Several influencers have been pinched by the tax for not having declared certain advantages, trips and stays received as gifts. Here’s what you need to know about income to report and deductions to claim as a self-employed person.
From a tax point of view, the status of self-employed or independent worker is very different from that of employees. Indeed, while the latter have deductions at source on their salary in order to pay the various contributions and income taxes, the self-employed worker will have to deduct these amounts himself.
This year, self-employed workers have until June 15 to file their income tax return, but be careful, because the amounts due to the tax authorities must be paid no later than April 30 to avoid penalties.
Gifts matter too
A self-employed person does not receive a salary and does not receive a T4 from his employer like a traditional employee. On the other hand, his clients send him T4As, stating the sums they have paid him in exchange for his services.
Josée Cabral, top tax specialist at H&R Block, says that beyond these amounts, there are other incomes to consider. “Gifts received must also be declared. For example, if an influencer promotes in their posts for a telecommunications company and they received a free phone, they will have to declare it,” she says.
To do this, he must indicate what the fair market value of the product in question is on the market, and include it in his business income. The same applies to trips, stays in hotels and other goods and services received as gifts in exchange for its services.
Many deductions
However, a self-employed person has the possibility of deducting certain expenses, as long as they were used to generate income.
They are many. These include advertising costs, meals and entertainment expenses, travel and parking expenses, office expenses, stationery and office supplies, interest and bank charges on accounts dedicated to work, internet, telephone, cost of seminars, conferences and training, professional fees (legal and accounting), union or professional order dues, travel expenses for professional purposes, etc.
Do not forget the amounts related to the use of the vehicle for work (gas, insurance, maintenance and repairs, registration, driver’s license, etc.), which will be deducted in proportion to the mileage traveled for business purposes .
“There is also everything related to the costs of using a home office such as heating, electricity, insurance, maintenance and repairs. For tenants, we also add the rent, and for the owners, interest on the mortgage loan, property taxes and condo fees, if applicable,” lists Josée Cabral.
Again, it will be necessary to evaluate the area used for the work in relation to the total area of the dwelling. For example, an office occupying a room in a 4 1⁄2 represents 25%, and it is this percentage that will be applied to calculate the deductions.
“People who become influencers don’t have experience. They spend all their income and are surprised by what the tax demands of them afterwards. They come to us with their T4As, but have not kept any receipts for their deductions. You have to be well informed and put money aside in anticipation of the sums that you will have to pay to the tax authorities,” warns Ms.me Cabral.
Advice
- Keep all your invoices and proof of payment. Ideally, we photograph or digitize them, and file everything in a file on our computer.
- Keep your documents for at least six years, because the government could ask for them during an audit.
- As a self-employed person, it is recommended to have a professional bank account different from your personal account.
- Above $30,000 in income, you must register for the GST-QST file, invoice these taxes to your customers, then declare them and remit them to the government.
- To learn more about eligible expenses as deductions, see this page from the Canada Revenue Agency.