FYI — EI special benefits for self-employed people Канада


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Self-employment tax for working hol >

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August 13th, 2020

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How much tax should I pay? When is my tax return due? Am I entitled to any deductions? All of your Canadian self-employment questions answered!

Many, if not most working holidaymakers in Canada seek employment opportunities in the same tried and trusted areas – retail, bars & restaurants, and ski-related roles in the winter resorts being prime examples.

But what if you’ve got a different path in mind? What if you want to make it out on your own?

If you have a skilled trade or a start-up business idea, you might be considering becoming self-employed during your working holiday in Canada.

There are many advantages to being self-employed. For starters you’ll have complete control and freedom over your working life. Fancy sleeping in every morning? Take it, you’re the boss!

But there are also some downsides to becoming self-employed. Some of these relate to tax. Simply put, tax is a slightly more complex subject for a self-employed individual than a typical employee.

However, this should not be seen as prohibitive to becoming self-employed. To ensure compliance with the Canadian tax authorities, there are just a few steps you need to follow.

With this in mind, we’ve created this useful guide of everything you need to know about tax as a self-employed individual in Canada.

So let’s get into it.

Am I self-employed?

It’s pretty easy to tell if you’ll be considered as ‘self-employed’ by the Canadian tax authorities.

In simple terms – if you don’t have an employer and you sell goods or services for money you will be considered a ‘sole proprietor’.

If you’re a sole proprietor, you must report all of your income to the Canada Revenue Agency (CRA) by your personal tax return.

Tax rates – how to calculate your taxes

Taxpayers with employment income in Canada are liable to pay both federal and provincial tax on their earnings.

All taxpayers are entitled to a tax-free allowance ($12,069 in 2020). This means that you can earn up to this amount without paying federal tax on your income.

Canadian tax rates are progressive — the more you earn (over the tax-free allowance), the more tax you’re obliged to pay. Federal tax deductions start from 15 percent on the first $47,630 of taxable income, with the provincial tax (applied in addition to federal tax) depending on the province in which you work.

Federal tax rates and income brackets

Tax Rate Bracket
15% $12,069 — $47,630
20.5% $47,630 — $95,259
25% $95,259 — $147,667
29% $147,667 — $210,371
33% $210,371 and over

Provincial tax rates

Alberta provincial income tax rates

Tax Rate Bracket
10% first $131,220
12% $131,220 — $157,464
13% $157,464 — $209,952
14% $209,952 — $314,982
15% over $314,982

British Columbia provincial income tax rates

Tax Rate Bracket
5.06% First $40,707
7.7% $40,707 — $81,416
10.5% $81,476 — $93,476
12.29% $93.476 – $113,506
14.7% over $153,900

Manitoba provincial income tax rates

Tax Rate Bracket
10.8% First $32,670
12.75% $32,670 — $70,610
17.4% Over $70,610

New Brunswick provincial income tax rates

Tax Rate Bracket
9.68% First $42,592
14.82% $42,592 -$85,184
16.52% $85,184 — $138,491
17.84% $138,491 — $157,778
20.3% Over $157,778

Newfoundland & Labrador provincial income tax rates

Tax Rate Bracket
8.7% First $37,591
14.5% $37,591 — $75,181
15.8% $75,181 — $134,224
17.3% $134,224 — $187,913
18.3% Over $187,913

Northwest Territories provincial income tax rates

Tax Rate Bracket
5.9% First $43,137
8.6% $43,137 — $86,277
12.2% $86,277 — $140,267
14.05% Over $140,267

Nova Scotia provincial income tax rates

Tax Rate Bracket
8.79% First $29,590
14.95% $29,590 — $59,180
16.67% $59,180 — $93,000
17.5% $93,000 — $150,000
21% over $150,000

Nunavut provincial income tax rates

Tax Rate Bracket
4% First $45,414
7% $45,414 — $90,829
9% $90,829 — $147,667
11.5% Over $147,667

Ontario provincial income tax rates

Tax Rate Bracket
5.05% First $43,906
9.15% $43,906 — $87,813
11.16% $87,813 — $150,000
12.16% $150,000 — $220,000
13.16% Over $220,000

Prince Edward Island provincial income tax rates

Tax Rate Bracket
9.8% First $31,984
13.8% $31,984 — $63,969
16.7% Over $63,969

Quebec provincial income tax rates

Tax Rate Bracket
15% First $43,055
20% $43,055 — $86,105
24% $86,105 — $104,765
25.75% Over $104,765

Saskatchewan provincial income tax rates

Tax Rate Bracket
10.75% First $45,225
12.75% $45,225 — $129,214
14.75% Over $129,214

Yukon provincial tax rates

Tax Rate Bracket
6.4% First $47,630
9% $47,630 — $95,259
10.9% $95,259 — $147,667
12.8% $147,667 — $500,000
15% over $500,000

Canadian Pension Plan

While there are lots of positives to being self-employed, you can include ‘Canadian Pension Plan (CPP) contributions’ on your list of cons.

