Going Out on your own
You have made a momentous decision; you are going to chuck the 9 to 5 grind, and get the best boss in the world; yourself. Or your company is downsizing, and they have agreed to keep you on, only now you are on a contract and they will pay you your hours, but no deductions and no benefits-in other words;
We can’t tell you how to make money. We can tell you how to keep what you earn and not face any unfortunate tax consequences of earning a good living.
- You have to keep records. Nothing is harder than trying to determine what you spent in running your new company. You need to open a bank account for your business and keep your business records separate from your personal records. Use a chequing account. Open a separate Mastercard, Visa or American Express account for business expenses.
- Keep detailed records of your earnings. You have to declare every penny of what you make. The CRA is constantly on the watch for business owners who do not report everything, and there are significant penalties for not reporting your income. This is also important when you pass another business milestone and become a HST registrant.
- Learn to recognise what is a business expense what is not. Every tax return has a self-employed business section known as the T2125. Here some of the categories that your business expenses will fall into: Advertising, Entertainment, Insurance, Fees Dues Licenses, Office expenses, Rent (Office or Shop-not your home), Repairs & Maintenance, Materials cost and Motor vehicle expense*
• You can deduct your expenses based on a percentage of business versus personal mileage
• Keep records for Gas, Maintenance, Insurance, etc.
• Auto leasing is deductible
• If you financed your vehicle-the interest portion is deductible.
• You can depreciate your vehicle. (a slow write off based on the cost of the car)