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Tag: Self-Employment

  • Don’t be afraid to ask for an advance: Suzanne Bowness on budgeting for freelancers – MoneySense

    Since 2002, Sue has provided content creation, editing, and consulting services to corporate clients through her business CodeWord Communications. Here, she talks about her formative experiences along the road to becoming a self-employment expert—and the right way to use debt.

    Who are your money/finance/investing heroes?

    As a freelance writer, I had an early gig reviewing business books, several of which were financial. That gave me insight into the fact that people actually wrote books about money that helped demystify elements like the stock market and other terms. I wish money management had been taught in high school; I would have preferred that class over other math that I never use as an adult. Suze Orman was one of my favourites from those early reads for her practical advice and encouragement that anyone could understand and manage their finances.

    How do you like to spend your free time?

    I like walking—both in nature and cities—travelling, and seeing new places. I like reading and listening to podcasts and audio books. I also like writing fiction and poetry, although it’s sometimes exhausting to make time for creative writing after a full day as a professional writer.  

    If money were no object, what would you be doing right now?

    I’ve always wanted to be a writer, but when I became an adult, I realized that I also needed to make a living. So I started working as a journalist and content writer. While I enjoy any kind of writing, I still like writing fiction, so I’d probably flip the time so that I’m writing my creative work during the day instead of after hours.

    What was your earliest memory about money?

    My earliest money memory was being given a dollar allowance from my parents for chores. (I was dusting and cleaning bathrooms; my younger brother was vacuuming. To this day these are our favourite chores. I love the quick fix of a good bathroom polish.) We would walk to our local depanneur in the Montreal suburbs and my brother would buy a big item, like a can of Coke or a chocolate bar, and I would stuff as much penny candy as I could into a little brown bag to last the week.

    I think math became important for that transaction as I made the money stretch as far as possible (was it better to buy five gummy bears at two cents each or a 10-cent lollipop?). I also learned that different people want and value different things, as I never brought my brother over to my way of thinking nor converted to his.

    What’s the first thing you remember buying with your own money?

    Besides penny candy, I think a cassette tape of the soundtrack to the movie Cocktail. Also books from Scholastic.

    What was your first job?

    After babysitting, my first real job was as a cashier at K-mart, where I also worked in the garden centre when I was 15. I still remember the stress when your cash register tape jammed, and I can still tell the difference between impatiens and petunias. 

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    I’m not sure what I did with my first paycheque, although probably saved some for a band camp later that summer, which is when I had to quit because my manager wouldn’t give me the week off. 

    What was the biggest money lesson you learned as an adult? What would you do differently today? 

    Probably saving earlier. I recall a bank having an ad in the subway about the difference in results between the person who started saving at 23 years old and the person who started saving at 30. The problem is that I think I saw that ad at 28 so I felt already behind. Also, I hated that nerd who had the wherewithal to start saving at 23. 

    A related lesson as a freelancer was to save my money for income taxes and HST in a separate place so you have it when it comes to tax time. It’s very easy to spend if it isn’t in a separate account.

    What’s the best money advice you’ve ever received?

    Paying off debt with the highest interest rates first (i.e. credit cards). But also, I learned myself the advantage of having credit available (and saying yes to a lower-interest line of credit) as a way to balance out my freelance business since mostly I’m paid 30 days after I submit an invoice. I’ve also learned to proactively ask for a percentage up front if I’m working on a larger project—say 30% to 50%.

    What’s the worst money advice you’ve ever received?

    I haven’t received this advice directly, but I find all-or-nothing money advice annoying. Especially the one about how much you can save by avoiding fancy coffees. I’m not a fancy coffee regular but if that’s the spend that earns you an hour of work at a table in a coffee shop or picks up your day, then it’s fine. Treats are okay in moderation and money is also for buying a nice life today, not just saving for the future.

    Would you rather receive a large sum of money all at once or a smaller amount of money every week/month for life?

    As a freelancer, I regularly receive large sums of money at the middle and end of projects and then nothing for a few weeks, so I am curious what it would be like to have regular deposit every week. 

    What do you think is the most underrated financial advice, tip, or strategy?

    Focusing individually on whether each purchase is a good idea. Just because something fits in your budget doesn’t mean it’s a reasonable splurge. I don’t think I’ve ever paid over $100 for a handbag, so if I see one priced at $500, that’s just not for me. Also knowing the current cost of items that you buy regularly so you’re not tricked by marketing or “sales” to think you’re getting a great deal. I know when the toilet paper really is a good sale.