CPP provides contributors and their families with partial replacement of earnings in cases of retirement, disability, or death. Almost all individuals who make over $3,500 a year working in Canada (outside Quebec, which has its own system) contribute to CPP.

Employees contribute 4.95 percent of their gross pay in CPP for each pay period. This amounts to half of the contribution, with the employer paying the other half. However, if you’re self-employed, you will have to pay the full CPP amount (9.9 percent) by yourself.

It’s important to note that you will only need to pay CPP on income you earn from $3,500 – $55,300. In other words, if you earn under $3,500 you will not need to pay CPP contributions. And you will not need to deduct any CPP from earnings you make over $55,300.

It’s also important to keep in mind that you must report details of your CPP contributions on your tax return.

Employment Insurance (EI)

The EI program provides temporary income support to unemployed workers while they look for employment or to upgrade their skills. The EI program also provides special benefits to workers who take time off work due to illness, pregnancy, caring for a new-born or newly adopted child (and more).

Contributing to the EI program is optional for all self-employed people in Canada and the rate is 1.66 percent of earnings

GST, HST, and PST – what’s the difference and do I need to pay it?

GST – General Sales Tax

PST – Provincial Sales Tax

HST – Harmonized Sales Tax

Some provinces have combined their GST and PST into a single tax – HST. Others charge them separately.

If you earn more than $30,000 of net taxable income in a year you will be required to collect federal sales tax and send it to the government. However, you’ll be considered a ‘small supplier’ if you earn less than this amount. Small suppliers are not required to collect GST/HST/PST.


If you are required to collect federal sales tax you will need to apply for a GST/HST/PST number.

Once you have your number, you will need to organise a payment plan with the CRA. These taxes are paid to the Canadian government on either an annual, quarterly, or monthly schedule.

Can I use any business expenses to reduce my tax liability?

Yes! If you’re self-employed in Canada there are a number of business expenses you can include on your tax return.

Some common examples of business expenses include:

Legal and accounting fees

Telephone and utilities

Meals and entertainment

Motor vehicle expenses

In general, it’s possible to deduct any reasonable expense you incurred in order to earn your business income.

However, personal expenses are not eligible. For example – if you work from home and you use your internet connection for business 70 percent of the time and personal use 30 percent of the time, you can only deduct 70 percent of your internet bill.

If you intend to deduct expenses from your tax bill it’s vital that you keep good records and your receipts in case you are subject to an audit from the CRA.

How to pay and file your tax

Employees in Canada have tax automatically deducted from their wages for each pay period. But if you’re self-employed you will have to make your own tax deductions.

So how much should you deduct?

Exactly how much you will have to pay will depend on your tax bracket (see tax rates above) and the deductions you qualify for. However, it’s generally advisable to set aside 25-30 percent of everything you earn through your business in order to pay your tax bill.

Key documents

Below are the three government documents that every self-employed person in Canada will need to be familiar with.

T-1 General – the form used in Canada by taxpayers to file their personal income tax return.

The below types of income must be declared on this form:

  • Employment income
  • Self-employment income
  • Foreign income
  • Interest
  • Dividends
  • Capital gains
  • Rental income

Income you earn from self-employed should be listed on Line 104 of the form. After applicable deductions, the net income and taxable income are determined, and federal and provincial or territorial tax are calculated to give the total payable amount.

Form T2125 – you’ll need to file this form in order to detail all of your business activities during the year to the CRA. You also use this form to list your deductible business expenses.

T4A slips – if you’re an independent contractor, you’ll receive a Form T4A, Statement of Pension, Retirement, Annuity, and Other Income from every client you worked with during the year. The client fills out one copy of the form, reporting how much they paid you, and submits it to the CRA. They fill out a second form, and send it to you. Using your T4As for the year, you can determine how much revenue you earned from each client, and therefore also a total sum of earnings from all clients.

These slips should prove useful when it comes to keeping tidy financial records.

It’s important to note that, if your client does not file a particular T4A slip, it will still be your responsibility to report the income.

Filing your return

Paper – you can choose to print out a paper form, fill it in, and mail it to the CRA.

Electronic – or you can fill it out online. This is much faster and easier than printing and mailing the forms yourself.

Agent – confused about the tax filing process? Why not enlist the help of a tax agent like Taxback.com? Their tax team will file your tax return for you and ensure you are 100 percent compliant with the Canadian tax authorities.

Paying your taxes

There are a range of options for paying your taxes – whether through online debit or credit card payment, or via a financial institution or wire service.

Tax Deadlines

Here are the most important tax deadlines that every self-employed worker in Canada should keep in mind.

January 31

If you have a GST/HST number and you make quarterly payments, this is the deadline for remitting payments for the previous quarterly reporting period.

February 20

This is the first day you can file your taxes online or by phone.

March 15

If you pay income tax in installments, your first quarterly payment is due on this date.

