K+.
If all of your consulting is with the same company, you should let them know in advance. THat being said, if all of this work is with a single company you could just register now and collect it from the start. You don’t “make” any extra money by collecting HST nor do your clients “lose” any money, it’s all a wash since it goes to the CRA either way.
As for invoicing, many people use Freshbooks, I personally use excel to track payments and I downloaded an invoice template I found online.
Companies are obligated to provide T4A slips, since they may consider you a vendor as opposed to a freelancer. That doesn’t really matter if you’re tracking everything on your own.
Hi Barry,
Thanks for the quick reply! One more additional question. For a purely professional services contracting mostly dealing with single clients at a time, would you recommend incorporation or sole proprietorship would suffice? I know that incorporating would lessen risk for liability but on the tax side, would the tax incentives be more and do you think it will be worth the additional paperwork and compliance? I ask this because I know some “employers” only consider contractors that are incorporated. I’m thinking if it is worth incorporating from the get go since this is my first time doing contract work. Thanks!
Hi Angelo,
From a tax perspective, I’ve been told that you need to leave a minimum of $25K per year in your corporation to break even after considering all the additional expenses. Leaving $50K in per year is where it likely becomes more appealing.
Note that money stays in the corporation so you just kind of need to decide what you plan on doing with the side income.
It may not be worth the trouble to incorporate right now.
That being said, I know what you mean about some companies only considering contractors who are incorporated. This hasn’t been an issue for me as of yet, but it’s something I’ve thought about. Now if a client came to me and said I have a $100K contract for you but you only get it if you’re incorporated, you better believe I’ll have my accounting to the paperwork right away.
Thanks for a detailed article about freelancing.
I wanted to know if I claim some portion of my rental expense for business purpose as I am doing freelancing from home and If I only do freelancing for couple of months. In that case Can I Claim rental expense for every month while I am reporting my tax for self employed income?
Hi Tim,
You can claim a portion of your rental for business expenses regardless of how many months you freelance for a year. Think of it this way, if 10% of your rental is for a home office which is used when you freelance, then you can claim 10% of your rent as a business expense.
Thanks 🙂
Hi Barry,
A friend of mine is close to winning a bid to contract to a company and he has asked me to do his AP/AR and other business administrative tasks. He will just be paying me via electronic transfer in 3 installments over the period of the contract and he told me to put aside 30% for tax. I am wondering how do I claim this when I do my taxes? I am not a small business or anything like that. The amount he would be paying me is 78k.
Hi Rae,
The 78K is just considered additional income so you report it as such. Keep in mind that if you have additional income, the $78K you’re earning could easily put you in a higher tax bracket so you may need to set aside more. You’ll also have to register for an HST # and collect HST once you make more than $30K (from your freelance work)
Hello:) I m a medical record analyst and i want to start working as a freelancer. I am a full-time student
Im in Novascotia and i have a 20 hours per week permit.
I would love to know how can i invoice to my clients and how much do i need to give to the government.
Please help me with that, Thanks
Hi Kumar,
The easiest way to invoice is to just download an invoice template and to log your hours in excel. Alternatively, you can also invoice using software such as Freshbooks.
How much you need to pay in taxes depends on your marginal tax rate in Nova Scotia. https://www.novascotia.ca/finance/en/home/taxation/tax101/personalincometax/default.aspx
Generally speaking, I recommend setting aside 25% of your income for taxes. If you make over $30K, you’ll likely need to register for an HST number
Hi Barry,
Thank you so much for replying to my query and also sharing the url, it is very helpful.
How shall I proceed for filing next year, netfile program or paper based? can you please guide me on that since I am an international student and have minimal knowledge on system yet but trying best to learn about it.
Thanks once again,
Regards,
Kumar
ANy software based filing program should be good enough. If it’s sill too complicated, just talk to an accountant. Don’t forget to save any receipts that relate to your business expenses.
Hi Barry,
Sounds great, sure will keep all the record. Thank you so much for your help.
Best regards,
Kumar
Hi Barry,
Can you please help me with my query. I work from home and my rent includes everything (internet and electricity), I do not have break up pertaining to monthly amount I pay. As mentioned above I work part time as medical record analyst, how shall I determine the expense related to my work in this situation and what can I use as a back up to support it? Please let me know.
Thank you so much for your help
Hi Kumar
If utilities and internet are included in your rent, you wouldn’t be able to claim that separately as a business expense.
Hi Barry,
Thank you so much for your prompt reply. I will be receiving T2202a from my school, where do I have to put those details while using any netfile software.
Thanks once again, appreciate your prompt reply and help.
Regards,
Kumar
It’ll be pretty obvious in the software since it’ll ask you about tuition credits.
Hello,
I am working as a freelance web developer with a company from usa.
I am earning under $1000 every month but the money is getting transferred into the account of my other partner( On work visa).
Do we need to pay any taxes. If yes, how much?
Is there any way to save this tax amount?
Ravikant,
If you live in Canada, you will need to pay taxes on your income tax at the marginal rate. How much you pay in tax is dependent on the province you live in. Generally speaking, I would set aside 25% of your income in a high-interest savings account for tax purposes.
Hi Barry,
I have 1 very simple question and hope you can help. I have a full time job. I did a one time side job graphic design and made 400$. How do I report that on my tax in the easiest way? Some said I can just do “other income” if I don’t claim any deductions.
Thanks!
Peter,
Yes, that would be the easiest way to report your additional income.
Hi Barry,
I have a corporation registered recently as Ontario Provincial one and I have started making money from a client from UK. I observed that the taxes for corporation is 15 % in Ontario. So is it enough if I set aside 15% of corporation’s profit for taxes?
Also I forecast the profit is going to be more than 40K from the UK client, do I need to register and charge GST/HST for the transactions eventhough the client is from UK?
Thanks,
Scott
Hi Scott,
Yes, if you’re set up as a corporation, you don’t need to set aside as much for taxes. I personally like to set aside a bit extra just in case.
As for GST/HST, you need to apply for it when you reach $30K in income regardless of where that income is coming from. You don’t charge your UK client GST/HST since they’re zero rated. When it comes to reporting your taxes, it’s best to separate the income coming from outside of Canada so the CRA doesn’t wonder why you’re not charging HST.
Hi Barry,
Thank you so much for this article. I’m a married, Canadian woman in my 20’s, freelancing at max 30 hours a week, making under 30k a year. I’ve been so worried and stressed about filing my taxes because of my freelance work, and reading your article and the comments that follow has been so helpful. I was finding it so difficult to find advice about matters like this for Canadians. You’ve made understanding this so simple! Thank you so much!
I really appreciate your website!! I am definitely subscribing!
Hey Cami,
Thanks for the kind words. I was in a similar position as you a few years back which is why I decided to write this article.
Hi,
I recently did a subcontracting job where I provide service to help live stream an event. The contractor request for my Social Insurance Number. Am I required to provide that?
Thanks!
Daniel,
If he plans to issue you a T4A, it likely is necessary to provide your SIN.
Hi,
I’ve recently started doing some transcription work on Rev.com, do I need to include the income here in my taxes? Would it be like claiming freelance work?
Thanks!
Hi Laura,
Yes, you would need to declare the additional income as freelance.
Hi Barry, since Rev.com is an American company, paying via paypal in aAmerican currency, do Canadian freelancers need to file taxes in the US too?
Thanks,
Nicole
Nicole,
Nope, you only file in Canada.
Hi Barry,
I came to Canada in January. I am working as a freelance consultant for 2 firms one is based out of US and the other Australia. My yearly income is above $30k. So, based on your article and comments above I understood this
1 – My clients are not Canada based so I do not need to collect HST/GST from them, However, I should get a HST number right?
I have a few of quick questions
1 – Is there a website wherein I can put in my income details and get a sense of tax I would have to pay at the end of the year.
2 – As a freelance consultant, Can I file for expenses in my tax return for things like – Home Internet, Mobile Bills, and Eating Out.
3 – Would my tax brackets be same as they for an Individual salaried employee working for a Canadian firm.
4- Can you give me a sense of Tax amount for someone making 55k-65k doing freelance work.
Thanks in advacne
Sorry for such a long post
H,
Do you have a day job and you freelance on the side? HST registration only applies to your side income after you reach $30K.
SimpleTax has a calculator https://simpletax.ca/calculator
Yes, you can claim expenses as a freelancer
Your tax bracket is determined based on your total income so it would be the same as a salaried employee
See taxtips.ca for the marginal tax brackets https://www.taxtips.ca/taxrates/canada.htm
Hey Barry,
Thanks for for the quick response.
I am an independent consultant who provides services to two different firms, one in US and other in Australia. My yearly income would be in the range of 55k-65k. With majority coming in from US (40-42K) and rest from Australian client.
I am just worried that i would be caught unaware with my tax amount next year. Since there is no tax deducted at source. Thats why I wanted to get a sense of the tax.
Would you suggest opening an Sole Proprietorship or forming an Inc. and would this help in saving tax
Thanks for your help.
Thanks,
H
H,
You would have to register for HST once you hit $30K, but you wouldn’t collect. You’d mainly just be responsible for taxes in your tax bracket.
Setting up a sole proprietorship may make sense if you plan to keep most of your profits within the company. Yes, you could potentially save some tax, but as mentioned, you need to keep the money in the company for you to get any real gains.
If you’re expecting to make $65K, it’s not like you’ll be paying insane taxes, you’ll be paying the same as everyone else.
Talk to an accountant if you have major concerns.
Thanks for the article, Barry!
Do I file freelance taxes along with my income tax, meaning, filling out both the T2125 and the T4 forms? I already have a full-time job but I freelance on the side for additional income.
Also, how do I expense rent, internet and cellphone if I work mostly from home and my phone is used for both personal and business?
Hi Jimmy,
Yes you would fill out a T2125 when doing your taxes. Your T4 comes from your full-time employer. As for expenses. Let’s say you use 15% of your home for business, then you could claim 15% of your rent or mortgage. If you used your cell phone for 50% business, you could claim 50% of those expenses.
Great, thanks Barry. What about other expenses, like website expenses, software, office supplies and travel to conferences? You also listed meals and entertainment, how are these claimable? and are there other expenses we could account for to write off?
Also, do we need to register as a business if we are freelancing? say if I set up a website to lead my clients to. (The website will be under my name).
Those expenses are all claimable. See this site for a full list https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/sole-proprietorships-partnerships/business-expenses.html
You don’t need to register for a business if you’re freelancing. You do need to register for a GST/HST number if you exceed $30K in a year in freelance income. Once you have a gst/hst number, you have to start collecting gst/hst from Canadian clients regardless of how much income you make freelancing.
Hello Harry!
Thanks for such as amazing article. I have some questions for you though
I live in Quebec and works as a French teacher with one of the school boards . My annual income is roughly $50000.
I’m considering working aside as a freelancer doing some instructional work remotely with US customers. I would like to know
1. Am I eligible to work aside as a freelancer ?
2. Should I register with registre des entreprises
3. 25% of for taxes , it is for federal and provincial taxes
4. Have you ever heard about 1099 form
Thanks
Hi Frankie,
ANyone can work as a freelancer. It’s just in your best interest to report your additional income and pay your taxes. I’m not familiar with the registre des entreprises, but if that’s simply setting up a registered business in Quebec, it’s not necessary. My rough estimate of setting aside 25% for taxes is indeed for federal and provincial taxes, but you may need to set aside more if you’re in a high tax bracket. The 1099 form tends to be for American citizens. Since you’re Canadian, you would use the T2125 form when doing your taxes in Canada. If your U.S. client requires proof that they don’t need to pay taxes in the U.S., usually you would fill out a W8BEN form for them.
Thanks for your quick response
Hi Barri,
I have had a sole proprietor photo editing company for 4 years now- side business from Ontario. I just incorporated my business and still need to get a HST number. I was making approx. $10,000-$15,000 annually but I am hoping to do more soon. I have not invoiced my first INC. bill. Do I still charge HST to my clients, now even thought I make under $30,000? Is there anything different as far as claiming expenses? Is this App good for me? QuickBooks Self-Employed or do you recommend another APP for Incorporated Companies?
Thanks
Jen
Jen
Hi Jen,
You only need to apply for HST when your business earns you an income of $30,000 in a single year. You don’t charge HST until you have that actual number. Claiming expenses is the same, however, there are some tax benefits if you leave income inside your business. QuickBooks Self-Employed could help you manage your day-to-day expenses, you kind of need to test it out to see if it’s the right fit for you.
Thank you Barry! Very helpful, thanks for the great article.
Thank you so much for this article!
[…] a short period of time or day trades them, the CRA may consider it a business and you’ll have to file your taxes […]
Nice Article. Thanks for this useful article.and appreciate your nice work keep blogging
Hi Barry, your article is very informative thank you for sharing! I just have a question too, my employer is an Architect and he is hiring me as online Executive Assistant, I am aware that I need to file my own tax as a freelancer (without the GST/HST because its less than 30K) my question is should I care if my employer is paying his own taxes here in Canada? Would there be an issue if i dont get to figure that out? He travels a lot and works from one country to another so asking this question directly to him doesn’t sounds really good. I badly need you advice before I continue with this work. thanks in advance.
Hi Marivic,
It’s irrelevant if your employer is paying his fair share of taxes. As long as you’re filing yours correctly, you’re good.
That being said, let’s say your employer’s tax base is outside of Canada, you wouldn’t charge him GST/HST even if you’re registered as that only applies to Canadian companies.