    What is the biggest misconception people have about growing money?

    That there’s a magic age past which it’s too late. I started saving more in my 30s and I think it’s never too late. It just means I have a lot more room in my RRSP to continue filling up. 

    MoneySense Editors

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  • Insurance for self-employed Canadians: What coverage do you need? – MoneySense

    If you are self-employed, the onus for insurance coverage is squarely on you. If you are considering self-employment or are already self-employed, consider whether the following types of insurance apply to you. 

    Life insurance

    If you have a spouse and/or children who rely on your income, you should probably have life insurance. It could replace that income if you were to die, protecting your family from financial hardship. 

    How much life insurance do you need? 

    You need enough life insurance to cover your financial obligations—such as a mortgage and personal debt—and provide sufficient care for your dependents.

    Although a family’s expenses could decrease if someone died, most households have lots of fixed expenses like rent, mortgage payments, property taxes, insurance, utilities, children’s expenses, and other costs that do not change if there is one less family member. In some cases, a family’s expenses could even increase to account for additional help like a nanny for little ones or other help around the house.

    A business owner may also consider life insurance to provide cash for their business to keep operating. If the business’s value could be impaired by their death, a life insurance policy paid for and owned by the business could provide the funds to hire a replacement or shore up cash flow.

    Some business partners agree to have life insurance on each other. This coverage can provide funds for the survivor(s) to buy the deceased partner’s share of the business from their family. 

    When you buy life insurance, you can buy term life insurance that covers you for a certain number of years, or you can get permanent life insurance that is notionally meant to keep forever. Permanent insurance contains an investment component, whether it’s whole life or universal life insurance. Premiums tend to be higher for permanent coverage since the risk of death rises with age. But term insurance generally has a renewal feature, whereby you can renew at progressively higher premiums for subsequent terms.

    Business owners with corporations are often pitched life insurance as a tax and investment strategy, especially whole life and universal life insurance. These policies generally have high monthly premiums and are meant to provide future retirement income or a larger estate value.

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    Corporately owned life insurance definitely reduces tax because you are putting money into a life insurance policy instead of into corporate investments, which generally produce taxable income. But the trade-off may be higher fees than comparable investment options. As a result, you may not be further ahead.

    It is also important for business owners to consider other tax-efficient saving options like registered retirement savings plans (RRSPs) and tax-free savings accounts (TFSAs). If RRSP and TFSA accounts are not maxed out already with a reasonable expectation that maximum contributions can continue, a corporate life insurance policy for any reason beyond risk management—that is, for tax and investment reasons—should be considered with caution.

    Corporately owned life insurance can be a great opportunity for someone who has more money in a corporation than they are ever going to spend during their own lifetime. It can provide a larger after-tax estate for their beneficiaries than other corporately held assets, since the proceeds can come out of the corporation tax-free, unlike the withdrawal of other corporate assets by the beneficiaries. Just be careful about overcommitting to too large a policy.

    Compare life insurance quotes and save

    Request a personalized quote and consult with an expert about your coverage needs. Get the protection you need at the right price.

    Disability insurance

    A disability can hurt a family’s financial well-being and progress. Like life insurance, it is important to have if you have beneficiaries. But even if you don’t have family members depending on your income, you should have disability insurance for as long as you are still working out of necessity rather than by choice.

    What does disability insurance cover?

    Disability insurance provides a monthly payment to you if you cannot work due to an illness or injury. Some policies last for a certain period like 24 months after disability, while others last until a certain age, like 65.

    Some policies will pay your monthly benefit if you cannot work your current job (called “own occupation”), while others (called “any occupation”) may not pay out if you can work another job in another field.

    The risk of disability for most working Canadians is higher than the risk of dying. That’s why the monthly premiums tend to be more expensive than those for a life insurance policy. This is often a deterrent from purchasing disability insurance.

    Most insurance agents focus primarily on life insurance over disability insurance. As a result, life insurance tends to be sold more often than disability insurance. But a savvy business owner looking to reduce their financial risks should be buying disability insurance to protect themselves and, if applicable, their family.

    Jason Heath, CFP

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  • How to report foreign income in Canada – MoneySense

    How to report foreign income in Canada – MoneySense

    This form is typically used for foreign bank accounts, foreign investment accounts or foreign rental properties, but it can include other foreign assets. Foreign investments, including U.S. stocks, must be reported even if they are held in Canadian investment accounts. Foreign personal-use properties, like a snowbird’s condo that is not earning rental income, may be exempt.