April 30

This is the tax filing deadline for individuals and sole proprietorships who are not self-employed full-time. Regardless of when you file, all sole proprietors must also pay their taxes by this date.

If you have a GST/HST number, this is the deadline for remitting payments for the previous quarterly reporting period.

June 15

This is the tax filing deadline for full-time self-employed people (you must still pay your tax by April 30).

FYI — EI special benefits for self-employed people Канада

April 1, 2010
by Truck News

Categories

Companies

Being your own boss has many benefits, but access to Canada’s federal Employment Insurance plan isn’t among them. If you’re self-employed and want to take time off to care for an ailing parent or new baby, or your own health prevents you from working, you’re on your own.

That’s changing. Under the EI Measure for Self-Employed People, you can now pay into EI and be eligible to claim certain benefits previously available only to salaried workers and wage-earners: maternity, parental, sickness, and compassionate-care.

You’ve probably seen TV commercials about this and all the other great new programs and tax cuts the government has made available to Canadians (I think this ad campaign is a government program to help the TV stations get through the recession).

Like anything else coming out of Ottawa, 30 seconds isn’t nearly enough time to cover the details. If you’re self-employed and thinking about opting into EI, here are some points to consider:

Are you “self-employed”?

The EI Measure for Self-Employed People defines the “self-employed” as someone who operates his own business or is an employee of a corporation but not eligible to participate in EI because he controls more than 40% of the voting shares.

What EI benefits can I receive?

There are four types of “special” EI benefits for the self-employed: maternity and parental benefits, for people who are pregnant, have recently given birth, are adopting a child, or are caring for a newborn; sickness benefits, for people who are sick, injured, or quarantined; and compassionate care benefits, for individuals who have to be away from work temporarily to care for a family member who is gravely ill with a significant risk of death. You must wait 12 months from your enrollment date before you can claim EI benefits.

How much are the premiums?

The premiums are payable on the amount of your earnings up to an annual maximum ($43,200 in selfemployment earnings 2010), based on your income tax return for the year you register. The 2010 EI premium rate for self-employed people is $1.73 per $100 of earnings, which is the same rate that employees pay. This means the maximum EI premium you can pay for the 2010 calendar year is $747.36.

EI premiums are payable on your self-employment income for the entire year, regardless of the date you register. Whether you register in April or December, you’ll pay EI premiums on your self-employment income for the entire year.

If you’re a shareholder of a corporation and have registered for the program, your EI premiums will be based on the amount of your T4 slip.

How do I sign up?

Register with the Canada Employment Insurance Commission (the Commission) through Service Canada’s online ‘My Service’ account. You must have earned $6,000 in self-employment income during 2010 to be eligible to file claims in 2011.

After you enroll, you have 60 days to reconsider and opt out without having to pay any premiums. Once the 60-day grace period has elapsed, your participation lasts indefinitely, unless you terminate it.

How do I opt out?

EI is voluntary for the self-employed, and you can terminate your participation at any time provided you have never received EI benefits as a self-employed person. Your participation will end on Dec. 31 of the year in which you file the notice of termination with Service Canada.

That means regardless of the date you file the notice of termination, you must pay EI premiums on your self-employment income for the entire calendar year. If you end your agreement on Apr. 20, 2011, you must continue to pay EI premiums until Dec. 31, 2011.Your access to EI special benefits will continue until the end of the year in which you terminate your agreement.

Again, you can only terminate your agreement if you have never claimed EI special benefits during your period of self-employment. If you have received benefits, you cannot terminate your agreement. In other words, after you receive EI special benefits, you have to continue to pay EI premiums on your selfemployment income for the duration of your self-employment career, regardless of any change in the nature of your employment.

Employment Insurance (EI) for the Self-Employed


Since January 2010, self-employed persons have been able to pay EI premiums on a voluntary basis, in order to qualify for EI special benefits, including

maternity benefits (maximum 15 weeks, a claim can start up to 8 weeks before the expected birth date)
parental/adoptive benefits (maximum 35 weeks),
sickness benefits (maximum 15 weeks),
compassionate care benefits (maximum 6 weeks — Federal 2015 Budget increased this to 6 months effective January 1, 2020), and
benefits for parents of critically ill children (PCIC, effective June 9, 2013, maximum 35 weeks)

These EI benefits are taxable.

Under the legislation, prior to claiming benefits, self-employed Canadians:

are required to opt into the program at least one year prior to claiming benefits
need to have earned a minimum in self-employed earnings (net income from self-employment) over the preceding calendar year. This amount is indexed annually, and increases to a minimum of $6,680 earnings in 2015 to qualify for for 2020 claims ($6,645 earnings in 2014 for 2015 claims).
can opt out of the EI program at the end of any tax year, as long as they have never claimed benefits.
must contribute on self-employed earnings for as long as they are self-employed, if they have claimed benefits.
will pay the same EI premium rate as salaried employees.
will not pay the employer portion of EI premiums, in recognition of the fact that they cannot collect regular EI benefits.