Great! Thank u very much Barry for immediate response! 🙂
Hi Barry,
I started working as a freelancer in 2018 and will be doing my taxes as a freelancer for the first time this year.
My question is this. I worked for a client in December 2018 and invoiced them in December 2018. I won’t receive payment from them until the end of January 2019. Do I include that payment in my 2018 tax returns or 2019 tax returns? i.e. does the CRA go by the invoice date or the payment date?
Many thanks for your help in advance!
Hi Rachel,
Technically speaking, if the income was earned in 2018, then you need to report it on your 2018 tax return. That being said, I’ve had a few accountants tell me it’s not a huge deal if you report it in the year you get paid (2019).
Thanks Barry! And just to further complicate matters, I get paid in foreign currency, so I have to calculate my payment in CAD based on the exchange rate on the day that the euros land in my account. Even though that date (i.e. the date of the currency exchange) would take place in 2019, I should still report the earnings in my 2018?
Rachel,
Some people use the exchange rate when the currency lands in their account, but some also use the average exchange rate for the year when logging their income. Either way, you likely won’t be audited if you’re honest about all your income.
I live in Ontario and rent an apartment in a fourplex. I have a room for hair can I claim that money if it is under a side job without being registered… what do I claim it under and will this income surfice for mortgage time
LC,
You would fill out the T2125 Statement of Business or Professional Activities and then claim the room as a business-use-of-home-expenses.
Generally speaking, banks do not consider freelance income as part of your income when you apply for a mortgage. That being said, if you’ve been doing it for a few years and have invoices / receipts to back up your income, someone might take it into consideration.
Okay even without a business number I can claim it?
When would I have to worry about getting a business number.. if I was making more than 30,000 a year with it?
LC,
Yes, you can still claim it even if you don’t have a registered business. You only need to register for HST when you cross $30K in side income in a single year.
Hi Barry,
I hope you can help me out?
I’m a freelancer on Upwork (do you know that platform?). I do not earn a lot; since last year June, when I actively started working on that platform, I have “only” made a little over CAD 1,000. It will most likely never climb over CAD 2,500 in a year as I really just do this on the side.
As of now I have not reported anything to CRA as I thought I don’t have to do that until I do my taxes in March/April, is this wrong? If so, what do I need to do to report it? If I only have to mention it during my tax return, how do I go about it?
The clients I’m working with are outside of Canada, if that makes a difference.
I’ve never done freelance work before and my husband is responsible to file the tax returns for us. When you work a regular full-time job things are easy *haha* But neither my husband nor I are really sure as how to handle my freelance Upwork income.
Many thanks in advance for you help.
Regards,
Jasmin
Hi Jasmin,
You only report the income when you do your taxes. You would basically fill out the T2125 and claim any relevant expenses
https://www.canada.ca/en/revenue-agency/services/forms-publications/forms/t2125.html
Since you’re not making over $30K, you don’t need to collect HST. Not that this applies to you now, but you would not charge HST/GST to clients outside of Canada.
Freelance work great and good for you for reporting the income.
Hello There,
Found this blog, but I just have a Quick question. When filing taxes, and you have multiple income from varied sources (eg) IG branded content, photography, odd jobs for other clients and NO T4, or T4A. Do you need to fill out different Statement of Business forms, or would you compile it all together as ONE income, and claim your expenses as necessary?
Hi Presley,
You file everything as one.
Hi, I work fulltime for a compagny and they deduct taxes off my paycheque which is all fine. I do work the odd saturday here and there on the side for other work. I do my own taxes and what i dont get is when i claim my side job money in “occasional earnings” or “other income” my refund literally drops by half of what i make on the side. That means the government takes 50% of what i earn of my side job money. Am i missing something here. It make me feel like its not even worth it. Im in ontario.
Hi Ben,
It depends on your income bracket. If you’re in a high income bracket, you would be taxed at your marginal rate. It’s also possible that you might be dinged at 50% because your refund thinks it’s a capital gain? The income should be filled under the T2125 form
Hi Barry,
I’m a self-employed hairdresser but I worked a few completely different industry freelance jobs last year with a promo agency and earned about $1400….the agency took my info (name, SIN, and paid through e-transfers)…would the agency have reported that info to CRA and should I be filling out a t2125 or can I just add that $1400 to my existing self-employment income instead of a separate freelance gig and having to do the extra work?
Hi Mary,
If the agency reported it to the CRA, you would get a T4A from them. If you didn’t get a T4A from them, you’d report it as self-employment income which should be part of the t2125 anyways.
Hi!
I was just hired for my first freelance project, and have never freelanced before. I’m a bit confused about how to set things up. Does a SIN serve the same purpose as a BN (for taxes)? I was asked for my Vat Number (BN), which I don’t have, can I provide my SIN?
Aidan,
Is the company you’re freelancing based outside of Canada?? If they’re asking for VAT, that refers to taxes in the UK. You would not need that since you’re based in Canada. You also would not charge them tax for 2 reasons. #1 you’re not registered for HST (that applies when you reach $30K in one year of freelancing). #2, you don’t tax companies outside of Canada.
Thanks so much for your prompt reply!
It’s a US based company that essentially brings freelance contractors and client companies together. In order to register with them I need to provide a Vat Number or a Tax Exemption ID. I don’t have either. I’ve called Canada Revenue and they weren’t able to help me. Not sure what to do.
Aidan,
If it’s a U.S. company, at most they would ask for is a W8Ben. You should contact the company that brings freelancers together for clarification because the U.S. client is definitely exempt from Canadian taxes.
As a freelancer/self-employed, you would have to set aside money on top of your taxes too right? Like employment insurance and the like, how much should be set aside for everything else?
thanks
Hi Tony,
Yeah, you’re looking at roughly another 10-12%
https://turbotax.intuit.ca/tips/cpp-ei-considerations-self-employed-canadians-8648
My common law spouse works for a medical transcription company. The company handles the contracts and decides what pay she receives, but does not collect any taxes, supply any tools except software, or decide when and where she works. Would she be considered a freelancer? Should she be filling out a T2125 and claiming a percentage of what she uses, like internet, heat, power and mortgage?
Dan,
What did her contract say when she signed with the company? Is she an employee or an independent contractor?
It simply said ‘subcontractor.’
Dan,
If her company doesn’t issue a T4A, then yes, she should be filling out the T2125 and claiming appropriate expenses.
Hi Barry,
I am a Freelance Makeup Artist for 3 different Beauty/ Skincare companies. I’m wondering if the income I earn from these job count as “freelancer” or if I am considered to be more of a part time employee since I get T4 slips from these companies.
Joanna,
If you get a T4, you’re an employee. If you get T4A slips from any of your employers, that would be considered freelance income.
Hi Barry,
My wife worked as independent contractor for a month and then she got employed by another employer in the later part of 2018. The second employer gave her a T4 so filling that was simple. But the contacting payment she got as an interac transfer. Do i need to show that as a self employed income? The amount is not very big ~600$.
Abhay,
Yes, your wife should report that income.
Thanks Barry for quick response.
One more question – I added that income in Turbo tax and saw that tax charged was a lot. (300$ +). I thought it would be 15% since it is too low. Also her income from T4 is also not very significant to put her into higher tax bracket.
Abhay,
Are you adding it in the right section? 50% tax seems high. Freelance income typically falls under the T2125 section https://www.canada.ca/en/revenue-agency/services/forms-publications/forms/t2125.html
HI Barry,
I’m a Canadian Non-Resident living and working in the states for a US company on a TN-1 Visa (close to 5 years now). When doing small freelance work for some clients back in Canada (earnings under 5k a year), do I need to file a tax return in Canada? If so, how do I go about this? I’ve heard soo many mixed opinions and am having a hard time finding information online for this scenario. Thank you!!
Chelsie,
Unfortunately I’m not sure how taxes work in your situation, I would advise speaking with an accountant.
Hi Barry,
In addition to my full time job, I have a dance hobby, which is totally unrelated to my profession. I would say this is a serious hobby since I’ve been taking lessons, workshops and training abroad for a long time. Last year I had a few paid performances, and I was asked to provide invoices by the dance organization that put together the events. Altogether, last year I made around $3,000 on these dance gigs. I also spent a considerable amount of money in dance lessons, workshops, dance shoes, outfits, etc. Which category does this side income fall into? Since I’m not a registered business, can I still deduct expenses such as dance lessons and workshops?
Thank you!
Hi Vero,
I’m not familiar with your particular situation. Some quick research shows you should be able to expense since it’s part of your professional development within your industry. Not being registered should not make a difference. I would advise speaking to an accountant or even calling the CRA for clarification.
Hi Barry,
Thank you for this article, helped me a lot, I have do have a couple of questions though and would appreciate it if you can shed some light.
1 – I will accept a part-time contract job as an independent contractor for 6months (20h/week) as a side-hustle working from home, I will be sending them invoices every 1 week, my contract says I should bill them ”x$/hours for 20hours/week + applicable taxes” how do I calculate that additional taxes? the company I will be a contractor for is based on Vancouver BC and I’m based in New-Brunswick
so should the invoice be x$/hours for 20h/week + 25%(taxes) = total ??
2 – Also, can I work as an independent contractor designer (part-time/side hustle) while being a full-time employee somewhere else (40h/week)
Thank you very much
Reda,
You only charge taxes if you’re registered for GST/HST. That only happens if you earn more than $30,000 in a year from your side hustle. Let’s say during those 6 months, you end up crossing the $30,000 threshold. You would have 30 days to register for a gst/hst number and you would charge the company tax from the time you register.
If you’re not going to cross that threshold, you don’t register for HST/GST.
Yes, you can have as many side hustles as you want regardless if you’re full time. But ALL of your side income counts towards HST/GST registration. So if you made $20K at one side hustle and $10K at another. You’d register when you hit the $30K and then charge tax for both companies moving forward (assuming they’re both in Canada)
Thank you for the quick answer Barry, this helps!
the question I’m really tormented about is the following:
I will be sending them invoices every 1 week, my contract says I should bill them ”x$/hours for 20hours/week + applicable taxes” how do I calculate that additional taxes? the company I will be a contractor for is based on Vancouver BC and I’m based in New-Brunswick
so should the invoice be x$/hours for 20h/week + 25%(taxes) = total and they would have to pay the total,
Thank you!
Taxes refers to GHST/HST. If you’re not registered, there are no taxes to bill. You just bill them for your hours.
I will be making less than 30k/ with them during that 6 months and I’m not registered
so I will just be billing them my hours and then set aside 25% of my income for taxes? did I get that right?
Thanks
Reda,
That’s correct. Note that 25% for taxes is just a suggestion. If you’re in a higher tax bracket, you’ll need to set aside more.
How do you determine that 25% taxes suggestion? I will be making less than 30k on my side hustle this year, for $0 – $41,675 provincial is 9.68% for New-Brunswick, and federal is 15% which is 24.68% is that how you calculate it?
thanks
Reda,
You got it. but you need to factor in your full-time income (if you have any) since the freelance income would add to your overall income.
Hi Barry,
so let’s say hypothetically you’re doing 20k on side hustle and another 45k as a full-time employee (where they already take taxes from you every month), you will then fall under the tax bracket for $46,606 – $83,351 which is 35.32% for provincial and federal combined
so you will need to keep 35.32% aside for your side hustle taxes, right?
I thought the side-hustle taxes were not added to your overall income since you’re already paying taxes for your full-time job at every payroll when your employer deduct your taxes.
Reda,
Correct to the first scenario.
Yes, you’re paying taxes automatically for fulltime employment, but side income is in addition to your fulltime income.
You need to pay taxes on your side income (or any additional) income wherever it falls in your income bracket.
So for the first $46,605 in income, you’re paying 24.68% and then any income between $46,606 – $83,351 you pay 35.32%.
The amount you pay in taxes is based on your total amount.
Hi Barry,
I am in Canada and going to start working as a freelancer (without registration, using my name) for the customers out of Canada.
Customers prefers to have a contract with me on their local language.
For CRA, should I have a contract and invoice in english? If yes, what format / information should be provided in the contract?
Oleg,
The contract is irrelevant to the CRA. They just want you to report any income. Keep in mind that even if all of your clients are outside of Canada, you still need to register for GST/HST once you earn $30K in a given year. You wouldn’t charge those foreign clients, but if you pick up any clients in Canada, GST/HST would apply once you’re registered.
Thanks, Barry!
Hello there,
This is my first time doing my taxes myself and I imputed my T4 information into an online software. It showed me that I was to get over $1,200 in refunds but when I added my freelance income it changed to me owing over $1,700 which worried me a lot.
So just to see what would happen, I started over and imputed my freelance income first (just over $7400) without my other income and I noticed that the amount owing was around $200 instead which is less than 25%
How does my total income effect how much I owe? With my freelance my total income is about 23k. I didn’t know when I started taking on side projects that I would have to pay taxes so I didn’t save any money for it so I’m a little concerned.
Thanks,
Cecile
Cecile,
You have to pay taxes on any income. So with a rough estimate of 25% for taxes, you would have to pay $1,850 on your freelance income so what your software is showing doesn’t seem completely out of the ordinary.
Hello Barry,
I worked as a freelancer for a period in 2018, for filing my tax, I was told by an agency that I need T4 to file my tax. What materials do I need to file my tax for my freelancing work? Can i just use my own invoice as a supportive document?
Chloe,
T4’s are only for employee income. Your invoices would likely be good enough supporting documents if you’re ever audited.
