Being self-employed doesn’t mean you have to be on your own when it comes to filing your income tax return.

To help the self-starters in our province with their income tax return, the Chartered Professional Accountants of British Columbia (CPABC) have prepared answers to some commonly asked questions.

1. What are the benefits to declaring self-employed status?
As a self-employed professional, you can generally take advantage of a wider range of available deductions in computing your taxable income than people who earn employment income. One of the benefits of being self-employed is that you are not required pay Employment Insurance (EI) premiums. This could have saved you up to $836 in EI premiums in 2017 and up to $858 in 2018. However, this means that if your consulting contracts terminate and you are left without work, you cannot claim EI benefits.

Canada Pension Plan (CPP) contributions are still required for self-employed professionals. If you are self-employed, you will need to pay the “employer’s portion” as well as your own share.

The maximum amount for the combined contribution was $5,128 for 2017. For 2018, the amount will be $5,188. You will, however, be able to claim a deduction in computing your income for the employer’s portion of CPP up to the maximum of $2,546 for 2017 and $2,594 for 2018, and a tax credit for your own share of the CPP.

Each case is unique. Keep in mind that there are other pros and cons of being employed versus self-employed.

2. I am a chiropractor who’s self-employed. Can I defer a portion of my income for tax purposes?
As of March 21, 2017, professionals, such as chiropractors, accountants, dentists, lawyers, and doctors, must include year-end unbilled time or “work in progress” in their income at the lower of cost and fair market value. To mitigate the effect of this change on professionals that previously relied on the election, a five-year transitional period will allow them to gradually bring the “work in progress” into income. The five-year transitional period is only available if the election to exclude “work in progress” was made in a taxation year that began on or prior to March 21, 2017.

3. When’s my deadline for filing my income tax return?
If you are self-employed, the filing deadline for you and your spouse or common-law partner is June 15, 2018. Remember to retain your records for at least six years after the end of the year to which the records relate. The Income Tax Act requires every taxpayer carrying on a business to keep records and books of account for verification. So if you are claiming automobile expenses, meals and entertainment costs, or any other business expenses, make sure you retain the documents or invoices to support your expense claim.

The failure to keep adequate records is an offence that can result in conviction along with a fine or imprisonment, or both.

Looking for more tips? Check out CPABC’s RRSP and Tax Tips at www.rrspandtaxtips.com.

Chartered Professional Accountants of British Columbia (CPABC): Tax rules relating to these RRSP tips are complex. This document is not intended as tax advice, and you should not make tax decisions based solely on the information presented in these tips. You should seek the advice of a chartered professional accountant before implementing a tax plan or taking a tax filing position.

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