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I'm having a bit of a problem knowing what to do for the upcoming tax season:

Starting in May of this year, I've been working as contractor for an American LLC, I get paid twice a month by online money transfer via Paypal.
For the first 5 months of my employment I was paid a fixed sum twice a month. Last month I was sent a W-8BEN and I filled it out, now I send an invoice and they pay me the same amount, but in reference to that invoice. I'm not sure what I need to do to file my taxes, or how to calculate how much I'll have to pay, so I'm unsure what to expect. Prior to this job I worked at a fast food restaurant, and received a T-4, which I simply gave to a Money Mart and they sorted it out. I worked at that job until April of this year, so I have wages from January - April from that job which will also have to be applied, though I'm not sure how that works, if I'll have to file to separate times for the income from my previous job, and the income from my current job. I'm also unsure of exactly where to go, or even what forms I have to fill out for my current job, and I don't know who to speak to about this. I'm 20, so I don't have an accountant or anything of the sort. I could really use some assistance.
 

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I hope you've been saving some of your paychecks because they haven't been deducting taxes, so you will definitely owe at tax time. You can look up your approximate tax bracket on taxtips.ca and that will tell you how much to save from each paycheck.

You'll only need to file once, the same tax return will include both your T4 and your self-employment earnings. You can either just list the self-employment under "other income" if you didn't have any expenses, or, if you had expenses, you'll need to fill out the self-employment form to be able to deduct your expenses from your income. By doing the self-employment form you also pay into CPP which is either a blessing or a curse, depending on how you feel about it.

You should be able to do it yourself with something such as simpletax.ca (free online, and it rocks), and by googling for answers to whatever questions you might have. Or post here when you have specific questions. It's not rocket science, you can do it.
 

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Don't forget the home-office write-offs if you are, in fact, doing your contracting from home. That will reduce the tax bill.
 

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The "self-employment form" he's talking about is the T2125. If you don't have any expenses, find some! Pretty much anything you spend for work can go in there in one box or another, although sometimes it's not worth the bother for small amounts. There's a large document which explains all of it. The short version is that services/consumables (eg. your internet connection) can be claimed entirely right now and stuff which lasts (eg. furniture, computer) is claimed over several years. And you are supposed to claim the % which is used for work if shared with personal use. This being Canada, it is of course made 10 times more complicated by lots of weird rules. I am assuming here that your work is services only. If you make physical products, there is yet another place to report everything you buy to make your product.

As far as income tax goes, set money aside for it. You'll need to pay it and you'll be required to pay provisional accounts the next year. So it's double hurt if you have no money come reporting time. A lot of people apparently get caught by this according to an accountant I got my information from. The rest of your report is mostly the same as with a salary except that you'll pay the employer's share of CPP (an extra 5% or so, set to increase in coming years) and perhaps a few other minor things depending on your province. But you won't pay nor get any E.I. So set money aside for that reason as well.

You should also get yourself a sales tax numer and file a report. Assuming you're exporting your entire work, you can probably get a refund of the GST and whatever provincial tax you happen to have paid on your work related expenses. Thankfully, that one is a very simple form. You'll need to check if whatever you do is actually zero-rated ( https://www.canada.ca/en/revenue-ag...esses/charge-gst/gst-hst-imports-exports.html ) If it's not, I think you must charge the tax and give the money to the government. Which basically means you should carve the tax out of the money you're being paid. You should check this carefully so it does not come back to bite you a few years down the road. The amount could be very large by then and "I did not know" will not lower the bill.

One last thing: keep paper traces for everything you claim. They may ask for it. All of this is free advice so take it as that, not as official gospel from the CRA ;-)
 

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Don't forget the home-office write-offs if you are, in fact, doing your contracting from home. That will reduce the tax bill.
True ... though this is an area that people have abused in the past so one should make sure one is up to date on CRA requirements to avoid CRA disallowing the expense in the future.
http://www.cbc.ca/news/business/tax...claims-coming-under-closer-scrutiny-1.1413324
http://www.taxdetective.ca/homeoffice.html
https://beta.theglobeandmail.com/gl...17682167/?ref=http://www.theglobeandmail.com&


Cheers
 

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Income taxes, employer/employee CPP premiums, WSIB premiums (required for most industries), and HST that hasn't been remitted.
 

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I really like Studio Tax.

Be prepared for the hit. Max CPP next year is something like $2500. Double that if you are paying both ends. That alone can be $400 plus a month if you are at the max CPP earnings level.

Deductions are your friend. Home office, communication/internet, office supplies, etc. Car if used for business. Bank fees, exchange fees. Keep accurate records. Don't be greedy on home office. Use a reasonable figure. Seems to me, if I remember correctly, the one thing that you cannot include in home office expenses is the portion of space relating to mortage interest.
 
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