The program had a start date of January 2010, so claims could have been made as early as January 2011 with minimum self-employment earnings of $6,000 in 2010.

Self-employed Quebec residents still receive benefits of maternity leave, paternity leave, parental leave and adoption leave through the Quebec Parental Insurance Program (QPIP) provided through the Quebec government. They are still eligible to take advantage of the EI sickness and compassionate care benefits being offered by the Government of Canada. If they opt into this program, their premium rates will be the same as the rates for employees in Quebec.

Revised: July 14, 2020

Copyright © 2002 Boat Harbour Investments Ltd. All Rights Reserved. See Reproduction of information from TaxTips.ca

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EI for the self-employed

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Should you opt in or stay out? Experts say ‘do the math’

Ever since the federal Employment Insurance program began in 1940 (then known as Unemployment Insurance), it has specifically excluded one very large group — the self-employed entrepreneur.

They haven’t needed to pay EI premiums. But the self-employed also couldn’t get any benefits when they found themselves unable to work.

That has now changed. Since the start of 2011, small business owners and other self-employed workers have been allowed to access select parts of the EI program — the «special benefits.» These include maternity and parental benefits, sickness allowance and compassionate-care payments.

Now, the more than 2.6 million Canadians who are self-employed — small business owners, real estate agents, lawyers and farmers, among others — can choose to become part of the safety net that millions of Canadian workers have counted on for 70 years.

How to register for special EI benefits for the self-employed

Enter into an agreement to opt in to the EI program by registering online through the government’s My Service Canada Account portal.

But there are lots of conditions to satisfy before any EI payments can be made, and the program isn’t for everyone. The figures show that, so far, the program hasn’t attracted the interest of the vast majority of the country’s self-employed. Since the expanded EI program first became available at the beginning of the year, just 11,127 have opted in and 1,810 have started drawing benefits.

Experts say people should carefully check out the pros and cons before signing up because it just doesn’t make financial sense for many entrepreneurs to join the EI club. (In Quebec, for example, the self-employed are already covered for maternity and parental benefits.)

Benefits

First, here’s a look at the kinds of special benefits that now are available to self-employed Canadians who opt in:

  • Maternity benefits — up to 15 weeks for birth mothers.
  • Parental — up to 35 weeks for biological or adoptive parents.
  • Sickness — up to 15 weeks for people who can’t work because of sickness or injury.
  • Compassionate care — up to six weeks for people who can’t work because they need to care for a severely ill family member.

Now, the costs. Once self-employed people decide to opt in, they begin paying EI premiums at the same rate as employees do: $1.78 per $100 of insurable earnings to a maximum $44,200 of insurable earnings (2011 rates).

That works out to a maximum annual premium of $786.76. Since the self-employed won’t have access to regular EI benefits for periods of unemployment, they won’t need to pay the employer portion of EI premiums.

The benefit is equal to 55 per cent of one’s average weekly earnings from self-employment in the calendar year before the claim is submitted. The maximum weekly benefit in 2011 is $468.

Do the math

From here, it’s easy to figure out whether it’s worth your while to opt in.

Let’s take the case of a 30-year-old self-employed designer, Jill, who made $50,000 last year. She’s thinking of having a child and wants to take a full year off to look after her newborn.

Catches and conditions

  • You must have paid EI premiums for at least 12 months before making a claim.
  • Must have made at least $6,000 in self-employment income in the calendar year before a claim is made.
  • Once a claim is made, you must continue to make EI contributions on self-employment income for as long as your self-employment career lasts.
  • Any income generated by your business while you receive special benefits could severely reduce your EI benefits
Source: Service Canada FAQ

If she had opted in and paid EI premiums for at least one year prior to applying for benefits, she could collect up to 50 weeks of benefits (15 weeks of maternity benefits and 35 weeks of parental benefits). She could collect a maximum $468 a week for all 50 weeks, giving her a total of $23,400.

Her EI premiums are $786.76 a year (2011 rates). At current EI rates, she would need to contribute for 29.74 years before she started paying more in premiums than she received from the program (assuming EI premiums and maximum benefits rise at the same rate).

That’s for just one child. If she had two children and took two 50-week leaves, she could be in line for up to $46,800 in benefits. If she paid the maximum for 30 years, she’d have paid only $23,602.80 in premiums, so opting in could really make sense for Jill.

But the calculation becomes a little murkier if Jill doesn’t want to take the full 50 weeks of maternity and parental benefits.

What if she just wants to take just 15 weeks away from her business? She pays the same $786.76 in annual premiums, but will collect just $7,020 in benefits. That’s equivalent to a little less than nine years of premiums at 2011 rates.

No opt-out after a claim

No problem, you say. Jill should just opt out of the program after she’s made a claim.

But that’s when Jill would find out about the biggest catch of the EI-for-the-self-employed program. Once you’ve made a claim — any claim — you must pay EI premiums for as long as you’re self-employed. You can’t opt out.