If you’re getting your taxes prepared by someone else, they usually only need the total amount you made plus any expenses. You shouldn’t have to provide any documents.
Hi Barry,
Thank you so much for this very helpful blog, and for continuing to answer all of the questions!
I have found an answer to almost everything I had doubts about, but am still wondering about a couple of things. I hope you can help me! I am doing creative advertising work from BC for a company in South America.
– Since the company I will be freelancing for is in South America, I understand I can invoice them in Spanish, as CRA won´t actually see my invoices, unless they ever ask for proof of income, is that right? Should I do everything in both languages, just in case?
– As I also understand, I can invoice them in US$ dollars and when I file my income, change those amounts to CAD $ to the rate of the date I got paid. Is that right?
– If I live in BC, as an international student, and will earn less than 30K, I do not need to register for a GST/HST number. But do I need to tax the PST since I am in BC? or this tax doesn’t apply either, as the company is in South America?
– As a student, can I count a percentage of housing as an expense? (considering my main job is to study and not to be doing freelance work?)
Once again, thank you so much for your help!
Logaine
Logaine,
Here are the answers to your questions but note I am not an accountant.
I don’t think you need to have invoices in 2 languages, just have one set of invoices should be good enough.
Technically speaking, the CRA wants you to use the average exchange rate for the previous year to calculate your income on foreign currencies, but many people just long the conversion rate on the day they get paid. It’s unlikely the CRA will audit you if you do that.
You do not need to charge GST/HST as long as you earn less than $30K from freelance income. PST does not apply as that’s provincial and freelancers do not collect that tax.
If 10% of your housing is used as a home office, then you can claim 10% of your housing as such. This would also apply to say your cell phone, internet, and hydro bills.
Thank you very much Barry, for your time and sharing all your knowledge and experience.
Barry,
I live with my parents and use one of the rooms (separate from my bedroom) as an office where I did all of my freelancing work. If I don’t pay any rent, does it still qualify as a home office/ can I deduct it as an expense?
Thank you!
Cecile,
Since you’re not paying rent or utilities, you can’t claim that expense.
I am a part time tutor, my income is less than 6k. My slip has no.48 box with the total amount in it and basically nothing else. Which form do I fill up in addition to the normal file?
Mat,
You can use the T2125 form to report freelance income
Hi Barry,
Thank very much for posting this detailed article. I have just come across it now, over a year it has been posted, but it still proves to be useful to so many!
A couple questions I have..
I just opened a freelance company through the CRA, which I now have a registered number for.
I have not yet registered through my province (Ontario) for a HST number, but I plan to.
-Even though I just got my federal business number in 2019, Can I still claim income for Freelance work from 2018, and file it under my new business number, or do I have to file it under my personal name? (Considering my number is new, and may only be used going forward, for any income made AFTER I received the number?)
-Considering this is a new venture for me, I did not invoice the companies I did work for last year, and only worked under contract and paid cheques. I was waiting to do this once I got my business number. My confusion lies in, to claim this as personal income or as business income under my new 2019 sole proprietorship business. I made under $30,000. but also had a separate job on payroll, and quit that job to start freelance work. (So, I will claim both incomes as one on payroll and the others on contract.)
-Also, I know you mention the tax does not have to be charged if you make $30,000 and under. But what if going forward, I automatically pre-charge it with each invoice of service, lets say monthly. How am I to anticipate if the income will be less or more of $30,000. at the end of the year if I pre-charge it? I don’t want to charge the companies with a huge chunch of HST at the start of the following year once I’ve calculated my yearly earnings. My question is, can I still charge tax even if I do not make $30,000.00. Would I have to return it back to the companies I work for, come next tax year, or just forward it to the government come tax season where they would get reimbursed for over paying taxes to me?
-If I now post-charge tax to the companies for services under $30,000.00 from last year-2018, is there anything wrong with that?
Basically, if I were on payroll, both the company then I would pay taxes. But when not taxing them with income under $30,000. How is it that they don’t get charged by CRA for paying me via contract as they would have to pay for some one on payroll, but only I would have to pay on my end? I am trying to understand the logic in this so no one gets burned in the end. 🙂
Many, MANY thanks for your time in answering my complicated questions. 🙂
Hi Erin,
I’m not an accountant, so please keep that in mind when reading my answers.
Since you weren’t registered as a business in 2018, you would claim your freelance taxes as personal income
Freelance work is separate from your employment income. With employment income, you would claim the income listed on your T4’s and any freelance income would fall under the T2125.
If you don’t have an HST #, you can’t precharge HST. If you want to charge HST from the start, just register for an HST # now.
You don’t post charge anyone HST. You don’t have an HST # so there’s no reason to post charge. Even if you register for an HST # after you earn $30K in 2019, you wouldn’t post charge for the original $30K.
Companies not withholding taxes for the CRA has nothing to do with $30K, it has to do with your employment status. Employees have taxes withheld, but freelancers need to pay taxes on their own which is why you need to set aside a minimum of roughly 25% of your income to pay the CRA later. That number would increase based on your income level and if you collect HST.
Hi Barry
Great advice here!
My son is an actor, Canadian,self employed but also works in LA a lot, so instead of hotels, he now rents a condo there. He also has his apartment he rents in Toronto. He goes back & forth. I know he can claim a portion of his Toronto rent for an office but my question is can he deduct the full rent of the LA condo since it is an expense (like a hotel would be, if he didn’t have it)
Many thanks!
Kathy,
I’m really not sure about that, you may want to seek the advice of an accountant.
Hi there!
I started freelancing (commission) around February 2019 and my services are Graphic Design and Illustration. I wanted to use a different name instead of my own name and I haven’t registered yet ( but I will eventually before the end of the year) Is there any good site/s that you would recommend where I can register my business for a low price? My estimation with my whole freelance work would be around $800 by the end of the year and I also don’t charge any GST/HST on my client’s invoice, should I? Also, I am receiving CCB from my daughter, would it change the amount I’m getting monthly if they know I have a business when I do my tax next year? Thanks so much!
Hi Anna,
You register your business online through the government. You don’t charge HST unless you have a registered HST number which you don’t need until you make $30,000 or more in freelance income in a year. Any income you make could affect the CCB monthly payout but you’d have to use a calculator to see how it applies to your individual situation.
https://www.canada.ca/en/revenue-agency/services/child-family-benefits/child-family-benefits-calculator.html
Thank you so much for this detailed blog! I have been looking for answers that are similar to my situation.
I’m a Canadian living in Europe. I am looking to register as a freelancer in Canada to keep consistency, although all of my clients will be European. Is it possible to work this way? Does it matter whether or not all my income enters into a Canadian bank?
Daria,
You can’t register as a freelancer in Canada. Your taxes are based on where you’re living. If you’re living in Europe, then you would pay taxes based on the local laws in the country you’re residing. Even if all your income is coming from Canadian clients, you would still do taxes based on your country of residence.
Hi Barry,
In recommending setting aside 25%, is that inclusive of GST, or 25% + 13%?
Bryan,
25% + 13% (total of 38%) if you collect HST. Note that if you’re in a higher income bracket, you should set aside even more.
Hi Barry,
Thank you for taking the time to answer these questions. Your article is very helpful!
I have a silly question for you. Let’s say I made 30k and paid 5k in taxes, is there any way to get the tax money back?
Helen,
What do you mean you’ve made $30K and paid $5K in taxes?
Generally speaking, once you’ve filed your taxes, if you’ve paid more than you owed, then you would get a refund.
That being said, if you only earned $30K, it’s unlikely you would have been making advance payments to the CRA.
Hey Barry,
Thanks for the quick response! I have a GST number and made 30k by freelancing and also have a full-time job. I compiled all my freelance earrings and inputted it into Simple Tax and it shows that I owe around $5k in taxes. Just wondering if I would get refunded or is it just a regular payment to the CRA.
Hi Helen,
If after filing your tax return and it shows that you owe $5K, then that’s what you owe. You would not get that refunded as it’s the tax you owe on your freelance income.
Hi, Barry.
Thanks for a great article, still relevant this year.
My daughter had a number of different jobs as an instructor last year that just paid cash and one that produced a t4. She made up one t2125 for her Canadian work but she also worked (here, at home) teaching esl online and was paid in cash deposits from China. No tax was deducted there. Since there is no Canadian company or address, should this income go on line 104?
My other question is, is the $30,000 threshold for GST number based on total income or just self-employed income? Would she combine her line 104 totals with line 135 totals, if so? Would that be for next year, as is the case with installment payments? She will not have this income next year, btw.
We’ve really wrestled with where to put this income.
P.B. Edwards,
Note that I’m not an accountant. I would put the teaching online income as part of the t2125 income. As for the GST/HST number, that only applies to making $30K in freelance income so it would not apply to income where she earns a T4 (T4A is different) or investment income.
Thanks for the quick reply!
However, the income from china was from a different employer, so it shouldn’t really go on that one, though I suppose it would make things easier since it would get the reporting component out of the way, even if it was wrong. and theT2125 forms ask for a business address in Canada. That’s why we thought the China income would go on 104.
Alternatively, could she make up a T2125 and put in her own address? or just use 104?
P. B., Edwards,
If I recall correctly, there is an area where you can report foreign income, but I don’t recall where it is as my accountant takes care of that for me. You should really seek the advice of an accountant. Sorry I couldn’t have been of more help.
Hey Barry,
Thank you for this! I was so close to going to H&R when I found this. I’m a newcomer in Canada. I entered last year as a Permanent Resident in June. I worked as a freelancer all of last year till I got a Canadian source of income this year. What would the last date be for me to file? And are there any other things I should keep in mind?
Thank you again!
Hi Shreya,
You need to file by April 30th, 2019. It’s pretty straightforward when you file your taxes, just be sure to claim any relevant expenses.
Hi Barry, I am a self employed graphic designer (a sole proprietor) working from home. I filed my 2018 taxes and paid what tax amount that I owed for that year. I did not take a wage from the income that I made in 2018. Now in 2019 I want to withdraw some of that money that I have in my business account. Are there any tax implications for that or is it considered after tax dollars? Cheers. Ray
Ray,
I’m not as familiar with business taxes so I really don’t have an answer for you, sorry!
Hey Barry,
I am a soon to be graduated international student and going to be working full-time as a web developer this month. There is a website project I worked on with a client as part of my program and she asks me if I can keep maintaining the website as a side job. I am wondering there is any legal restrictions to this, and if not is it enough that I invoice her under my name and do my taxes accordingly? Thanks
Hi Hakan,
I don’t believe there are any legal restrictions, just remember to set aside some of your freelance income for taxes.
Hi Barry
I will be going to BC Services for some advice also but wanted to ask you too in case you might be able to guide me too.
I am in BC Canada on a two year working visa. I am freelancing as a photographer and selling my photo prints. I certainly make under the 30k a year and this is my sole income.
I understand I do not need to register my business.
I definitely want to do the right thing and claim my earnings at the end of the tax year. So until then do I just keep all my receipts and track all expenses and sales? And if I want to I can also claim expenses related to my business (such as software subscriptions, camera services, camera equipment, fedex charges etc).
Is there anything else I should be aware of or doing?
Thankyou so much,
Maree
Hi Barry,
I landed a job as a freelance developer before I came back here in Canada. I worked for a US company for almost 2 years now and haven’t filed a tax since I returned last Feb 2019. While I was out of the country, I worked for the same company. How am I going to file a tax?
Hey RJ,
You should seek the advice of an accountant as they can get you all sorted out.
Hi Barry,
I’m making roughly 300$ a week from a US-based company through PayPal. I was going to claim it as freelance, and it’ll be under 15,000 this year as I also have a full-time job.
When you say to put aside 25%, is that just a precaution? i’m curious because a) that’s a lot of tax to pay on less than 30k and b) do you think it would go toward my tax bracket with my job?
Would it then be beneficial to “pay myself” minimum wage out of that money and claim the rest after writing off other expenses?
Cameron,
Any income you make is taxed at your marginal tax bracket. So let’s say your full-time income is $50K and you earned $15K in freelance income, you’d be taxed at your marginal tax bracket based on $65k income.
Federal tax rates for 2019
15% on the first $47,630 of taxable income, plus
20.5% on the next $47,629 of taxable income (on the portion of taxable income over 47,630 up to $95,259), plus
26% on the next $52,408 of taxable income (on the portion of taxable income over $95,259 up to $147,667), plus
29% on the next $62,704 of taxable income (on the portion of taxable income over 147,667 up to $210,371), plus
33% of taxable income over $210,371
You also need to factor in provincial tax rates. For reference, here’s what you’d pay in Ontario.
5.05% on the first $43,906 of taxable income, +
9.15% on the next $43,907, +
11.16% on the next $62,187, +
12.16% on the next $70,000, +
13.16 % on the amount over $220,000
https://www.canada.ca/en/revenue-agency/services/tax/individuals/frequently-asked-questions-individuals/canadian-income-tax-rates-individuals-current-previous-years.html
Hello,
I just moved to Toronto as a Permanent Resident and received an offer letter to work as an Independent Contractor.
Do I need to make any registration, payment or insurance before sign in the company contract?
Additionally, I am supposed to work 40hours a week for $17.50/hour.
It’s all new for me all these regulations. I would appreciate any information about it.
Thank you in advance.
Mara,
This article will give you a better idea of what’s the difference between employees and independent contractors.
https://www.canadaemploymenthumanrightslaw.com/2018/07/employee-independent-contractor-effect-bill-148/
You don’t need to register for HST until you make at least $30K.
