Canadian Money Forum banner

1 - 3 of 3 Posts

·
Registered
Joined
·
2 Posts
Discussion Starter · #1 ·
Dear members,

I started a new job. I`m working for a company as an "independent contractor" in Toronto, Ontario, meaning that I`m not getting a regular paycheck biweekly but have to bill for the hours I`ve worked instead (write an invoice). I have to deduct taxes myself instead of the employer doing that for me.

My question is: how much percent of each invoice do I need to put aside to be all good when filing taxes?

I make around 2,800$ a month, or 33,600$ a year. I figured that the percentage would probably depent on what income bracket one is in, right?

Could anyone give me an estimate of how much money I gotta put aside, please?

Thanks a lot!
Baniza
 

·
Registered
Joined
·
3,954 Posts
It's a little complicated. We live in a graduated tax system where the more you make the higher the percentage you need to pay in taxes. If the income is fairly consistent (you bill for the same hours each week) you can do your own calculation using the CRA's program that an employer would use for an employee.

https://www.canada.ca/en/revenue-ag...ses/payroll-deductions-online-calculator.html

The only thing to remember is that you do not need to pay EI premiums but you need to pay twice the amount of CPP since you will be charged for your own and the employer's share of CPP.

Just take the "employers sheet" and instead of remitting it to CRA, as your employer would, just put it aside for when you file your taxes. On that sheet the employee's share and the employer's share of CPP is calculated, plus the amount of tax that should be owed. If you have already earned a lot of money this year you may have maxed out for CPP for 2018 already. If happens once your income goes above $55,900. If that is the case then just disregard CPP for 2018 and then start calculating it again for 2019.

The reason I mention CPP is that when you take into account both yours and the employer's share of CPP it is almost 10% of your income and CRA will ask for it, when you file your tax return, just as they ask for the taxes. It's an amount one does not want to forget about and then get hit for it later. I think 10% is quite a big number. It may not be as big as the tax number but is significant enough, in my opinion.
 

·
Registered
Joined
·
3,994 Posts
Dear members,

I started a new job. I`m working for a company as an "independent contractor" in Toronto, Ontario, meaning that I`m not getting a regular paycheck biweekly but have to bill for the hours I`ve worked instead (write an invoice). I have to deduct taxes myself instead of the employer doing that for me.

My question is: how much percent of each invoice do I need to put aside to be all good when filing taxes?

I make around 2,800$ a month, or 33,600$ a year. I figured that the percentage would probably depent on what income bracket one is in, right?

Could anyone give me an estimate of how much money I gotta put aside, please?

Thanks a lot!
Baniza
You should do the calculation. 20% should probably do it. If you can work partly from home and if you need to travel for business, maybe you can also claim some business expenses? http://madanca.com/blog/what-can-independent-contractors-deduct-accountant-mississauga/

You might do a trial run using a 2017 tax program like Studio Tax. Put the Gross income is under Professional Income (line 163) and the Net after expenses tight alongside on line 137) https://www.studiotax.com/en/.
 
1 - 3 of 3 Posts
Top