That’s why advisers are recommending that people weigh the pros and cons carefully before deciding whether to opt in.

Only in Quebec, you say?

In Quebec, the self-employed are already covered for maternity and parental benefits through the Quebec Parental Insurance Program. They can access the sickness and compassionate-care provisions of the federal EI program by paying reduced premiums.

That’s not the only reason to hesitate before making the plunge. Any income made while collecting special EI benefits must be reported and will end up reducing those benefits — often on a dollar-for-dollar basis.

If you have the type of business that generates passive income whether you’re working on it or not, you won’t want to opt in.

«I have yet to see a situation where it makes sense financially for someone to opt into the program, although I do discuss the program with my self-employed clients,» says Angus Shuttleworth, a chartered accountant in Burlington, Ont., who specializes in the small business sector.

Shuttleworth notes that it’s difficult for many owners of small businesses to step away from their business. Combine that reality with the requirement that once you take benefits, you are required to continue paying into the program for as long as you are self-employed, and he says the math won’t add up for most people.

Still, Shuttleworth acknowledges that it may make sense for some to opt in. He asks his clients the following questions to assess whether they might be good candidates to sign up:

  • Do you have children? Do you plan to have any? If so, how many?
  • What is the likelihood of you claiming sick leave? (Shuttleworth notes that no medical examination is required for EI benefits for the self-employed, so the program «may be beneficial for the business owner as a way to enhance or supplement short-term disability benefits.»)
  • Do you have members of your family who may require your care in the future?
  • How seasonal is your business? (People in seasonal businesses, such as roofing and landscaping, may have periods of little or no income so benefits paid during those periods wouldn’t be reduced. «However, it is difficult to time sicknesses or births to coincide with seasonal lulls in one’s business,» Shuttleworth points out.)

You also have to figure out if your business is really the type that you can leave for months at a time.

An e-mail to CBCNews.ca from commenter «ShootFromThe Hip» shortly after the EI reforms were announced addressed that point directly: «I don’t know about you guys, but if I take parental leave, who’ll run the company? I’m not a big business with infrastructure in place to keep my clients happy.»

More catches

That’s not the only catch. As noted earlier, you must also have paid premiums for a full year before drawing any benefits.

So, deciding to opt in when you’re three months pregnant won’t work. You have to opt in when you’re thinking of starting a family.

You also must have reported a minimum of $6,000 in self-employed income in the calendar year before the year in which the claim is made.

And if your business folds and you find yourself out of work, no benefits will be paid. This isn’t like regular Employment Insurance.

Add up all the costs, benefits and drawbacks and you can see why many experts aren’t surprised that fewer than one half of one per cent of Canada’s 2.6 million self-employed have chosen to opt in to the EI system.

For many of those who have decided to join the club, the math may have made sense for them.

Others may have joined simply because they want another income option if their career is temporarily interrupted.

Call it a security blanket … albeit one with costs, catches, and conditions.

Are self-employed people in Canada required to pay into EI?

Are self employed individuals in Canada REQUIRED to pay into Employment Insurance? In the past, self-employed people did not even qualify for EI benefits. But now there is «EI Special Benefits» which make self-employed people eligible should they choose to pay into it rather than regular EI.

My question is, do you need to fill out a form to opt out of it? Or do just simply not pay into it, period? Does every employed individual in Canada have a legal obligation to pay into EI in the same way that CPP contributions are mandatory?

8 Key Benefits of Being Self-Employed

In June 2020, Gallup released the findings of an interesting study titled ‘The World’s Broken Workplace’. The poll discovered that 85% of people hate their jobs – and experts contend that engagement isn’t getting any better anytime soon. Since management refuses to address this problematic trend, a growing number of employees are saying ‘sayonara’ and gambling on entrepreneurship.

With so many individuals disgruntled, frustrated and perturbed by their bosses, more and more professionals are rolling the dice by transitioning to self-employment. It’s estimated that more than 550,000 people become entrepreneurs every month – and it’s only getting larger, thanks to evolving technology.

And why not? There are so many perks when you’re self-employed, ones that you can never fully enjoy when you’re working for someone else, whether it’s a multinational corporation or a startup. From schedule flexibility to tax credits, there’s an abundance of rewards for that person launching a web store, that scribe offering writing services or that digital marketer performing consultancy. It is truly an art form to go solo.


Unconvinced there are benefits to being self-employed? Here are eight perks to enjoy in today’s market!

1. You’re Independent

How many times have you had to seek approval from your supervisor and your supervisor’s supervisor? How much do you loathe the idea of having your innovative ideas being shot down because the company lacks the vision? How often do you feel tied down and that you’re wasting your talents?

That is the problem of being employed by a business – big or small.

This does not happen when you’re self-employed. In fact, it’s quite the opposite, particularly if you have the characteristics of your typical entrepreneur. Since you’re using your own capital – financial, human and otherwise – you’re far more independent to make your choices, utilise your own concepts and employ the appropriate measures to sell your product or service. In other words, you’re accountable to nobody except yourself and your customers. And that’s a wonderful feeling.