Thanks very much for this super helpful article, Barry.
I’m sure you answered this questions somewhere above but there are SOOO many questions so I thought I’d try my luck and ask: I just started freelancing (graphic design) in BC (I’m a permanent resident) and if I got it right, unless I make more than $30k per year, I don’t need to worry about GST/PST? So when sending out an invoice, I just charge them the agreed rate and do NOT ad gst/pst and just take 25% aside of what I make to pay my taxes each year?
Thanks again.
Pavla
Pavla,
Correct, as long as you don’t hit the $30K in freelance income, you don’t need to register for GST/HST. The 25% to put aside for taxes is just a suggestion. If you’re in a higher tax bracket, you need to put aside more.
E.g. if you make say $50K from a full time job + $25K from freelance, you’ll want to set aside more for taxes.
Thanks so much, Barry… I did not know that. I do have a full-time job that pays exactly that. I don’t think I will make $25k from freelancing though. I’d say it’s going to be up to $15. When does it start to be more than 25%? Sounds like I will have to give a third of what I make (freelancing) away… not fun…
Pavla,
Even though you pay more tax as you earn more income, you’ll always end up ahead.
Paying more tax is arguably a good thing since it just means you’re making more money.
For your marginal tax rate, check the government of Canada website.
https://www.canada.ca/en/revenue-agency/services/tax/individuals/frequently-asked-questions-individuals/canadian-income-tax-rates-individuals-current-previous-years.html
Hi i am working as a teacher for chineese people and for a company based in chineese. I have student visa. My income is about 1000 dollars per month. Now i am wondering if i have to pay tax or i have to report my income? I am in quebec. If so, in which form do i have to report my taxes?
Amir,
If you’re working, you should be filing taxes. The 2125 form is what you want
But i dont have any document as a proof to give it to the government. Do i need something to present or just stating that i am working as a freelancer is enough?
I emphasize that i am paid below 30000 dollars per year
Amir,
You just need to state the income you made as a freelancer. Since you earned less than $30K a year, you wouldn’t have to register for HST/GST.
Hello Barry, I live in Canada with student Visa. According to the law, I can work 20 hours per week and I have SIN number as well. The thing is that I work as a teacher online and the company is based in Hong kong. I earn less than $30K a year and I get paid through my bank account in my home country.
I came across this link —> https://www.canada.ca/en/immigration-refugees-citizenship/corporate/publications-manuals/operational-bulletins-manuals/temporary-residents/foreign-workers/what-is-work.html
Here it says ‘self-employment where the work to be done would have no real impact on the labour market, nor really provide an opportunity for Canadians. Examples include a U.S. farmer crossing the border to work on fields that he owns, or a miner coming to work on his own claim;’ ‘An activity which does not really ‘take away’ from opportunities for Canadians or permanent residents to gain employment or experience in the workplace is not “work” for the purposes of the definition.’
In this case, it seems like my freelancing job doesn’t fall into category of ‘work’ and I’d like to know if I still have to state income in Canada or if i can just do tax in my home country. And if I have to state income, 20 hours working rules apply to the free lancing job too?
Scarlett,
To be honest, that goes beyond my expertise. You should probably seek the advice of an accountant.
Thank you for your comment!
Hi Barry,
Working as as a freelancer I earn less than $30K a year ( about $10K) and I live with my parents. I submitted my T4 to my parents accountant and had a small return this year. Should I consider getting more returns? Can I claim renting of my parents property as well?
Julia,
If you’re paying rent to your parents, you can claim a portion of your “office” on taxes. So let’s say you’re paying $1,000 in rent and 20% of your space is used for work purposes, you could claim $200.
Thanks very much Barry. It’s actually my son. I came across your wonderful website yesterday.I ‘d wish I found your website earlier. (Better managing of our RRSP is our priority after the reading your information).
Hey Julia,
Your son would also be able to claim things like his internet and cell phone bill assuming he pays for it himself. Thanks for the feedback on my website, it’s never too late to make a change =D.
Hi Barry,
I recently moved to Canada. I have permanent residence here. I worked in the US as a freelance in the translation industry for many years. The way it worked there was that I contact the company, they set the hourly compensation, they send me the projects remotely, after I deliver the completed project, they create the PO that I approve in the system that creates an invoice for the specific project. They collect all the info about the payments they issue to me throughout the year and in January they send me a 1099MISC form with “Nonemployee compensation”. With this form I can file my personal taxes. I am considered a sole proprietor by IRS but no registration of a business or else is needed. That was it. Now, I want to start working as a freelance in Canada the same way I was doing in the US. Does it work the same way? I try to get info but it is still confusing. Thank you.
Francesca,
Note that I’m not an accountant but the CRA basically just wants you to report any income you’re earning. I don’t believe the CRA needs a formal form from a client in the U.S., you just need to report the amount you’ve earned after the exchange rate (assuming you’re paid in USD). If you make above $30K in a year, you need to register HST and then charge that moving forward but that only applies to Canadian clients. Even if your income is 100% from the U.S., you still need to register for HST after you earn $30K HST even though you’re not charging your U.S. client.
Thank you for your prompt reply. So, is it correct to say that I can start working anytime as a freelance using my name without going through the process of registering a “business”? Then, keep track of what I earn and file the taxes next year (assuming I don’t make more than $30k that requires registering for HST)? THX.
Francesca,
You don’t need to register as a business to work freelance in Canada. Yes, just keep track of what you make and report accordingly.
Hi Barry
My son is on ODSP and he is living with me. Should he pay me rent in order to keep his payment from ODSP?
Hi Barry
You mentioned Federal income: 15% on the first $47,630 of taxable income
and provincial: 5.05% on the first $43,906 of taxable income,
Does this mean the people who make less than $47,630 or $43,906 .. they don’t pay tax
I got a job online with a company from outside Canada. They deposit my salary into my bank account. Is this income considered as main income or free lance.
Moni,
I’m not familiar with ODSP payments so I can’t comment on any tax breaks when paying rent. That said, if you charge him rent, you’d have to claim it as income so you’d likely end up paying more tax than what he would save. For income under $47,630, you’re simply taxed at a lower rate. No one pays no tax, but depending on your tax bracket and circumstances, you may not owe any taxes. Freelance income refers to any income where you’re not an employee.
got a job online with a company from outside Canada. They deposit my salary into my bank account. Is this income considered as main income or free lance.
In this case is it better to register myself as self employed or as sole proprietorship
It’s really up to you, but creating a sole proprietorship will likely mean more work for you. Please note that I’m not an accountant. You should seek the advice of one if you have more detailed questions.
I just want to say thank you so much for answering every question that pops up here Barry Choi as I have found the answers I was looking for here. You are a life saver!
[…] to be enterprise entities by the Canadian Revenue Agency (CRA), because of which they may must file their taxes utilizing completely different kinds. Lastly, the legislation requires buyers to maintain an […]
I have a small business for IT and I have a separate business account for it. I may teach part time IT course at a college. College told me that they can not issue the cheque in my business name and it has to be in my name. Can I consider this revenue as part of my business rather than my personal income?
Alan,
You’d have to check with an accountant as I’m not familiar with that scenario.
Hello, I did independent contracting for a month in January 2019 only earned $476 from it. Other than that, I was always a normal employed person, not an independent contractor. Do I file income as independent contractor? Do I even need to file income below $500, are there penalties for that? Technically it was invoiced, so it would be back-traceable?
BE,
Just fill out the T2125 form next year and report your income. I personally prefer to be honest about all income and report everything to the CRA.
Incredible post, Barry.
I had always thought that in order to claim expenses one must register as a business, but from your post, I just realized it’s not true. I’m employed full-time but also want to start some freelance work. I need to purchase a laptop in order to do the freelance work. So does that mean I’m able to write-off the laptop expense under my individual tax return – self-employment section? And I don’t need to register any business for it? Do you know if expense credits are weighted differently with incorporated and freelancers.
Also, I heard expenses for incorporated must be incurred after the business start date. Is this not the same for freelancers? Since as a freelancer, I don’t have any official start date.
R.H.,
Yes, you can write off your laptop but note that it’s considered a depreciating asset so you can’t write off the entire amount in one year if I recall correctly.
You do not need to register as a business to claim business expenses. Taxes are done a bit differently for incorporated companies. You can’t claim any business expenses in your incorporated business that doesn’t exist yet. As a freelancer, you can claim expenses right away. Of course, you’ll also have to report all income.
Hi, i’m a freelancer living in Québec, i took a job this year with and income of about 65k from US company and i use a freelancer to help me that live in Europe. All amount are deposit direct to me and i pay his share (17k) to the freelancer. What paper do i need to not be taxed on the 65k revenue i get from this job?
Thanks
Jimmy,
If you’re working for a company based in the U.S., you should have filled out a W8-Ben for them so they don’t withhold any taxes. You would still need to register for a GST number since you make more than $30K, but you wouldn’t charge them tax since they’re based in the U.S.
Hey Barry!
I’m so happy I found this site!
I recently landed an Online Service Contract for a Spanish Company while I was travelling in Europe.
Now that it is time to invoice I have been told that I must put a 24% withholding tax (WHT) on my invoice as I am a non resident.
My confusion is that I live in Canada,I am consider a resident of Canada, I even requested a certificate of residency from the CRA just to be certain for the this current tax year which states that I am. I am filing my taxes to the CRA so I don’t understand why I would have to lose 24% of my monthly earning and who that money would go too.
Do you have any knowledge of this WHT ?
I feel like there is a miscommunication as to where I reside and who I am claiming income tax too.
Glenda,
You’d have to contact an accountant about this as it goes well beyond my expertise. That said, Canada and Spain have a deal in place to avoid double taxation.
https://www.fin.gc.ca/treaties-conventions/notices/spain-espagne-eng.asp
Thanks Barry for the quick reply and info, I am going to the see a tax lawyer regarding this treaty and inquiry about double taxation and withholding tax
Hello Barry,
I am so thankfull for sharing your knowledge with us. You should charge us, you know?! 🙂
I am about to reach the $30 000 threshold as an independent contractor for a Saint Vincent and Grenadine company, working for a US based company. I understand that I do not charge GST/QST the foreign company I am working for, however am I suppose to pay GST/QST even though I am not collecting it?
Thank you so much
Hi Lizi,
You would have to register for a GST/QST number as soon as you make $30,000Kin freelance income in a year.
https://www.revenuquebec.ca/en/businesses/consumption-taxes/gsthst-and-qst/basic-rules-for-applying-the-gsthst-and-qst/who-must-register-for-the-gsthst-and-qst/
Since the company you’re working for is U.S. based, you don’t charge them tax since they’re zero rated. When you file your taxes, there will be a section where you can say your clients are U.S. which is why you haven’t collected GST / QST. You do not pay GST/QST since you’re not collecting it from that client.
Hello Barry,
Thank you very much for your response. Very helpful!
Hey Barry,
I am working from my home in ontario and just hit the 30k threshold and have registered for a GST/HST account with the CRA.
I have a Quebec client that I will start charging 5% GST. Do I need to register with Revenu Quebec as well ? I read that they have new rules regarding QST starting this year. My business is to perform I.T services like data analysis and report development on the clients server, connecting remotely. I do not sell any software or goods.
Thanks!
Joel,
I’m pretty sure since you’re based in Ontario, you don’t need to worry about Revenu Quebec but note that I’m not an accountant.
Hello,
I’m 31 years old, Graphic Web designer and photographer. I arrived here in Toronto 8 month ago from Italy, I have an open work permit and I would like to try to work as a freelance, but I have a few questions:
I’m ok invoicing under my name and last name but I didn’t understand if I have (and when) to fill the forms for taxes declaration if I’m earning less than 30.000$ per year. I mean, if I’m not reaching that amount, am I allowed to don’t comunicate my earning to anyone and forget about forms and taxes? Or I have to declare my earning anyways?
Do I need a business consultant to work as a freelance or it is extremely easy to fill up forms for declarations?
Thank you so much!
Diego,
If you’ve made income, you need to declare it and pay taxes. It doesn’t matter how little you’ve earned, it needs to be reported. You don’t need an accountant to help you with your taxes, it’s pretty straight forward.
Hi, I’m a freelancer in Nova Scotia. Thus far, I work as an individual and just report professional income on my taxes – some expenses as outlined above.
I’ve hit a first where a client wishes me to order parts/tools necessary for a project and simply invoice them pass-through fashion (In the past I have had clients buy consumables to avoid this). How do I track this both on an invoice, as well as come tax time. I will not be charging any mark up/profit, simply charging them exactly what I paid for the order+shipping. I will not retain any of the parts, ie. they will be 100% owned, used by the project. If it matters to an answer, I do have an HST registration.
Dave,
This is outside my specialty, you’d have to consult an accountant or someone who knows more than I do.
Hello Barry,
I have a full time job and do visual art part time. Both are different industries. I’m gaining some interest in people wanting to purchase my art work. Hence, I guess I’d have to report that as a freelance visual artist. How does separating the two work?, as I’m already getting taxed on my full time regular job. Also, if I’m working out of my home studio (I have set up a working area, all my supplies, artwork etc. are stored in a working area; clients are able to come in and review original pieces), in this case, am I able to expense my rent?
Thank you for your help on this!
Nadiya,
Income from your art is just freelance income. You would have to pay taxes on that income so just set aside about 25% (more if you’re already in a higher tax bracket) for taxes as you’ll have to pay it eventually.
