Process that is business income tax reporting and self-employment tax deductions.
Nathalie Hatter is one of those who’s still running her former side hustle. A corporate travel executive who planned company getaways, she watched as her career stalled in March 2020. “As soon as Canada advised Canadians not to travel, that’s when companies had to cancel their programs,” says Hatter, who lives in Oakville, Ont.
Hatter has elderly parents, so she needed a new job that would be socially distanced and flexible—like dogwalking. She ordered business cards and handed them out to dog owners in her neighbourhood. Soon, Hatter was relying on her earlier chef’s training to bake artisanal dog treats, which she sold at weekend farmers’ markets. Pivot Dog Biscuits was born. “I was selling out every weekend,” she says.
Now, three years on, Hatter’s dog treat business is thriving. She’s currently gearing up to pay taxes by the federal tax deadline of April 30. (It falls on a Tuesday in 2024. The filing deadline for self-employed people (and their spouses) is June 15, but any taxes owing are still due April 30. “I like to get my taxes in ahead of the curve,” Hatter says.
Having a side business can bring in a lot of extra income. It’s critical to track your business expenses and keep the receipts, so you can claim tax deductions. More considerations if you’re newly self-employed: Your extra income could push you into a higher tax bracket, lead the Canada Revenue Agency (CRA) to ask that you pay taxes in installments and/or require you to register for and start charging GST/HST (more on that below).
These changes might be more than you bargained for when you launched your side venture, but planning ahead, maximizing deductions and reducing your overall income can ensure you maximize your profits while meeting your tax obligations. Here’s how to make that happen.
Is your side hustle taxable?
Absolutely, unless your side hustle brings in just a couple hundred dollars a year (so it’s more of a hobby than a business). Beyond that, any business income is taxable, says Dean Paley, a Chartered Professional Accountant in Burlington, Ont.
To find out how much tax you owe, plug your income into an online tax calculator—Paley recommends Ernst and Young’s. Then add almost 12% for Canada Pension Plan (CPP) or Québec Pension Plan (QPP) contributions. If your net self-employment income plus pensionable employment income is over $3,500, you must begin contributing to CPP/QPP—and, unlike salaried employees, you must pay both the employer and employee portions for CPP.
Anna Sharratt
Source link