2. You Enjoy More Flexibility

Surveys repeatedly find that workers would appreciate having more flexibility in their schedules. This could consist of arriving to work an hour late, leaving the office an hour early or finishing projects at home or on the road.

Despite mobile technology, cloud computing and the endless opportunities to work remotely, most people are still chained to their cubicles. To this date, you’re required to work the standard business days and hours, even if you feel that you could get all your work done in the morning – or during non-business times. It can be frustrating at times.

One of the main benefits of self-employment is the fact that you have far greater flexibility. Your flexibility can be the days and hours you choose to work or the location you can get your tasks completed. While you should put in your 40 hours, you can design your own schedule rather than have a private firm dictate it to you.

3. You’re Happier

The corporate world can eat away at your soul day by day, year by year. At first, you’re a starry-eyed kid with aims of changing the world. By the end, you’re planning your escape with a bitter and cynical attitude. You’re not the person you once were. This is no way to live.

However, you will discover your old self once you embark upon the self-employment journey.

You’ll be a lot nicer to everyone. Your patience will grow. Your positivity will bloom. Your overall outlook on life will blossom. Your entire demeanour will change for the better. It might not happen overnight, but as time goes by, you’ll be a far happier person.

4. You Make Money for Yourself

Sure, you may be earning $15, $20 or $25 per hour in your current job, but you realise that you’re still making the company a lot of money for the work you do. In fact, if you had your own business, you could triple what you earn in an hour. A lot of employees get perturbed by the fact that they’re generating profits for someone else while they get peanuts.

Peanuts to that!

An important advantage for the self-employed is that everything they earn is for them – and only them. If you compose a white paper for $500 or design a website for $5,000, then that money goes into your pocket, not a company’s. The more you work, the more money will be added to your bank account.

5. You Skip Workplace Drama

We’re all supposed to be adults, but we sometimes act like teenagers at the office. From gossiping to bullying to romance, there are so many things that make the workplace seem like high school rather than a location to earn a paycheque.

When you’re working for yourself, you no longer need to deal with workplace drama. You don’t need to hear Sally complain about Harry. You don’t need to pick sides in the Jack-John spat. You don’t need to worry about which side of the bed your supervisor woke up on – the good or the bad.

This is because you’re now self-employed, and all the drama has vanished. The only drama you’ll have is what lunch you’re going to eat or what marketing scheme you’ll come up with for Christmas.

6. You Save Money

Believe it or not, but we spend a lot of money just to work: transportation, clothing, food and everything else in between. It seems like we’re doling out a great chunk of our paycheque to sustain our careers.

It is different when you’re self-employed, especially if you’re working from home. You don’t need to spend your hard-earned cash on transportation, dry cleaning, lunches or anything else that is essential if you’re employed at an office.

At first, you might be earning less than what you made at a company, but a portion of it is offset by the money you saved by being self-employed.

7. You Enjoy Tax Opportunities

In today’s economy, governments are encouraging constituents to become entrepreneurs. Politicians and bureaucrats want the citizenry to open businesses and hire employees. They want individuals to innovate and invent. The key difficulty is facilitating this behaviour, which can be solved through taxes.

That’s right. If you’re starting your own business, then there’s a plethora of opportunities come Tax Day. You can get free money for being an entrepreneur, whether it is in the form of deductions or credits.

A lot of these tax perks can’t be received by your typical worker who endures the sights and sounds of the asphalt jungle every day. If you’re reluctant to be self-employed, then you should think about your potential tax situation.

You may not believe it now, but you’ll be excited when it is time to file your taxes.

8. You Feel Self-Fulfilled

A great thing about entrepreneurship is that you’re testing your limits, acumen and skills. Your financial future depends on your hard work, dedication and ingenuity, not on your employer. You’re like Robinson Crusoe, but in the corporate world.

When you turn a profit, expand your business and realise that you have gone beyond a passive income, it feels rather rewarding. You have done this all on your own without a big business behind you. Without the comfort of a 9-to-5 job, you’re paying the rent, putting groceries on the table and travelling the world. Perhaps it is time to give yourself a pat on the back.

So, you want to be self-employed, huh?

It’s a lofty goal for most people, but it’s something that a lot of us are experimenting with because we’re detached from our current jobs. The studies find that more and more people are quitting their day jobs to pursue their passion and follow their dreams. It’s a risk, but it’s a worthwhile attempt at ditching the cubicle and embracing the world as your office.

Whether you’ve quit your job to start a business or you’re making the slow transition to self-employment, we would like to wish you the best of luck in your future endeavours.

Are you self-employed? Let us know about your career change in the comments section below!

FYI — EI special benefits for self-employed people Канада

In one of the opening episodes of the CBC hit “Schitt’s Creek,” Johnny Creek tries to obtain Employment Insurance benefits but is turned away because he’s never paid into the program. As a small business owner, Johnny could have avoided that situation if he had just signed up for EI special benefits. If you are self-employed, you don’t have to contribute to the EI program, but if you want the peace of mind of these benefits, you should consider signing up.

