Canadian Pension Plan (CPP) and Employment Insurance (EI) contributions
For self-employed individuals, the CPP amount is 9.9%, which applies for a range of $3,500–$55,300. Earnings under and over this amount do not count. EI contributions are optional for self-employed workers but it has several benefits.
Self-employed individuals are required to file Form T1 and Form T2125 for personal income and any business expenses respectively. You don’t have to pay any business income tax when you’re self-employed and working in Canada.
Form T1 and Form T2125
Business income of sole proprietors is also treated as their personal income, getting reported on the personal tax return, which is the Form T1. As dictated on Line 104 (“Employment income not reported on a T4 slip.”)
Form T2125 is used to explain all of your business activities that have taken place over the year.
When working with an independent contractor, you in this case, a client will send out a copy of Form T4A to the CRA that dictates the amount you were paid by them. Maintain a track record of all the clients you work with, along with any payments made to you using T4As.
GST, HST, and PST
If your net taxable income crosses $30,000, you can collect federal sales tax. Otherwise, you’re considered a Small Supplier by the federal government and cannot collect either GST or HST. You are required to keep track of net taxable income and apply for collection once you cross that figure.
The GST and PST are both combined and collected as the HST in some provinces as well.
Paper-based forms can be filled out and mailed to the CRA as well. But a faster way is to set up an account online and use the NETFILE service by the CRA. Apart from credit, debit and wire transfer, you can pay off in other ways as well.
Make sure you never miss out on your tax payments with the help of Duggal Professional Corporation. Offering you a wide range of financial solutions such as payroll services and full cycle accounting services.
Reach out to us today if you require a CPA in Edmonton.