    Foreign asset disclosure applies to taxable investments, so assets held in tax-sheltered accounts like registered retirement savings plans (RRSPs), tax-free savings accounts (TFSAs), pensions and other non-taxable accounts are generally exempt.

    U.S. persons in Canada

    U.S. citizens or green card holders must generally file U.S. tax returns despite living in Canada. The United States is one of the few countries in the world that has this requirement for non-residents. As a result, you may have to report both Canadian and U.S. income, deductions, credits and foreign tax payable.

    Adding to the complexity is that certain types of income are taxable in one country but not the other, and some deductions or credits may only apply on one tax return.

    Voluntary disclosure for previous years

    If you have not reported foreign income or declared foreign assets in the past and you should have done so, you may be able to file a voluntary disclosure with the CRA. This program may allow relief on a case-by-case basis for taxpayers who contact the CRA to fix errors or omissions for past tax returns.

    There are five conditions to apply:

    1. You must submit your application voluntarily and before the CRA takes any enforcement action against you or a third party related to you.
    2. You must include all relevant information and documentation (including all returns, forms and schedules needed to correct the error or omission).
    3. Your information involves an application or potential application of a penalty.
    4. Your information is at least one year or one reporting period past due.
    5. You must include payment of the estimated tax owing, or request a payment arrangement (subject to CRA approval).

    Before pursuing a voluntary disclosure, you should seek professional advice. The CRA also offers a pre-disclosure discussion service that is informal and non-binding, and it does not require the disclosure of your identity.

    Bottom line

    When you are a Canadian tax resident, whether you are a citizen or not, you have worldwide income and asset disclosure requirements on your tax return. Some Canadian residents, despite living abroad, may still be considered factual residents or deemed residents of Canada with ongoing tax-filing requirements.

    Jason Heath, CFP

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  • What new rules in B.C. mean for gig worker rights in Canada – MoneySense

    What new rules in B.C. mean for gig worker rights in Canada – MoneySense

    Regulations that came into effect on Sept. 3 introduced protections for gig workers in the province, including: a minimum wage, mileage compensation, upfront fare transparency, and rules for account deactivation and dispute resolution. The regulations also give workers access to workers’ compensation through WorkSafeBC, a provincial agency that supports injured workers. 

    If you’re a gig worker or considering working through an app, here’s what you need to know about the rights you have across the country. 

    What led to new gig worker protections in B.C.? 

    The regulations come after years of efforts by unions and gig workers themselves to have gig work covered by provincial employment standards. In provincial labour law, app-based workers are considered independent contractors rather than employees, which means they haven’t been eligible for traditional employment protections, such as a minimum wage and rules around termination and severance pay. Gig work platforms also don’t have to make employment insurance (EI) or Canada Pension Plan (CPP) contributions on behalf of gig workers.

    The workforce for ride-hailing and delivery platforms, including Uber, DoorDash, SkipTheDishes and Lyft, grew 46% in 2023, according to Statistics Canada’s December 2023 labour force survey. That brought the total number of workers aged 16 to 69 to 365,000, up from 250,000 in 2022. Landed immigrants accounted for almost six in 10 of those workers.

    B.C.’s rules are a “step in the right direction,” says Jim Stanford, an economist and the director of the Centre for Future Work, a progressive research institute. But gig work is still largely the “wild west of employment,” he says, and there are few avenues for workers to assert their rights.

    Wages for gig workers

    B.C. is the first province or territory to implement a minimum wage for gig workers. At $20.88 per hour, the rate is 120% of the regular provincial minimum wage of $17.40 per hour. It only applies to “engaged time,” meaning the time drivers and couriers actually spend on assignments—hence the wage premium. Workers whose engaged time over a select pay period falls below the gig worker minimum wage are topped up by the platform at the time they’re paid. (Tips are not included in the minimum wage calculation.) 

    “The equation is difficult and it’s not perfect, but it aims to start to address idle time, when someone is waiting to pick up a person or package,” says Pablo Godoy, director of emerging sectors for the United Food and Commercial Workers Canada (UFCW), a private sector union. The UFCW Canada signed an agreement with Uber Canada in 2022 that made the union the official representative for Uber drivers and delivery workers across the country.