Eligible Registrants

If you own your own business, you may register for special benefits. This also includes people who own more than 40% of a corporation and farmers. However, if you are a contract worker such as a barber or taxi driver, you should use the regular EI program. Additionally, if you are a fisher, you do not have to sign up for the special program, as you are insured under EI Fishing Regulations.

Signing Up

The Canada Employment Insurance Commission handles this program, and you can apply through your My Service Canada Account. To sign up, open your account and select “Employment Insurance for the Self Employed” on the home page. Then, follow the prompts to create your account.

Calculating EI Premiums

As of 2020, EI premiums are 1.63% of earnings up to $51,300. That means you pay $1.63 for every $100 you earn. However, if your earnings exceed $51,300, you do not have to pay premiums on the excess earnings. The rates and thresholds change annually, so it is important to check for updates.

Note that you pay contributions on your income, not your business revenue. To explain, imagine you earn $1,000 in revenue and incur $200 in expenses. In this case, you only pay EI premiums on $800, as that amount is considered your income.

Claiming Benefits

If you cannot work due to an issue covered by EI such as giving birth or needing to take care of a sick family member, you can submit a claim for benefits. You must pay premiums for at least 12 months prior to making a claim. You can request benefits online. The process takes about an hour, and you need your Social Insurance Number, address, and other relevant details.

Amount of Benefits

If you submit a claim, you receive 55% of your insurance earnings per week. As of 2020, the maximum amount of insurable earnings is $51,300. As a result, the maximum weekly EI benefit is $542.60. If you work part time while receiving benefits, you do not get the full amount of your payment, but the reduction varies based on the type of leave and the amount you are earning.

Working Two Jobs

If you have another job in addition to your self-employment, you may opt to only pay EI premiums through that job. However, in that case, your self-employment earnings are not taken into account when calculating your EI benefit, and as a result, you may receive a lower amount.

8 Key Benefits of Being Self-Employed

In June 2020, Gallup released the findings of an interesting study titled ‘The World’s Broken Workplace’. The poll discovered that 85% of people hate their jobs – and experts contend that engagement isn’t getting any better anytime soon. Since management refuses to address this problematic trend, a growing number of employees are saying ‘sayonara’ and gambling on entrepreneurship.

With so many individuals disgruntled, frustrated and perturbed by their bosses, more and more professionals are rolling the dice by transitioning to self-employment. It’s estimated that more than 550,000 people become entrepreneurs every month – and it’s only getting larger, thanks to evolving technology.

And why not? There are so many perks when you’re self-employed, ones that you can never fully enjoy when you’re working for someone else, whether it’s a multinational corporation or a startup. From schedule flexibility to tax credits, there’s an abundance of rewards for that person launching a web store, that scribe offering writing services or that digital marketer performing consultancy. It is truly an art form to go solo.

Unconvinced there are benefits to being self-employed? Here are eight perks to enjoy in today’s market!

1. You’re Independent

How many times have you had to seek approval from your supervisor and your supervisor’s supervisor? How much do you loathe the idea of having your innovative ideas being shot down because the company lacks the vision? How often do you feel tied down and that you’re wasting your talents?

That is the problem of being employed by a business – big or small.

This does not happen when you’re self-employed. In fact, it’s quite the opposite, particularly if you have the characteristics of your typical entrepreneur. Since you’re using your own capital – financial, human and otherwise – you’re far more independent to make your choices, utilise your own concepts and employ the appropriate measures to sell your product or service. In other words, you’re accountable to nobody except yourself and your customers. And that’s a wonderful feeling.

2. You Enjoy More Flexibility

Surveys repeatedly find that workers would appreciate having more flexibility in their schedules. This could consist of arriving to work an hour late, leaving the office an hour early or finishing projects at home or on the road.

Despite mobile technology, cloud computing and the endless opportunities to work remotely, most people are still chained to their cubicles. To this date, you’re required to work the standard business days and hours, even if you feel that you could get all your work done in the morning – or during non-business times. It can be frustrating at times.

One of the main benefits of self-employment is the fact that you have far greater flexibility. Your flexibility can be the days and hours you choose to work or the location you can get your tasks completed. While you should put in your 40 hours, you can design your own schedule rather than have a private firm dictate it to you.

3. You’re Happier

The corporate world can eat away at your soul day by day, year by year. At first, you’re a starry-eyed kid with aims of changing the world. By the end, you’re planning your escape with a bitter and cynical attitude. You’re not the person you once were. This is no way to live.

However, you will discover your old self once you embark upon the self-employment journey.

You’ll be a lot nicer to everyone. Your patience will grow. Your positivity will bloom. Your overall outlook on life will blossom. Your entire demeanour will change for the better. It might not happen overnight, but as time goes by, you’ll be a far happier person.