You can basically deduct rent and utilities based on a percentage of your home. Let’s say your studio is 25% of your home, you would be able to deduct 25% of your rent and utilities. You should be able to claim all of your supplies.
Hi there – if I run a small renovation business and do a job that required me to purchase 500 in materials (e.g. lumber) and 500 for labour, is it okay to receipt just for the labour and give the material receipts to the customer?
Todd,
From what I understand that’s fine as all you did was buy something on behalf of your customer. You obviously couldn’t both claim it but you’re not doing that so you’re good.
From a CRA perspective, should I be claiming $1000 income or is just the $500 okay?
Todd,
I’m assuming $500 but note that I’m not an accountant.
If I bill in December2019 for services that I will provide in January – June 2020, does it get claimed on my 2019 or 2020 tax returns?
Tiz,
Technically you report under your 2020 return but I don’t think it would make a huge difference if you reported in 2019 when you’re paid.
Hi Barry,
I’m a remote freelancer and was living abroad (while working digitally) for a few months in 2019. My home is still based in Ontario. Am I allowed to claim my living costs while abroad as “rent” under my self-employment expenses? Or does rent only count if it’s in your home province?
Thanks!
SJ,
I’m not an accountant but I don’t living costs while abroad counts. You may want to seek the opinion from an accountant.
Thanks, Barry. I guess it’s safe to say though that I do have to report all of my freelancing income for the year, regardless of where I was doing it in the world, right? Because it’s not like the job was based in another country. I do remote work for mainly Canadian clients. Thanks again! – SJ
SJ,
Correct, you need to report all your income regardless of where it was coming from.
Hi Barry,
I found your article very useful as I moved to Canada from the UK and began working on a self-employed basis and wanted to make sure I was doing everything by the book. So thank you. However, I do just want to add the below to help anyone else who only earns overseas income as I spent quite a lot of time on the phone to CRA today and eventually got passed to a senior member of the team to assure me that GST/HST registration wasn’t needed even though I had crossed the 30K threshold.
FOR THOSE WITH ONLY INTERNATIONAL INCOME READ BELOW.
Regarding this line: Canadians with clients outside of Canada; ‘Even if all of your clients are outside of Canada, you still need to register for GST/HST once you hit that $30K threshold.’
I spoke to a level 2 agent at the CRA today and they informed me that this isn’t the case. They also pointed me in the direction of a publication on the CRA website which also confirms this (document number rc4022). Quote below:
‘Generally, you cannot register for the GST/HST if your business provides only exempt supplies; one exception is if you are a listed financial institution resident in Canada.’
I am a self-employed IT Professional that only has clients in Europe so I was told not to register and just submit my individual tax return as normal.
Hello! I am a freelance writer for Upwork. I am wondering if I qualify to deduct home expenses as I work from home doing this. I thought that if i am working from home in any capacity that I can claim a certain amount of my home expenses such as property tax, utilities, and internet. I actually don’t make that much money freelancing(gas money or maybe a little more every month) but I wanted to get clarification on whether this is allowed or if there is a certain amount I have to make every year before I can claim expenses.
Also, do i have to register as a business or can this just be claimed as self employment? Everything is done online so there are really no physical expenses such as gas, meals, or office supplies.
I do have a regular full time day job that I file taxes on as expected each year as well.
Thank you in advance!
Hi Toni,
Yes you can claim your expenses from your side income. There’s no need to register a business. You’d only have to register for an HST number if you make more than $30K in a calendar year.
Wow that was fast lol!! Thank you so much. I’m just getting back into the writing gig, so it won’t be claimed this year, I’ll be claiming for next year so I will start printing and keeping copies of the bills for the expenses I’ll be claiming. This is something I’ve always wanted to do and really commit to, in the hopes that it will be a good source of side income in the coming years(I’m hoping to retire in five years, so as you know any additional income I can manage to get will be very helpful). Knowing that I can claim some expenses from working from home is good news. 🙂
Toni,
Writing started as a side job for me but I ended up getting so much work that I quit my day job. Best of luck!
Hello Toni,
I am a newcomer to Canada (from the Netherlands) and I live temporarily in BC, Canada. I do posses a work permit (valid for 2 years). I have the chance to work as a freelance interpreter for a company. So i am looking into the ‘tax rules’ but it’s not very simple. The company I would work for invoice their clients and they decide how much I make. It is a work-from-home-job (the company is based in Manitoba) and I would work in on-call shifts. As I understand from your article I do not need to register as a business since I would be self-employed, correct? Are there things I overlook here, since I work from another province then the company is based in, and since I don’t invoice the clients myself, do other rules apply when it comes to tax return? Thank you!
T,
It doesn’t matter what province they’re based in. It would only matter if you earn more than $30K a year as you would then need to register a gst/hst number and charge for your home province. There’s no need to register yourself as a company, you’re simply a freelancer.
Hello,
I have a question about invoicing and payments across years (in Canada). I signed a contract for work in 2019, and was paid half as an advance in 2019, and the remainder upon invoicing in 2020. Should I pay the taxes in the years I received the payments, or just in the year I invoiced (2020).
Thanks very much.
Ramon,
For taxes, you’re supposed to normally claim your income in the year you performed the work. That said, some people just claim the income in the year they’re paid and it’s rarely an issue.
Hi Barry,
Thanks for this article and actively replying to everyone. I have a question I’m hoping you can help me with. Most of 2019 I worked as a freelancer for Rogers from April-November and to get paid I would invoice them every 2 weeks. Now that we’re approaching Tax season. My GST/HST Deadline is March 31st.
To pay my GST/HST do I just total all the HST I charged them on my invoice from April-November? And that sum is what I have to pay back to the CRA? And what about Input Tax Credits how do I deduct those credits from my GST payment and what are some examples of elegible ITCs I can use? Would my Adobe Creative Cloud membership HST work?
Thanks a lot!
Patrick,
You would pay GST/HST collected minus ITCs. Once you’ve finished your taxes, it should tell you.
So let’s say you spent $1,000 on meals which would work out to $130 in HST. Since you can claim 50% of meals on your taxes, you could claim $65 in ITCs for the purpose of HST.
https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/gst-hst-businesses/complete-file-input-tax-credit.html
Thanks for the quick response!
Oh okay! so ITCs and your general deductions are the same? My situation is kinda weird. I worked freelance for 1 specific company and I did not work from home. I worked at their office in Toronto. So I can’t really deduct a lot of expenses like home office, or business related meals & entertainment. I want to use my vehicle expense (gas,oil,kms) but i didn’t keep track of those receipts stupidly.. I also can’t use my GO Train and TTC travel cause the transit tax credit no longer exists. The things that I can really use are My advertising (business cards, website), cellphone bill, Adobe membership, Health Insurance? and my RRSP contribution. Would those be enough to bring down my total amount owing?
Patrick,
Any deduction brings down the amount owing so it all helps IMO.
This is true, thanks for the advice! really appreciate it. I usually file my taxes with Softron tax so they’ll probably know what to do. Thanks again.
Hello Barry,
I would like to thank you very much for your informative article and very useful questions and answers.
For a number of years I have done Casual freelance jobs (tutoring, …) and my income has been in the range of $ 6000 to $ 8000 which I have always received in cash. I do not have rent or other related expenses and it has not been claimed on my tax.
My clients have Never asked for invoice …and I have Never needed to keep a record as the amount is very low and Occasional. I wonder will CRA asks for proof of payment and if so , how should I handle the situation as I have always received in cash ?!!!
I have another important question but I ask it separately to avoid Confusion.
Thanks for your kind help
Hey Layla,
I don’t think the CRA would ask for proof of payment, but you do want to keep some kind of record of your income in the event your audited. It’s highly unlikely that you would be audited, but it’s always best to have some records.
Hello Barry,
Thank you very much for your prompt reply.. As I have explained in my second question, I was ” Reviewed ” last year (even with so Low income of 8000 ) being asked for proof of payment by employer… and when i wrote back explaining that my payments have been in cash, they did Not Accept cash as Income under “other employment income ” category …!!!
They did Not refund Any taxes to me (which normally they should with so low income .) and that made me to seek your advise as what to do on Receiving cash,… as I will file under Self employed from now on !
Of course I can keep record based on your suggestion but I cannot provide proof as they are in cash !!
I wonder by your good knowledge of taxes , Could filing under ” self employment ” category make a difference and allows us to receive cash (I mean No need for proof of payment ) versus ” other Employment income” Category which they asked for proof of payment ?!!!
Thank you and God bless you
Layla,
I’m not a tax expert, but I suspect that they didn’t refund you because you’ve listed your freelance income as other employment income when it should be self-employed income.
What you would need to do is make a change to your returns for the affected years – https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/change-your-return.html
I don’t know for sure if they would allow cash as an acceptable proof of payment, but at least you’d be filing things correctly.
Hello again,
This is my second question and i have to elaborate on it as I have filed my taxes under a ” Wrong category ” for 6 years and I need to see what is your advise !!
For a number of years, a ” Chartered account ” was filing my taxes under self employed category for the Above mentioned income ($6000 to 8000) … until 6 years ago he Stopped doing it due his sickness and I NEVER heard back from him. Therefore, I started to do my taxes using Ufile for the year 2013 by the help of my friend and the following years by myself.
Having very little tax knowledge and having full trust in him as a Chartered accountant, I filled out my taxes based on the last model that had filed my taxes which was ” Other employment income ” Category instead of ” Self-employed ” and I filed my taxes from 2013 to 2018 based on this Category WITHOUT knowing that this category is Very different from ” Self Employed ” category.!!
Last year (2018 tax year) , I received a letter from CRA that I am being reviewed and they were asking for the employer … and proof of payments,… Regarding “Other employment income ” Category which at that time I started to understand my mistake Partially but Not fully !!
Just Recently after reading the question and answer section of your article, I Learned that I have filed my taxes under a Wrong category All these years and that Category is Considered ” Employment” and Not ” Self employed ” !!
In my letter to CRA regarding 2018, I mentioned about my cash income and working for myself but of course they did not change the category by themselves and I did Not receive any tax refund with my income of $ 8200 being filed under a Wrong category !!
Recently I Reviewed my tax years before 2012 where it was filed under Self employed and I had some Tax refund plus payment for CPP which I have missed its payment for all these years
Now, I wonder what would be your suggestion renegading my mistake for all these years ?!! Do you suggest to use the ” Change my Return ” of CRA and amend it using the right category of Self Employed ” for ” as many years” as it is possible on Ufile (I doubt going back 6 years would be possible ) OR just Leave it as it is and doing it right from now on ?!!
Having an irrational fear of taxes , I am also concerned about Changing ” the category ” for those years with respect to CRA as there is No Place on the Tax pages being able to explain what i explained here and for this reason , i do Not want Any Misunderstanding and complication on their part !!!
Please forgive me for taking your time and giving so much explanation but I need to clarify the situation. As I mentioned before, I have always received in cash with No invoice.
Again thank you very much and I look forward to hearing from you.
Kind Regards,
Layla
Hello Barry,
Thank you very much for your kind reply and please accept my apology to write back after a week as I was extremely busy with a number of issues and just NOW I saw your response.
I am aware that I did Not get Any refund filing under a WRONG category …and that lead to my understanding of WRONG filing for so many years….
However, I wonder does your response also include this LONG text of March 2, 2020 at 5:56 pm because from your response, I did Not understand if I need to go back and Refile my taxes from 2013 to 2018 under the “Self employment ” category or just I need to To Refile the reviewed year OF 2018 ?!! I ask because of the following concerns :
1- Refiling for so Many years (6 years ) wouldn’t cause Any Misunderstanding for CRA as ” HOW come she did not know what was she doing for so many years ” ?!!! Which as I explained, I really did not know I was filing under a Wrong category and followed a WRONG Model ….considering the fact that I was Randomly selected for Review in 2018, I am scared of Misunderstanding… !!
2- By looking at the link that you kindly sent me which states ( An EFILE service provider can change your T1 return online for the 2019, 2018, 2017, and 2016 tax years with EFILE certified software.), I can Refile Electronically for the years 2016 to 2018 using Ufile….
Now if I need to go further back to 2013, is there a way to be done and is it in my benefit to REFILE FOR so Many years back ?!!! Again >!! I should reemphasize that my MAIN concern is MISUNDERSTANDING on CRA part !!
3- I have used Ufile since 2013 but recently I heard about ” SimpleTax” SOFTWARE. . Doe it have any privilege over UFILE or BOTH ARE almost the same AND I should continue using Ufile ?!!
I am aware that you are Not an accountant however, I would be grateful if you PLEASE kindly give me a CLEAR answer to all my concerns with respect to your years of experience and knowledge of taxes.
Again Thank you very much for this very USEFUL Blog and also for taking your time to read my questions and respond to them.
Kind Regards
Layla,
What you’re asking goes way beyond my knowledge of taxes. This is likely just something minor and you’re worrying for no real reason. Speak to an accountant who can help you get everything sorted.
Barry,
I am sorry if I bothered you and asked Irrelevant questions regarding your knowledge.
I asked because I am Overseas for unknown period of time due to family emergency issues and do not have access to a Canadian accountant … and I thought you might know.
Anyhow my apology, Never mind
Hey, I’m a Canadian Citizen (non-resident) and will be teaching online English (Remotely). Will I need to file income taxes for Canada? I am a permanent resident in Brazil (I plan to stay long term).
Neeks,
It depends on your status – https://www.canada.ca/en/revenue-agency/services/tax/international-non-residents/individuals-leaving-entering-canada-non-residents/non-residents-canada.html
Hi!