    Tips and vehicle allowances

    As part of the new legislation, B.C. has mandated that platforms pay workers 100% of their tips. It has also introduced a vehicle allowance to compensate workers for the cost of maintaining their vehicles. Drivers receive 45 cents per kilometre for personal vehicles and 35 cents per kilometre for other forms of transportation, including motorized e-bikes and bicycles. (Those who travel by foot aren’t eligible for the allowance.) 

    Kelsey Rolfe

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  • Is it better to be an employee or self-employed? – MoneySense

    Is it better to be an employee or self-employed? – MoneySense

    What factors determine employment status?

    The Canada Revenue Agency (CRA) uses an important distinction when evaluating a relationship between a worker and a business: the difference is between a contract for “services” and a “contract of service.”

    What is a contract for services?

    A contract for services is a business relationship, like when you hire a contractor to renovate your bathroom or a snow removal company to clear your driveway. Neither the general contractor nor the snowplow driver is your employee. They do not work for you. They provide work for you.

    What is a contract of services?

    If you own a restaurant and hire a cook, or you own a store and hire a cashier, this is a contract of service. You set the shifts and the terms of employment, so it’s a different type of relationship.

    How to determine if you are employed or self employed

    When in doubt about your employment status, the CRA considers six primary factors, Elza.

    1. Control: When the payer dictates when and how work is done, it’s more likely that the person being paid is an employee.
    2. Tools and equipment: An employer is more likely to provide equipment and tools to an employee compared to a self-employed contractor who provides their own.
    3. Subcontracting work or hiring assistants: An employee is unlikely to be permitted to subcontract their work or hire others, whereas a self-employed person can make decisions like this without permission.
    4. Financial risk: Employees typically do not have to pay for expenses to earn their income—or they are reimbursed when they do—whereas a self-employed person is responsible for their own expenses and business profitability.
    5. Responsibility for investment and management: A worker generally does not have to invest their own capital to earn their living, and they don’t typically have a discernible business presence.
    6. Opportunity for profit: An employee’s income may vary depending on their hours, bonus or commissions, but a worker cannot generally control their proceeds and expenses nor incur a loss, like a self-employed person.

    It’s also more likely that you’re an employee if you’re only providing services to a single payer. Someone who is self-employed tends to have multiple clients or customers.

    Should you incorporate if you’re self-employed?

    If you’re self-employed and run a business that has a significant amount of risk, Elza, you may want to consider incorporating. This can limit your liability.

    If you have business partners, incorporation can also be a more efficient way to involve shareholders or raise capital.

    One of the main tax advantages of incorporating is the ability to retain savings within the corporation. You may benefit from a corporate small business tax rate that’s around 40% lower than the top personal tax rate.

    Jason Heath, CFP

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  • “I have the dream job”: Brian Scudamore on making meaning with your money – MoneySense

    “I have the dream job”: Brian Scudamore on making meaning with your money – MoneySense

    Dragon’s Den cast: Wes Hall, Michele Romanow, Arlene Dickinson, Brian Scudamore and Manjit Minhas.

    Who is your money hero?

    One of my fellow “dragons,” Wes Hall, who I got to know a little bit this year, during filming. I’m so inspired with how he spends money. He’s very different from me in the sense that he’s got the fancy cars and the big mansion and so on. I drive my Ford pickup truck and I have a modest home. But I’m inspired by how he puts charity first. He takes care of other people before he takes care of himself. He grew up in Jamaica. He didn’t have a lot, but he says, “This is about helping others.” He’s made it, and I think that’s what money is all about.

    How do you like to spend your free time?

    I love traveling. I love eating. For example, this summer, I went to France with my family. It was just a combination of family, friends, great food, some wine, practicing my French. That ties in everything I love.

    My wife and three kids—we were in Paris as a base, we went down to Cap Ferret, which is just south of Bordeaux—a beautiful little peninsula, beach town. We hung out in Lille for a little bit to watch the Olympic basketball. We spent time in Bordeaux and went to some wineries. Paris is such a well-travelled place, so we had dinners with different friends and their families who were in town. I just I love that country.

    What’s your first memory about money?

    My dad, who’s a liver transplant surgeon, is not an entrepreneur or a business person. But he taught me early on to be purposeful with money. What am I doing with even the cheques I would get from aunts, uncles and grandparents for the holidays? He had me write thank-you notes, which no kid likes to do. I had to tell them how I was using the money they gave me.

