A great deal has changed in the working world with the boom in “contracting”. It used to be that companies would hire workers and pay them as employees. This has changed dramatically over the past 20 years. By contracting a worker, employers no longer have those strings, responsibilities and obligations that come with having an employee.
Where contractors are concerned, a job is a job, however contract positions can prove to be a major headache when tax time comes if you are not good about keeping your books.
The 2015 tax deadline is approaching – are you ready? If this is your first year filing as a contractor, here are some tips:
· Try your best to organize your receipts and invoices.
· If you haven’t been saving them, request bank statements and credit card statements. This will at least show deposits and give you an idea of what you spent.
· Find a bookkeeper. If your receipts are all in a pile, or in a box, or worse, you don’t have any, a bookkeeper is your cheapest solution. If you bring your box of loose records to an accountant you will likely pay more to have them organized than you would through a bookkeeper.
· If you have not registered a business, make sure that you get a T2200 from your employer. The T2200 allows you to claim personal expenses in accordance with your job.
· Make sure that you have collected your T forms. If you are a contractor likely your employer will give you a T4A, but there are other T slips to consider. If you are in a union they will issue a T slip for your union dues, which are tax deductible. There may also be another T slip from the company that contracts you or from the union if you are in one related to taxable benefits (which are monies you may have received which are taxable).
· Make sure you consider all expenses you incur to fulfill your contract – and do not write off things you are not entitled to. So many people do this and this will land you in real trouble with CRA later.
Our next major tip regarding the upcoming June tax deadline: don’t miss it! If you miss it and this is your first time filing late you will pay a 5% fee on the amount that you owe, plus 1% per month for up to 12 months. Interest will accrue on top of both the tax debt and penalties.
If you filed late in the 3 years preceding this year the penalty may increase to 10% of the amount of the tax debt, then 2% per month for up to 20% plus interest.
If you are currently behind a couple of years filing, now is a better time than ever to get compliant! Did you know that you can’t claim HST input tax credits more than 4 years retroactively? This is a huge incentive to get filing in order.
Now, add to this the fact that not filing your tax returns is tax evasion and could land you with a criminal problem, and tax time turns into a nightmare! Don’t believe us? Look how many people have already been prosecuted this year alone for tax evasion http://www.cra-arc.gc.ca/nwsrm/cnvctns/menu-eng.html
Typically people avoid filing tax returns for 3 reasons: 1)They don’t think that they are going to owe 2)They know they will owe and want to buy time 3)They have no records and don’t know how to go about filing.
If you are coming up to the June deadline and fall into the second or third groups, you should seek out professional guidance ASAP. A tax debt is a financial problem with severe consequences. You can’t ignore it because it won’t go away by itself and the more time that passes the greater the consequences.
Fortunately there is still time! Call DebtCare Canada today and we can help you get those tax debts straightened out: 1-888-890-0888.