I was freelancing from 2016 towards the end of 2018. (I got a full-time job late 2018 that required me to stop freelancing). This article helped a lot come tax season throughout those years! So thank you 🙂
Each tax year that I was still freelancing, I claimed my income and expenses. In 2019, I still actively paid for expenses that I normally would claim under being self-employed (ie. phone bill, internet, etc…) Sinec I didn’t receive any income from freelancing in 2019, do I still need to claim my expenses this tax season?
Many Thanks!
Daisy,
No need to claim expenses if you’re not freelancing.
Hi,
I am a full time student and did some resume writing last year and made $5600, all in cash as I was writing during my free time for students. How can I report it to CRA? I don’t have any business number or any other registered account with CRA. I just did it in my free time and made some money.
Please let me know.
Manav,
You just fill out the T2125 when doing your taxes.
Thanks for the info, Barry!
Unfortunately I didn’t know about the GST/HST registration, and I made about $40k freelancing last year (I hit $30k on October 31st). At least my clients were all in the US or UK, so I don’t need to collect tax from them. Like Samantha said above, is it still necessary to register for GST/HST even if my only clients are foreign? If so, what sort of penalty should I expect for registering late?
And finally, if I do register for the GST/HST, do I file a GST/HST return in addition to my personal return? Do I wait for my GST/HST account number before I file?
Thanks!
Hi Ben,
Regardless of where your income is coming from, you need to register for GST/HST as soon as you reach $30K in freelance/self-employed income.
You do indeed file GST/HST separately from your personal taxes. The number is given right away when you register.
I advise talking to an accountant about any penalties and when you should file.
Okay, thanks. Unfortunately since I’m a temporary resident, I can only register for GST/HST by mail (I think it’s usually possible by phone too, but not these days when so much is shut down). So I hope my registration goes through quickly.
I am so amazed at your quick response to all these comments! Seriously blown away by your helpfulness! since you’re so helpful, I’ll try my luck at asking a question. I made around $300 writing blogs for a marketing company before landing my full-time job. The only documentation I have are the invoices that I emailed to the company each month. What do I do? And do I need any additional documentation?
Leah,
You would just report it under the T2125 form. You wouldn’t need any real documentation for such a small amount.
Thank you!!
With my commission income can I claim on my 2019 tax return my new IPhone i just bought on Jan 2, 2020 or do I have to wait til next year’s return
Janet,
As the purchase happened in 2020, you could only report it when you file your 2020 taxes.
Hey so i only made like $300 with my business and was paid cash, I only have invoices. what forms would i need to fill the t2125? Also whats the likely-hood that the cra asks for proof of the invoices
Adam,
Just the T2125. It’s highly unlikely the CRA would ask for proof.
Thanks so much for the reply i have a hypothetical question; lets say im a freelancer and i do services for free to get my name out there but havent actually made any money would i still qualify for cerb benfit?
No you would not.
Hi Terrence,
You should be manually logging all of your income and commissions in a spreadsheet. That income would then be declared under the T2125 when you file your taxes. You do not need a business account for this.
You must report all income. The $30K threshold is just for getting an HST number
Oh ok cool. So all I have to do is give them my 2020 spreadsheet of my commissions? Correct?
And with that, typically how much do I have to put aside for taxes? Like 20% or 25% of my yearly income?
Also since I’m using PayPal, my clients are from outside Canada. But when I get payments its automatically converts to CAD. My paypal account actually has my activity log/ transactions on there so could I just print that or do I still make a spreadsheet manually?
You only provide the CRA with your spreadsheet if you get audited. How much you put aside for taxes depends on where you’ll think you’ll fall in the income brackets. If you don’t think you’ll make more than $30K, 25% is likely enough.
You could use your activity log if you get audited, but this assumes that’s the only way you’re getting paid. If you’re getting cheques, cash or direct deposits, you should have some kind of log.
Hi.
I’m in canada on an open work permit and I’ve worked both for an employer and sold some homemade crafts, ( at farmers markets)
I’m really confused about how to pay for this income.
Any advide greatly appreciated!
Magdalena,
Your employer income would be reported with T4’s. Any income you made on the side is reported with the T2125 form. Don’t forget to deduct any expenses. If you use TurboTax Self-Employed, it pretty much walks you though the process.
Also one last question. Whether I get audited or not, Is it ok for me to give my PayPal log anyways just to show that I have made money as a freelancer?
I’m just getting some reassurance here. Sorry if im asking too many questions. By the way you are helping me alot so thank u
Last last question. So just to make sure. When filing for taxes for 2021. I give them my paypal log and whatever else tax form I get?
Also i dont think I’ll reach even close to 5K. Let alone 30K.
So what is ur best advice for me going forward so i can be safe for next year
You only provide the documentation if you get audited. Your PayPal would be good enough.
You should be logging all your income.
Since you won’t be making $30K, there’s no GST/HST to collect.
Hi Terrence,
You should be manually logging all of your income and commissions in a spreadsheet. That income would then be declared under the T2125 when you file your taxes. You do not need a business account for this.
You must report all income. The $30K threshold is just for getting an HST number
Oh ok cool. So all I have to do is give them my 2020 spreadsheet of my commissions? Correct?
And with that, typically how much do I have to put aside for taxes? Like 20% or 25% of my yearly income?
Also since I’m using PayPal, my clients are from outside Canada. But when I get payments its automatically converts to CAD. My paypal account actually has my activity log/ transactions on there so could I just print that or do I still make a spreadsheet manually?
You only provide the CRA with your spreadsheet if you get audited. How much you put aside for taxes depends on where you’ll think you’ll fall in the income brackets. If you don’t think you’ll make more than $30K, 25% is likely enough.
You could use your activity log if you get audited, but this assumes that’s the only way you’re getting paid. If you’re getting cheques, cash or direct deposits, you should have some kind of log.
Hi.
I’m in canada on an open work permit and I’ve worked both for an employer and sold some homemade crafts, ( at farmers markets)
I’m really confused about how to pay for this income.
Any advide greatly appreciated!
Magdalena,
Your employer income would be reported with T4’s. Any income you made on the side is reported with the T2125 form. Don’t forget to deduct any expenses. If you use TurboTax Self-Employed, it pretty much walks you though the process.
Also one last question. Whether I get audited or not, Is it ok for me to give my PayPal log anyways just to show that I have made money as a freelancer?
I’m just getting some reassurance here. Sorry if im asking too many questions. By the way you are helping me alot so thank u
Last last question. So just to make sure. When filing for taxes for 2021. I give them my paypal log and whatever else tax form I get?
Also i dont think I’ll reach even close to 5K. Let alone 30K.
So what is ur best advice for me going forward so i can be safe for next year
You only provide the documentation if you get audited. Your PayPal would be good enough.
You should be logging all your income.
Since you won’t be making $30K, there’s no GST/HST to collect.
So how can I avoid getting audited?
There’s no formula. If you’re reporting your income and taxes, the CRA likely won’t care. Now if you’re saying you only made $5K, but you’re claiming $20K in business expenses, you’ll likely get audited.
Oh ok that make sense. In my situation I dont use the money for any business expenses. I make money by making graphic work for people and that’s it. So do I just report that and that’s it?
Hi,
Thanks for your answers.
I’m a freelance writer-editor with so many clients. One new client, a non-profit, is not paying HST while others are. paying.
All my clients and I are based in Ontario. I pay to CRA the HST that I’ve been collecting from all my clients. How will this new client affect how I file next year?
Thank you so much.
Jaelen,
You only need to report the tax you’ve collected. Since the charity is HST exempt, there’s nothing to report for them.
Thank you for your reply. I’m not sure if they’re tax-exempt.
I have read your post. Great post!
Hi. I want to start selling masks. I have a full time job. I want to sew the masks and sell them. Does this qualifies as self-employment? I pay mortgage. I’ll be sewing in my home, on the weekend. I have the receipt for the fabric, scissors and thread I’m using – are those eligible expenses? Do I charge gst/hst? I believe I’ll make way less than 30k with the masks, but my full time job is over 30k.
Please, help me understand it.
I think your post is very good.
Thanks.
Angel,
The GST/HST registration only applies if you make $30,000 in freelance income. Your regular income does not apply. Yes, selling masks count as income so any income minus your expenses need to be reported. Everything you listed counts as eligible expenses.
Can I consider a percentage of the mortgage (as I don’t pay rent)? Like I take the percentage of the room where I sew? As this is not only an intellectual work, I have to pay any other tax related to the masks?
Yes, you would claim it under office space. If 10% of your home is used as your office, you could claim 10% of your mortgage as well as 10% of utilities. You only pay income tax.
Thank so much!
Hi,
I left Canada on 2017 and did not back yet. I live in a country which Canada does not have tax treaty with.
I had income from Italy, but I deposited into my Canadian bank account.
As I am not residense of Canada, am I freelance? How would be my tax for 2019?
Thank you,
Shany,
Taxes are typically based on your country of residence so you would need to refer to the local tax laws.
Hi Barry
I’m a freelancer spray registered for GST/HST making over 30k a year and my business has grown to the point where I may need to subcontract work to other freelancers. How fires this affect the way I file my income tax? I’ve never hired on help before and it would be other freelancers, not actual employees. I’ve looked all over to find information about this but can’t seem to. Thanks in advance for your help.
Amy,
When you file your taxes, there’s a section that asks you if you have any subcontractors and how much you paid out. If those subcontractors charge you HST, it offsets what you’ve collected.
Hi! Is it $30,000 net or gross?
Thanks for the article, super helpful!
Gross
Hey Barry!
So if I do freelance commissions, can I claim any tools that I need to purchase for my work?
Hi Abby,
You sure can.
Thanks Barry!
I’m a bit lost on which parts of the T2125 form I need to fill out as a free lancer operating under my own name. Let’s say I earn money through an Only Fans account. I don’t use my real name, and people who subscribe are invoiced through the company.
In the T2125 form, do I simply enter my own name as the business name? What about the business number, do I just leave that blank?
Furthermore, do I need to worry about the IRS (being that Only Fans is an American company) at all, since I’m operating out of my home in Canada?
Hi Tay,
You would put your own name as the business name. No business number unless you have an HST #(which you would need to if you made $30K or more from self-employment income).
You shouldn’t have to pay the IRS taxes as you’re not an employee of Only Fans. Usually U.S. companies would have Canadians fill out a W8-BEN form so there are no withholding taxes (but that’s not always the case)
I’m an illustrator based in Quebec, when invoicing a customer in Toronto do I charge them the just the 5% GST or the 13% HST?
Gideon,
You charge the rate of your province so 5%
Hi Barry,
Great article! Glad to hear I don’t have to pay GST on any US earnings!
I work under a very small CCPC (as primary consultant and only shareholder) and have just landed a freelance gig in the US. Before I sign the contract, am I opening my corporation up to any tax liabilities? As a corporation do you know what forms I fill out on the US side to not pay US taxes? If I take on the gig as a individual freelancer am I opening my personal finances up to IRS scrutiny? Which way is best? (I do hope to do through corporation to show CRA I have several clients).
Lee,
I’m not set up as a corporation, so I can’t comment too much there. That said, any U.S. company that has hired me usually has me fill out a W8-BEN form so they don’t have to withhold any taxes as I’m a foreign contractor.
Hi Barry,
wow, you really answered all the questions, I am really impressed how much private time you put into this, thank you so much for doing all this- I hope you see that you helped hundrets of people…
I am an on and off freelancer. Just started this year my business and made over $35k. My net tax owing will be over $3000, means next year I have to pay quartaly instalments. But my plan is to have a year off next year.
My question is:
a) Since I do already know that I am not working next year, is there a chance to avoid the advanced tax instalments for 2021?
b) In case I have pay them, do I just declare them at the end of 2021 and I will get them returned and the following year (2022) there will be no more tax instalments requiered?
Thanks a lot and have a great weekend,
Peter
Peter,
From what I understand, you don’t need to make the installments if you know you’re not going to work. I asked my accountant a similar question. I suspected I was going to make less one year and he told me to just pay less or skip the last two installment payments.
If you want to play it safe and pay them, yes you would declare them. The CRA would just write you a cheque and send it back since you have no tax owing. I’m guessing when you file your taxes in 2021 and it shows you don’t have any taxes over $3,000, you won’t have to worry about installments in 2022. That said, I’m not 100% sure about that since I’m not an accountant.
I’m thinking of teaching English online to children who live in China. The company is also based in China. I would be located in Canada and am a Canadian citizen.
I assume that I would file with CRA. Is this correct? Any information is welcome.
Hi Hannah,
Yes, you file taxes based on where you reside.
Hi Barry. This article and your subsequent responses have been so helpful to us all.
I am primarily a waitress but I have begun working as a model this year. I lost my job as a waitress and modelling has also been extremely affected by covid-19 . I have been filing for EI/CERB. I was able to do one job last month for $250. I could get paid for this job anywhere from 2-4 months from now.
I have not reported to EI that I am self-employed. I honestly forgot that it would affect my EI as I had only worked twice as a model before lockdown and my regular job is at a restaurant. I want to report to EI that I am self-employed, but i am concerned my eligibility for EI/cerb will be affected when I indicate that I am self-employed, even though a payment has not been received yet. should i report the $250 as money earned or should I wait for the money to be paid through my agency to report my self-employment earnings to EI? Thanks for the advice
Nia,
From what I understand, you report things when you’re paid. I’m not 100% sure, but I believe with EI, if you made $250 in that pay period, you’d just get $250 less from EI. CERB is a little different but I recall they had changed the rules so you could make some money which would offset your CERB payments.