    My dad really hammered into me to save that money for education. And I did, but it was really ironic, because here I am, a high school dropout, a university dropout. But I valued learning about money from my dad and just being wise with how I spend it and being purposeful.

    But one of my early memories was when I saved up my life savings as an eight-year-old and bought a brand-new bike. A couple of days later, I put a big basket on it so I could deliver newspapers more efficiently. I put that prized bike to work. I learned from my dad that money was about investment—a purposeful investment.

    There’s also a frugal side of me that thinks, “Do I really need that?” Fancy cars wouldn’t bring me joy. Would I rent a Ferrari for a day on the coast of Italy? Heck, yeah. Would I ever buy one? No. And he got me to think about the value of money and what you can do with it.

    If money were no object, what would you be doing right now?

    Nothing different. I have the dream job. I am so excited to be a “dragon” and to help inspire others, give some wisdom, shared learnings to the pitchers on Dragon’s Den. I love building and growing my companies. Not to make more money, but to grow opportunities and possibilities for other people, and for the freedom to travel and spend time with family and friends, which I love to do.

    MoneySense Editors

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  • New to Canada and no pension: How to save for your retirement – MoneySense

    New to Canada and no pension: How to save for your retirement – MoneySense

    The difficulties facing newcomers to Canada with respect to retirement planning are particularly acute. Given how Canada’s immigration points system works, economic immigrants are usually in their late 20s or early 30s—and they face unique challenges:

    1. Depleted savings: If you’re a 30-year-old newcomer, chances are you’ve used a large portion—if not all—of your savings to set up your new life in Canada. So, you’re behind in the retirement savings game. If retirement savings were a 100-metre race, lifelong Canadians have a 20- to 30-metre head start over newcomers.
    2. Lower income: If you’re a newcomer to Canada, you’ve probably had to restart your career a few rungs lower on the corporate ladder because of your lack of Canadian work experience. This means you’re not earning as much as others your age who have similar experience. Consequently, your ability to save for retirement is lower.
    3. Lack of knowledge: You need to understand Canada’s financial and tax systems to maximize its retirement planning opportunities, and gathering this knowledge takes time.
    4. Reduced contributions: Joining the Canadian workforce later in life than their Canadian-born peers, immigrants have fewer years to contribute to the Canada Pension Plan (CPP) and build up registered retirement savings plan (RRSP) and tax-free savings account (TFSA) contribution room. For this reason, they rely on less tax-efficient unregistered savings and investment vehicles to sustain their retirements to a greater degree than their neighbours.

    But there’s good news. As Toronto-based financial advisor Jason Pereira points out, “Canada’s retirement system does not discriminate against newcomers. The rules are the same for everybody.” So, with the right knowledge and expertise, you can work towards building a strong retirement plan. 

    How to start retirement planning as an immigrant

    To plan for retirement, you need to know:

    • How much money will you need each month in retirement? The simplest method to estimate your income requirement in retirement is to consider it to be 70% to 80% of your current income. For example, if you earn $75,000 a year today, 70% of that is $52,500—that’s $4,375 per month—in today’s dollars. Alternatively, you could estimate the amount you’d need in retirement using this tool.
    • How much you’ll receive from government pension and aid payments: You need to estimate approximately how much you’ll get from the Canada Pension Plan (CPP) and other government programs: Old Age Security (OAS) and the Guaranteed Income Supplement (GIS). The tool at this link will help you do so. Ayana Forward, an Ottawa-based financial planner, notes that “some home countries for newcomers have social-security agreements with Canada, which can help newcomers reach the eligibility requirements for OAS.”
    • How much you’ll receive from your employer-sponsored retirement plan: Workplaces without a defined benefit pension plan sometimes offer a registered investment account (usually a group RRSP), with contributions made by you and your employer or only your employer. If you have a group RRSP from your employer, what will its estimated future value be at the time of your retirement? You could use a compound interest calculator to find out.
    • How to make up for a shortfall: The CPP, OAS, GIS and your group RRSP likely won’t be enough to fund your retirement. You’ll need to make up for the shortfall through your personal investments or additional sources of income.

    Sample retirement cash flow for a 35-year-old (retirement age 65)

    This table illustrates the types of income you could have in retirement. The amounts used in the table are hypothetical estimates. (To estimate your retirement income, try the various tools linked to above.)

