The Gig Economy: Navigating the tricky tax waters
Canada’s gig economy is growing at a rapid pace and shows no signs of slowing down. Whether you are a freelancer enjoying flex work freedom, a full-time employee taking on some side gigs or have a skill or hobby and are looking to monetize, here are a few considerations to help you execute a positive result.
1) Begin by creating a plan. Start small and save the equivalent of six months living expenses before you embark on an all or nothing strategy.
2) Manage your finances. According to uFile tax expert Gerry Vittoratos, managing finances as a full-time employee is relatively straightforward. Most of us think of deductible expenses only a month or two before the Canada Revenue Agency tax filing deadline. However, for the growing number of Canadians who are choosing to opt out of the nine-to-five grind in favour of flex work freedom or taking on extra side gigs, managing finances and filling out taxes is the “not-so-fun” part. But it’s also not impossible – if you’re organized.
3) Find the right tools. Keeping track of expenses, projections, and profits can feel like an overwhelming uphill battle to climb. Successful freelancers will have a preferred financial advisor, software provider to guide them or simply take pleasure in keeping up-to-date on government policies and self-employment trends. That makes filing federal income tax online easier. First-time freelancers who haven’t yet invested in the right tools and services may struggle at the beginning. A few upfront costs can save you in the long run.
A few tax-planning strategies:
1) New freelancers can set up shop at home and the business expenses can be treated as a deduction on your tax return. Deductible expenses include real estate taxes, mortgage interest, rent, casualty losses, utilities, insurance, depreciation, maintenance and repairs. But not all types of businesses can deduct all types of expenses, so understand the limits.
2) Transportation costs are deductible and good software will help you keep track of the business/personal use ratio. Keep all receipts.
3) Spending time with clients or potentials clients is essential, so keep in mind meals and entertainment costs are 50 per cent deductible. Make sure to keep all receipts, statements and invoices.
4) If you start up your business alone, it doesn’t mean you have to do everything alone. Keep receipts of who is working for you and how much you are paying them.
It is has never been easier to start up a side business with the technology that is available to you. As Vittoratos says: “If you have a brilliant idea and the ambition to turn it into something real, there really is no excuse not to get out there and start up a business.”