I’m getting more into freelancing and this was such a helpful article. Thank you so much for writing this! Your writing style is clear and concise.
Hey Barry!
Thank you so much for this useful article article.
My situation is a bit different over here. I am currently living in Canada doing my post graduate under student visa. I used to work for a company before as a freelancer back then in my homeland. Recently, they contacted me again and wanted me to work for them on contract. Now, the problem is, they pay me using Crypto Currencies like bitcoin (they are registered company outside Canada). Am I allowed to work as a student and receive payments in bitcoin? How should I fill my taxes since they pay me in cryptocurrencies?
I really hope you can help me with this matter.
Thanks Barry!
Xian,
This is a question for an accountant, but these are my general thoughts.
If your student Visa allows you to work, you just need to follow those rules.
You would log your income based on the value of the cryptocurrency the day you’re paid
You would also log any changes in value if you trade or dispose of your crypto.
You would fill out the 2125 tax form
Again, please seek the advice of a professional accountant.
Hey Barry!
Thanks for the prompt reply. I will get in touch with a professional accountant and will try to give updates over here regarding this matter so others can get help 🙂
Once again, thank you Barry!
Hello, I live in Ontario and am looking at starting a translation and proofreading side hustle. I am wondering when I charge the clients will I need to collect tax right away or it’s only after registering for a GST/HST number ( after reaching the 30K revenue) that I am required to collect taxes? I am trying to understand if I have to include taxes in the price and how all that works. Sorry if my question sounds ridiculous I have no clue how it all works.
FYI: I am also thinking of registering a sole proprietorship for this freelance business.
Hi Nathalie,
You only start charging HST after you register for an HST number. You don’t need to register for HST until you earn at least $30,000 of side income.
You explain things so clearly! Thank you so much!
I have a question if you got a minute to respond. I am currently on mat leave from my full time position, and I started doing some graphic design freelance. I’m not making much, but is it possible this extra revenue will take me into the next tax bracket since I already have a full time job/income? Or does CRA views freelance income separate from my actual job and taxes it separately? Also (dumb question), just so I understand, if I make under $30K non of my freelance income will be taxed, or will it still be taxed but just at a different rate?
Lastly, do you have a suggestion for a source to look-up more info about business registration? In you article you said: “There’s no legal obligation to register your business as long as you’re invoicing under your own name.” but I want to do a bit more research about what are the pros and cons for registering and not registering your business and other legalities 🙂
THANKS AGAIN!
Hi Jenia,
So there are a few things going on with your situation. Any income you earn would reduce your E.I. parental benefits, so it’s not that advantageous to freelance when you’re on mat leave.
The income that you make from freelance is always added ontop of your regular income. So let’s say you make 65K at your regular job, and you made 20K from freelance. Your total taxable income is $80K. That could put you in a higher tax bracket, but in Canada, we’re on a marginal tax system so you only pay extra tax on the income you’ve made in the higher tax bracket. More tax just means you’re making more money, so it’s not a bad thing. You can also claim any expenses when you file your taxes.
You get taxed on ALL income over $12,069 in Canada – https://www.canada.ca/en/financial-consumer-agency/services/financial-toolkit/taxes/taxes-3/7.html
Again, your freelance income is just additional income. It gets added to any other income streams you have.
The $30K threshold is just for registering for a GST/HST number. If you make less than $30K from freelancing, you don’t need to register for a GST/HST #. Once you go over that limit, you need to get one.
Registration as a business is irrelevant. What you want to look up is if it’s worth incorporating. A quick google search should give you all the info you need. TurboTax and the government may even have resources on their websites.
Thanks for another thorough response! Wow you are so good at what you do!
Hi Barry,
first of all, thanks for all your time and afford which you put into this website/answer.
I am a self-employed Software Consultant based in Canada. My clients are all in the US. I do use the TransferWise borderless account to receive US currency (means the bank account is located in the US).
I do have some questions:
a) Do I have to exchange the USD into CAD for income tax purpose or could I just use the exchange rate from the day I received the payment and still keep the USD? (kind of a virtual exchange instead of a real exchange)
b) I do use Tangerine for my private banking and TransferWise as business account (they support CAD too). Since TransferWise does not offer a Credit Card, I do pay some bills with my private bank account. I am not incorporated ( I am sole proprietorship). I was wondering if it is a problem to use my private bank account for some stuff and put it all together at my income tax at the end of the year? The payment is only once a month and very easy to keep record of.
Thanks a lot for your thoughts on that.
Have a nice evening,
Peter
Peter,
Technically speaking, you’re supposed to use the average exchange rate for the year which is posted by the Bank of Canada at the end of year. That said, I think most people (including myself) just log what the exchange rate is the day they get paid and report that.
If you’re not incorporated, there’s no issue using your personal banking accounts for business (I do this)
Thank you so much for your answer Barry! That helps me a lot.
The type of business I am doing is sole proprietorship. I registered a business name to look better on the outside. Can I still use my personal bank account for it? Or does a business name requiere to have a business bank account? I could not find anything on CRA.
Thank you!
Peter,
It looks like you can, but it might be more work.
https://www.canada.ca/en/revenue-agency/services/tax/businesses/small-businesses-self-employed-income/setting-your-business/sole-proprietorship.html
reddit.com/r/PersonalFinanceCanada/comments/7v87p7/do_i_need_a_business_account_if_im_a_sole/
Hi Barry,
The info here is amazing. It resolved a lot of my queries. I moved to Canada about 3 years ago to pursue an MBA and recently got my 3 yr work visa after finishing my degree in January. I now work full time as well as earn income on the side. Due to the pandemic, I prefer not to physically visit a CA and most CAs wouldn’t answer my queries on the phone–asking me to come and visit them. Could you help me with the following?
My client is based out of another country. Thanks to your website, I now know that I don’t have to charge them a GST. I get paid approximately 6500CAD by them every month (varies month to month), but I get the whole work outsourced (from a third country) so I end up netting around 1500 USD. Will the GST/HST limit (of 30000CAD) apply to my “gross income” (6500/month) or my “net income” (approx. 1500 CAD/month)? I take money in my name and have not incorporated a business. As I do not have a permanent resisdenceship yet, can I even apply for GST/HST registration? Also, in this side income in any way beneficial when applying for a permanent residenceship?
Thank you for your help!
Hi Verma,
Registering for GST/HST is based on gross. As a non-resident, you’d still have to apply – https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/2-5/non-resident-registration.html
The outsourcing costs can be written off as a business expense which would reduce your taxable income.
I’m not an immigration lawyer, so I’m not sure of any benefits you would get out of this if you’re applying for permanent residence.
Hi,
A German company that I am aiming to work for (as freelance) is asking for my freelance tax ID.
I can’t seem to find what this ID would be. Every article that I read points to having to register for GST/HST to get said “tax number” but I’m not charging tax (non-Canadian client) OR going to be making over 30k. May I just give the company my SIN as I would to a normal employer? It is only for the purpose of creating an invoice.
Thank you
Hey Anna,
A quick Google search shows that freelance tax ID is something used in Germany and likely only refers to German nationals. You could confirm with them directly.
I don’t even think they would need your SIN as it would be irrelevant to them.
Looks like Canada has a tax treaty with Germany so there shouldn’t be any double taxation issues – https://www.canada.ca/en/department-finance/programs/tax-policy/tax-treaties/country/germany-agreement-1981.html
Thank you very much Barry! I didn’t think of looking for that as I was so focused on what the Canadian equivalent would be. That’s very helpful.
Hi Barry! I am following this blog since a long time and I am always so impressed that you give all people a nice and professional answer. Maybe you have some thoughts on my question too. Thank you already for answering my question!
I am an freelancer (graphics designer), I do make less than 30k at the moment and I am not collecting GST/HST. Means, I am a small supplier at the moment and not registered for GST/HST. I bought a brand new laptop this week and I paid GST/HST on it.
My questions:
a) Do I use the full amount (incl. GST/HST) to calculate CCA or do I calculate the CCA without tax?
b) Am I only able to get ITC once I am registered for GST/HST?
If all my assumptions are wrong, could you please give me an example of how it would look like in my case?
Thanks a lot and have a great weekend,
Sabrina
Sabrina,
I personally used the full amount when calculating the CCA (before I got an HST number). ITCs only apply when you have a GST/HST number. The reason I used the full amount before GST/HST registration was that after I had my HST #, I could just claim the HST as an ITC. To be honest, I’m not 100% sure right if this was the right thing to do.
Thanks Barry! Ok, that means I can not apply for ITC for the GST which I paid on my laptop, since I am not a GST/HST registrant. Correct?
That means that registering for GST/HST can be an advantage, right?
Lets assume another situation:
I purchased a brand new laptop and I am a GST/HST registrant. Does that mean I use the purchasing price from my laptop without GST to calculate the CCA?
Or do I use the full amount and claim ITC later to get GST/HST back? Similar to what you did, right?
Thanks a lot for your thoughts!
Sabrina,
Correct you can not apply ITC since you’re not GST/HST registered.
There’s no real advantage/disadvantage when applying for a GST/HST number. ANy ITC you claim just offsets the tax you’ve collected that would have been paid back regardless.
If you have a GST/HST number, you would claim the base price for CCA. Taxes would be UTC.
Hello! My question may does not fit into this forum here, but maybe you have an idea to it since I feel you are the guru 🙂
I am a self-employed (sole proprietorship) business consultant. Currently not registered for GST/HST.
I am invoicing with my personal name. I do have a website and that website has a fancy name. The website itself does not create any income, it is simply a digital CV. I use my personal bank account for everything.
I was wondering if I am now requiered to register for a business name since I have a website with a fancy name? On the other hand my invoice has my personal name on it and the website does not offer services to buy.
Can you please give me some ideas here? On the CRA website it is obvious to read that once your invoice has a different name then you are requiered to register or if I have a webshop with a fancy name, that requieres that too.
I am thankful for any thoughts!
Gabriel,
If you’re just invoicing from your own name, you don’t need to register as a business.
Hi Barry! How are you? I hope you do not mind that I add another question.
I am a freelancer. I also traded Bitcoin this year and made loss on it. The trading activities are not considered as captial gains, they are considered as business income.
I am wondering if I can offset the loss of my trades against the profit which I made in my business? (similar to captial gains and capital loss rule).
Or is it not possible to apply the loss rules when its not capital gain?
In case it is not possible, does that mean I do not even report the income loss?
Simon,
No, when it comes to investing, capital losses can only offset capital gains. You can not use it against any personal or business income.
I believe you can carry over the capital loss for a few years but I’m not 100% sure.
Thank you for your reply. I just wanted to ask a crypto related question and I saw that you closed the comment section. I do not want to be unpolite, if you do not want to answer this question, feel free to delete it – I would understand as this topic can create a lot of questions.
Bought crypto in 2018. Did nothing with it in 2018, just holding.
In 2019 I started trading Bitcoin for Bitcoin with leverage on Bybit.com. I lost a lot Bitcoin. I stopped it and kept the rest. I am holding the rest of my Bitcoin now for investment purpose.
Means, I did not exchange for FIAT or other cryptos at all, just leveraged Bitcoin for Bitcoin on a trading platform. From my understand, this does not count as a taxable event, means I do not have to report anything. Is that correct?
Thanks for clarifying that!
Simon,
I’m not sure how Bybit works so I can’t really comment on if your situation is taxable or not.
This is also a very interesting question to me! Bybit is just a margin (leverage) trading platform where you trade BTC for BTC.
The question Simon asked is quiet interesting. The CRA website explains a lot on how to treat crypto gains, but it does not talk about trades within the same crypto currency.
Barry, do you have some advise on how to report BTC to BTC trades?
Thanks a lot
Hello Barry! I hope you are doing well during those crazy times. I hope you have some ideas for my situation.
I am a self employed business consultant, located in BC.
100% of my clients are in the US (remote work). I am about to cross the 30k threshold. I registered already for GST collection.
I am aware that foreign countries are zero rated. I am now wondering about my obligations regarding the GST collection since all my work is zero rated – any advise?
Thanks a lot and have a wonderful day
Peter
Peter,
When you file your taxes, there’s a section for foreign income where you put all your income. Your domestic income would be $0. When the CRA sees this, they’ll understand why you haven’t collected any taxes even though you have a GST number.
Hi Barry,
I’m in a similar situation and just wanted to clarify. I would not have to pay any GST/HST to CRA due to the fact that 100% of my income was from foreign sources? I’m finalizing the terms of a contract and want to be sure there is no need to negotiate the additional costs.
Hi Karl,
You don’t charge GST/HST for clients outside of Canada – https://quickbooks.intuit.com/ca/resources/taxes/small-business-provincial-sales-tax
You would still have to register for an HST number when you cross $30K in income, you just wouldn’t charge any taxes. When you report your taxes, you would list your income being foreign.
Hi Barry,
Thanks so much for this super helpful article.
I hope you can help address a concern.
I’m a Canadian freelancer who’s about to start a project with a client in Germany. When invoicing, do I set up my invoice in CAD or in EURO? What’s the best possible method to get paid?
FYI – I dont have an HST registration as I haven’t hit the $30k a year threshold, and so far, my Canadian clients have been paying me through an INTERAC e-transfer (which isn’t available internationally). Also, I create my invoices and track expenses manually (I don’t use any softwares).