    Amount (today’s value) Amount (inflation adjusted)
    A Amount needed $52,500 $127,400
    B Government pension and aid payouts
    (CPP, OAS, GIS)    		 $22,000 $53,400
    C Employer-sponsored pension plan
    (group RRSP)    		 $8,000 $19,400
    D B + C $30,000 $72,800
    E Shortfall (A – D) $22,500 $54,600
    F Needed value of investments in the year of retirement (E divided by 4%, based on the 4% rule) $562,500 $1,365,000
    G Needed flat/constant monthly investment amount from now to retirement $969

    In the example above, the person faces an annual shortfall of $22,500. In other words, this person needs to generate an additional $22,500 per year to meet their retirement income needs, after accounting for the typical government pension or aid payouts and their employer-sponsored retirement plan. To do this, they’d need to invest about $969 per month, assuming an 8% annual rate of return from now to retirement 30 years later. How could they fill this gap and meet their shortfall? Enter self-directed investments, real estate and small-business income.

    Build your own retirement portfolio

    An obvious and tax-efficient way to cover your retirement income shortfall is to build your own investment portfolio from which to draw income in your retirement years. These investments can be held in registered or non-registered accounts. Registered accounts, such as the TFSA and RRSP, offer useful tax advantages—such as a tax deduction and/or tax-free or tax-sheltered gains, depending on the account—but the amount you can contribute to these accounts is limited. Non-registered accounts have no contribution limits but offer no tax advantages. 

    Newcomers often have lower TFSA and RRSP contribution room compared to their peers because they’ve lived and worked in Canada for a shorter period. “TFSA contribution room starts accruing the year of becoming a resident of Canada,” Forward explains. “RRSP contribution room is based on earned income in the previous year.”

    Your TFSA and RRSP contribution room information is available on your Notice of Assessment from the Canada Revenue Agency, which you’ll receive after you file your tax return. To check your TFSA limit, you can also use a TFSA contribution room calculator.

    Aditya Nain

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  • Do I need a GST or HST number? – MoneySense

    Do I need a GST or HST number? – MoneySense

    Why registering for GST/HST pays off

    The other excellent reason to charge GST and HST is that it pays off in dollars and cents.

    One of the great advantages of being self-employed is that when you charge these taxes, you only give the government what you charged minus the GST or HST you pay on your deductible business expenses. 

    For freelance writers like us, this is the sales tax we pay on printer paper, internet service, professional development workshops and more. The government lets us in essence deduct the sales taxes we pay on deductible expenses from the sales taxes we charge our clients. We then pocket the difference. The amount we save each year is roughly enough to pay for a trip to Europe.

    HST quick method or detailed method?

    The good news is that we don’t have to add up every bit of GST and sales tax we pay on our expenses to take advantage of this. That’s because we use the “quick method” for our calculations. 

    The government gives you two choices for paying GST and PST/HST instalments: the “detailed method” and the “quick method.” With the quick method, you simply pay 3.6% of the 5% GST you collect. In the case of provinces with HST, it’s a percentage of the HST: so, in Ontario, you only pay 8.8% to the government from the 13% you collect. 

    Image by rawpixel.com on Freepik

    The advantage of the quick method is that it’s much less work. You must only add up how much sales tax you charge your clients or customers. My spouse and I use the quick method and find it easy to do our calculations with an Excel spreadsheet. There is no need to keep a detailed account of the sales tax you pay on all the pens, paper, printer cartridges and more you claim as deductible expenses. 

    There’s another bonus to using the quick method. Governments offer a credit of an additional 1% on the first $30,000 of gross revenue. So, for example, in Ontario you pay 7.8% (instead of 8.8%) of the 13% HST you collect for that amount and pocket the other 5.2%. However, if you use the quick method, you must add the credit to your total revenue when you file your income tax return.

    The detailed method involves more work, since you must add up the GST and PST/HST you paid on each of your expenses and subtract it from the taxes you collect to determine the amount you have to pay. But this calculation method is useful if your taxable expenses are proportionately high, amounting to roughly more than 50% of your income. The advantage of the detailed method is that you don’t have to add the amount you retain to your revenue when you file your income tax return. 

    Julie Barlow

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  • How much should I charge for freelance services? – MoneySense

    How much should I charge for freelance services? – MoneySense

    Pricing your services can be tricky, even for experienced freelancers. Let’s go over the factors to consider when deciding your rates. There are three parts to this: understanding the market you’re in, determining your income needs and your business’s break-even point and, lastly, setting your price using cost-based or value-based pricing.

    1. Understanding the market

    The first step in finding out how much you should charge for freelance services is to do market research. You’ll want to determine the following: 

    • Competitors: Who are the other players (businesses or freelancers) that offer the same or similar services in your industry or region? 
    • Customers: Who are your competitors targeting? Who are their customers, where are they, and what specific products or services are they buying?
    • Pricing: How are your competitors pricing their services? Check their websites to see whether they use hourly or project-based pricing. What factors might play a role in their pricing—for example, do they provide unique value or services, do they have lots of experience, or do they charge below-market prices to attract customers? 

    Then, map out where you fall into this mix, and use your research as a benchmark when making your own decisions. When doing this analysis, you can figure out your place in the market using the popular S.W.O.T. method: find out the strengths, weaknesses, opportunities and threats in your business environment (your geographical region or your competition online, for example). This will also help you compare your offerings to those of other vendors. 

    If you’re a freelance event photographer, for example, and you offer photos but not videos, your service packages should be priced lower than those of freelancers who offer both. This could help you attract customers who are looking for more affordable rates. And, you could also expand your services to include video in the future.

    By the end of your research, you should be able to answer some questions about how much you will invoice as a freelancer, such as: 

    • What are the going rates for services in your industry?
    • Will you charge hourly for your services, or will your pricing be project-based, or both?
    • If you are charging for projects and/or packages, what services will they include?
    • Will you have different bundles or packages at different price points, based on your costs and the value you provide to the customer? 

    How much to invoice as a freelancer 

    Now, you need to determine the dollar amount you should charge for your freelance services. There are two parts to this: a personal needs assessment and calculating your business expenses.

    1. Personal needs assessment

    How much will you need to pay yourself? Understanding your personal needs (rent payments, utilities and other necessities) versus wants (discretionary spending on food, entertainment or hobbies) will help you determine what you are able to pay yourself and what you are willing to sacrifice until your business grows. 

    Let’s say your needs require that you earn at least $1,000 a month from freelancing in addition to your other sources of income. When determining your personal payout, you need to consider your income tax bracket as well—new freelancers often forget about this. If your needs cost you $1,000 per month, and you’re roughly in a 30% tax bracket, you’ll need to pay yourself at least $1,300 from the business. (Read more about tax brackets, how they work in Canada and find out how much taxes you may have to pay.)

    Shalini Dharna Kibsey, CPA

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  • Self-employed? Here’s how to file taxes for a side hustle – MoneySense

    Self-employed? Here’s how to file taxes for a side hustle – MoneySense

    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

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  • Tackle Taxes With This Prep and Deduction Bundle With Courses Just $2 Each | Entrepreneur

    Tackle Taxes With This Prep and Deduction Bundle With Courses Just $2 Each | Entrepreneur

    Disclosure: Our goal is to feature products and services that we think you’ll find interesting and useful. If you purchase them, Entrepreneur may get a small share of the revenue from the sale from our commerce partners.

    There’s a reason everyone dreads doing their taxes. It’s a difficult and confusing process, made even worse if you’re a busy entrepreneur. Forbes revealed entrepreneurs revealed that among their ten most burdensome problems, four of them are related to taxes. If you’d like to get a better grasp on all things taxes from the comfort of your own home, The 2023 Tax Preparation & Deduction Super Bundle can help.

    Packed with 15 informative courses filled with 123 hours of instruction, The 2023 Tax Preparation & Deduction Super Bundle gives a well-rounded education on all things tax preparation and deduction. And right now, this bundle can be yours for just $29.99 (reg. $375) — that’s just $2 a course.

    The 2023 Tax Preparation & Deduction Super Bundle provides you with a ton of courses to help get you up to speed on the ins and outs of the confusing process of tax preparation, as well as the part you really care about — tax deductions. And you can access them all from the comfort of your own home right on your device, so there’s no need to head back to the classroom.

    This bundle offers courses like Income Tax Schedule C Small Business Sole Proprietor 2023, taught by real-life CPA Robert Steele. It focuses on tax prep for those that are self-employed, helping you identify things like business expenses and Schedule C income. From there Robert also teaches another important element of tax — credits! — with Tax Credits: Family & Dependent Tax Credits 2023, which schools you on all the important tax credits you need to know about. There’s also a six part Tax Preparation 2022-2023 and many more courses included.

    Snag the 2023 Tax Preparation & Deduction Super Bundle, on sale now for just $29.99 (reg. $375), and get these informative tax courses for just $2 a course.

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    Entrepreneur Store

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