Thanks very much!
Hi Jane,
You invoice in whatever currency they pay you in, but for reporting purposes, you would log the Canadian equivalent. Generally speaking, PayPal is usually the easiest. If they pay in EUR, you’ll take a currency exchange hit when you convert to Canadian.
Hello!
I am self employed in that I do transcription work from home. I am not registered business, just use my SIN for invoicing. I invoice and then receive a cheque in the mail weeks later. I make less than 5000 dollars per year doing this. A couple of questions, do I calculate my income based on the date of my invoice? or the date I received the cheque? (I received payments in Jan/Feb of 2021 for invoices I sent before end of December).
T2125 is 7 pages long and I think includes many things that are not relevant to me. Do I still complete it, or just put my income in as ‘other income’ on my T1?
I have purchased a computer chair, headphones, software to do my job, and other office expenses since starting this job in January 2020. Can you give advice on how to include these? Or can I?
Thank you!
Heidi,
Yes, the T215 is necessary, but if you’re filing online, it only takes a few minutes. Technically speaking, you’re supposed to use the date the work was done when filing.
I would say the expense you’ve listed qualify as office expenses, you would just claim the portion that’s related to your job. E.g., if you use the chair 50% of the time for work, you can claim 50% of the cost.
Very helpful and timely article, Barry! It is very well laid and and simple to understand. I think I will learn a lot by going through the comments as well. Do bloggers that earn income through display ad networks like Monumetric still need to complete the T215 form?
yup, it’s side income regardless
Hello!
I am freelance transcriptionist. My work is shared with provincial and federal authorities, meaning they share the cost of payment. i.e. when I invoice, I send 1/2 my fee to the province and the other half to the feds. I did recieve a T4a (fee for services) from the province (NS) but not from the feds. Now that I’m filling out my taxes, what do I do? Just put the total I was paid in the t4a section, even though I only have ONE official t4a? If not, where do I put the other income?
It is less than $5000 for the year total; I am trying to fill out a T2125. I am confused. lol It says NOT to use the ‘other’ income section for self employed work.
Heidi,
Since you were formally working for the government, they should have sent you a T4a also. You should contact them to see if one is coming. If not, you claim that portion as regular self-employment income. When using tax software, it’s pretty straightforward. Self employment income would be one section and other is for other stuff. They don’t want you to put in the info twice.
Hi Barrie,
Would a Squarespace website + cost for domain name count as an ITC? They’re based in Ireland, charge in US dollars and don’t show any taxes charged on my invoices.
Thanks,
James
James,
ITC refers to taxes collected vs. what you need to pay.
You can claim your domain name and website space under office supplies.
Hi Barry,
I am a freelancer working as sole prop. I am expecting to get a big project this year which means I will have to pay a lot of taxes back by the beginning of next year.
I understood that if I owe more than $3000 in taxes, the government will ask to do installments for the following year.
I have two questions:
1) If I owe lets say 30k in taxes, how can I pay such a big sum? Can I just do a standard EFT or are there other ways?
2) How can I avoid installment payments for the following year? I already now that 2022 will be an “off year” for me and I want to avoid paying taxes in advance without making any income
Thanks a lot for your help 🙂 Appreciate all your afford 🙂
Peter
Hi Peter,
You pay your taxes via bill payment so you can just do it online.
If you know for sure you’re not going to make less, you can simply make smaller installment payments. Let’s say you’re assuming you’re going to owe $15K in taxes (instead of $30K), just pay $3,750 each quarter. To be honest, I’m not 100% sure if this is correct, as I’ve never dealt with such a large sum. When I expected a massive income drop, it was only $5-10K. My accountant advised me to just pay less for my final installment.
hi barrie,
i am a freelancer (sole prop) and i just crossed the 30k gross income mark. i registered for gst/hst number.
i did my tax all the time with simpletax, i was wondering if you know if simpletax also supports the gst/hst part of the income tax return or if i need to switch to a business software for that?
i know that incorporated taxes can not be done with simpletax..
thanks for all your help!
Hi Peter,
I haven’t used Simpletax, but I don’t see why it wouldn’t have an option to in HST info.
That said, TurboTax has a Self-Employed version that’s designed for freelancers which may make it easier on you to file with them in the future.
Thank you for answering all these tax questions for people. It’s amazingly kind of you! My situation is thus: In 2020 I had to report to Service Canada that I had two weeks of self-employment due to freelance services for which I earned $200 (all of this happened while I was on EI which is why I reported this employment/income to Service Canada as part of EI reporting). My issue is that I was never actually paid by the client. This is the only income I earned from self-employment in 2020 and the only self-employment job I did. How would I claim/report something like this?
Cheers for any response (I have never been on EI or claimed self-employment before so if this is a dumb question I apologize!).
Mary,
So you did the job but never got paid? Do you expect to ever get paid for the gig? If the answer is no, I wouldn’t report it. Even though you reported it to the CRA at the time as it’s what’s your supposed to do, you never got paid in the end, so there’s no income to report.
Thanks for your response. I don’t know if they will ever pay me, but EI reduced my payment for those two weeks anyways so I lost money in this situation. I may also try and give CRA a call and see what they say to confirm your advice. I want to do everything correctly as I don’t want to be audited etc, because of this discrepancy of what I reported to EI and now what I am reporting on my tax return.
Thanks again!
Hi Barry,
I am on the way to become self-employed. I decided to go as Sole-Proprietor for now. I will work in IT.
The reason why I want to become self-employed is, that I got a one year contract on the table as an independent contractor.
Now I read a lot about the implication of having only one client, the CRA could determine my business as PSB (Personal Services Business).
The thing is, I only read PSB in combination with being incorporated. Do you know if the PSB declaration can also happen as sole proprietor?
If you are incorporated and you are determined as PSB, you will lose all the benefits of being incorporated, but those benefits do even not exists as sole proprietor.
Appreciate your thoughts!
Thanks
Will
Hey Will,
I have no experience with this, so I recommend speaking with an accountant about this.
Hi Barry,
I hope you are doing well! I am following your website since a long time and I was hoping that you might have an answer for my question 🙂
I am freelancing (Sole Prop) and filling GST/HST for the first time. I was wondering if I have to transfer the collected GST/HST amount separately from income tax owing or if this is an all-together-amount (collected GST + sales tax owing) ? (I am aware that I have installments next year, but I am referring to the initial payment of the collected GST/HST).
Thanks a lot Barry!
Hi Sarah,
GST/HST payments are separate from your personal income tax.
Thanks for your feedback. If you dont mind, I have another question regarding ITC (assuming that I am a GST/HST registrant)
Lets assume I made a gross income of $100k.
I charged 5% GST which brings my total income to $105k.
I bought within the same business year a laptop for $1050.
$50 was for GST, so the laptop itself was $1000.
Would I report that in the following way:
– For CCA I would use the base amount of $1000 for the laptop (without GST)
– And as for the ITC I would reduce the $5000 (collected GST) by $50 (payed GST) and put it into the line “Gross sales, commissions, or fees (include GST/HST collected or collectible) ” ? Or is there a separate section for ITC?
I am not using any tax software right now, if I would be using TurboTax, would it guide me through all of that, like worry free? especially about the GST and ITC part?
Thanks a lot!
Hi Sarah,
My accountant deals with all that stuff so I don’t have a hard answer. That said, as far as I know, the software walks you through everything.
I’m working for as a freelance writer for a Canadian company but am living and working full time in Germany. Do I still charge HST on my invoices if I’m paying taxes on this income in Germany? (no taxes in Canada due to tax treaty). Any advice would be really helpful.
VC,
Assuming you’re a resident of Germany and paying taxes there, local taxes laws would apply.
I’m not familiar with the tax system there, so I can’t really give you an answer.
Greetings! 🙂
I hope you may have an advise for me. I am self-employed, got my own business laptop and using CCA to write it off.
Recently someone broke into my car and took the laptop away. I have no insurance and I have to buy a new one.
A) As for the stolen laptop, do I just declare a disposition of the laptop with proceeds of disposition of zero dollar?
B) Can I just buy a new one and simply follow the CCA rules/classes for the laptop or do I have to do something special since I am replacing a stolen item?
Thanks a lot for your help,
Peter
Hi Peter,
Those questions go a bit beyond my scope of knowledge. Sorry I couldn’t give you a better answer.
Hi Barry,
Very helpful article!
I’m a new watercolour artist that makes under 30K. I recently had my first high paying client who was from the US. They paid me on their company card via Paypal and now are asking for a receipt. can I make a receipt without a tax number? How does this work? This would be my first time creating a receipt.
Hey Tristan,
I’m pretty sure the client means they just want a formal invoice so they have a record.
You can find a generic invoice template online pretty quickly.
There’s no need to add a tax number since you don’t have one and US clients don’t get charged tax anyways.
if it’s the actual receipt they want, I’m sure you can just create one in word to say they paid.
Hi Barry! Great blog! Love it! 🙂
I am self-employed and started to understand the advantages of the quick method filing.
The great thing is, it is still possible to claim ITC for capital assets, such as computer. However, I was unable to find out if ITC would also apply for an office rental using the quick method.
Any idea?
Thanks
Hey Peter,
Unfortunately, I don’t know the answer to that one.
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It is a pity that there are no separate points about the fundamental differences between the Canadian and American systems
Do I need an HST/GST number if NONE of my sales are in Canada (but I am in Canada/am Canadian)? In trying to register, I am not able to due to having $0 income made in Canada. All of my clients are based in the US.
Hey Rachel,
Once you made $30,000 CAD, you must register for GST/HST regardless of where your clients are based.
Thanks for sharing your opinion hope you will share more post.
nice post i love it thanks for sharing it
Hi Barry, thank you for sharing this info!
I’ve got a couple of questions:
1. Do I need to register a business (sole prop or corp) first in order to register for a gst/hst account or can I do so without one since I’m operating under my personal name?
2. Can I tax write-off as an expense contractors that I hire outside of Canada? Does this have a limit since I don’t have a business registered?
Thanks in advance!
Vide,
You do not need to register your business and You do NOT need to incorporate to register for an HST account.
Subcontractors can be written off as an expense. I don’t remember off the top of my head where it falls under as my accountant takes care of that.
Hi Barry.
Your site is amazing.
I am an employee in Alberta with more then 30.000 (CAD) . This year I’ve got 1.000 (US) from the Upwork as a freelancer. I have a registered GST account. I don’t have any other income. My question is: Do I have to pay GST % to CRA in my case?
Thanks in advance!
Andrey,
If you’re registered for GST, you’d have to pay any GST earned from your side hustle. That said, any GST you paid to run your business would offset what you owe. Basically, wen you file your taxes, you’d find out what you owe or don’t owe. Upwork should have an option to input your GST information. But if you only made $1,000 US. Any GST owed would be minimal.
Morning Barry. Thank you for the quick response.
May I ask more questions?
If my client on Upwork from Ontario I have to pay 13% GST to CRA and 5% if the client from Alberta, right?
How about if I have the clients on Upwork outside of Canada? Do I have to pay GST to CRA for the outside clients. And how much?
One more.
Lets say an Upwork client pays 100$. The Upwork fee 20% plus GST 5% on the Upwork fee. I will have 100-(20+1)=79$ Which amount (100 or 79) I should use when I will calculate GST for CRA?
Thanks.
Andrey,
GHST/HST is paid based on where the services are rendered. So yes, if your client is in Ontario, you’d charge 13%. You don’t need to pay another 5% for your home province since you’ve already collected it in Ontario.
GST/HST does not apply to any clients outside of Canada. That said, with Upwork it’s a bit tricky since the government introduced a new law for freelancers.
https://support.upwork.com/hc/en-us/articles/4401838411283-Canada-Indirect-Taxes-for-Freelancers
Basically, you should be inputting your GST number into Upwork and then they should be collecting taxes for you (and paying them to you). It would be then up to you to remit those taxes.
The tax you pay is based on the work you performed. So on $100, you’d pay the 5% GST. The 20% fee you pay can be deducted as a business expense and would lower your overall taxable income.
Note that I am not an accountant, I’m speaking strictly in general terms.
Hi Barry!
I’d be interested in getting a virtual address to keep conducting my freelance business in Vancouver while residing in another province.
Are you familiar with this concept? If so, do you know if I can communicate it to the CRA as a replacement for my current physical address?
Also, would I need to invoice the GST applicable in the province where the virtual address is, or in the new province?
Thank you in advance for your help and have a nice day/evening!
Hey Alicia,
This question goes beyond my expertise. I would advise consulting an accountant.
Hi Barry,
I was employed full time in 2022, but I also received a small affiliate commission of $100 since starting affiliate marketing on the side last year. I understand that I will likely have to declare this with form T2125, however I am unsure about the industry code for affiliate marketing and if I will need to make CPP contributions on this small amount, since I already contribute through payroll deductions by my employer. Also wondering if I should check off the Cash or Accrual box for Accounting Method (commission only) and if I need to provide the url of my lead capture page under Internet Business Activities, since I didn’t earn the commission through a website that I own or operate. Any suggestions would be greatly appreciated. Thank you
Hey Tim,
You do have to declare the income, just choose an industry that’s close enough, that would likely be marketing. The $100 income is considered self-employment income, so CPP contributions are optional. That said since you have a full-time job, if you already reach the max CPP contributions each year, there’s no need to contribute anymore. Cash is likely the best choice. Honestly, don’t over think things. It’s $100, if you put whatever is close enough, you’ll be fine.
Thanks so much!