4. You Make Money for Yourself

Sure, you may be earning $15, $20 or $25 per hour in your current job, but you realise that you’re still making the company a lot of money for the work you do. In fact, if you had your own business, you could triple what you earn in an hour. A lot of employees get perturbed by the fact that they’re generating profits for someone else while they get peanuts.

Peanuts to that!

An important advantage for the self-employed is that everything they earn is for them – and only them. If you compose a white paper for $500 or design a website for $5,000, then that money goes into your pocket, not a company’s. The more you work, the more money will be added to your bank account.

5. You Skip Workplace Drama

We’re all supposed to be adults, but we sometimes act like teenagers at the office. From gossiping to bullying to romance, there are so many things that make the workplace seem like high school rather than a location to earn a paycheque.

When you’re working for yourself, you no longer need to deal with workplace drama. You don’t need to hear Sally complain about Harry. You don’t need to pick sides in the Jack-John spat. You don’t need to worry about which side of the bed your supervisor woke up on – the good or the bad.

This is because you’re now self-employed, and all the drama has vanished. The only drama you’ll have is what lunch you’re going to eat or what marketing scheme you’ll come up with for Christmas.

6. You Save Money

Believe it or not, but we spend a lot of money just to work: transportation, clothing, food and everything else in between. It seems like we’re doling out a great chunk of our paycheque to sustain our careers.

It is different when you’re self-employed, especially if you’re working from home. You don’t need to spend your hard-earned cash on transportation, dry cleaning, lunches or anything else that is essential if you’re employed at an office.

At first, you might be earning less than what you made at a company, but a portion of it is offset by the money you saved by being self-employed.

7. You Enjoy Tax Opportunities

In today’s economy, governments are encouraging constituents to become entrepreneurs. Politicians and bureaucrats want the citizenry to open businesses and hire employees. They want individuals to innovate and invent. The key difficulty is facilitating this behaviour, which can be solved through taxes.

That’s right. If you’re starting your own business, then there’s a plethora of opportunities come Tax Day. You can get free money for being an entrepreneur, whether it is in the form of deductions or credits.

A lot of these tax perks can’t be received by your typical worker who endures the sights and sounds of the asphalt jungle every day. If you’re reluctant to be self-employed, then you should think about your potential tax situation.

You may not believe it now, but you’ll be excited when it is time to file your taxes.

8. You Feel Self-Fulfilled

A great thing about entrepreneurship is that you’re testing your limits, acumen and skills. Your financial future depends on your hard work, dedication and ingenuity, not on your employer. You’re like Robinson Crusoe, but in the corporate world.

When you turn a profit, expand your business and realise that you have gone beyond a passive income, it feels rather rewarding. You have done this all on your own without a big business behind you. Without the comfort of a 9-to-5 job, you’re paying the rent, putting groceries on the table and travelling the world. Perhaps it is time to give yourself a pat on the back.

So, you want to be self-employed, huh?

It’s a lofty goal for most people, but it’s something that a lot of us are experimenting with because we’re detached from our current jobs. The studies find that more and more people are quitting their day jobs to pursue their passion and follow their dreams. It’s a risk, but it’s a worthwhile attempt at ditching the cubicle and embracing the world as your office.

Whether you’ve quit your job to start a business or you’re making the slow transition to self-employment, we would like to wish you the best of luck in your future endeavours.

Are you self-employed? Let us know about your career change in the comments section below!

Self-employment tax for working hol >

Author

August 13th, 2020

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How much tax should I pay? When is my tax return due? Am I entitled to any deductions? All of your Canadian self-employment questions answered!

Many, if not most working holidaymakers in Canada seek employment opportunities in the same tried and trusted areas – retail, bars & restaurants, and ski-related roles in the winter resorts being prime examples.

But what if you’ve got a different path in mind? What if you want to make it out on your own?

If you have a skilled trade or a start-up business idea, you might be considering becoming self-employed during your working holiday in Canada.

There are many advantages to being self-employed. For starters you’ll have complete control and freedom over your working life. Fancy sleeping in every morning? Take it, you’re the boss!

But there are also some downsides to becoming self-employed. Some of these relate to tax. Simply put, tax is a slightly more complex subject for a self-employed individual than a typical employee.

However, this should not be seen as prohibitive to becoming self-employed. To ensure compliance with the Canadian tax authorities, there are just a few steps you need to follow.

With this in mind, we’ve created this useful guide of everything you need to know about tax as a self-employed individual in Canada.

So let’s get into it.

Am I self-employed?

It’s pretty easy to tell if you’ll be considered as ‘self-employed’ by the Canadian tax authorities.

In simple terms – if you don’t have an employer and you sell goods or services for money you will be considered a ‘sole proprietor’.

If you’re a sole proprietor, you must report all of your income to the Canada Revenue Agency (CRA) by your personal tax return.

Tax rates – how to calculate your taxes

Taxpayers with employment income in Canada are liable to pay both federal and provincial tax on their earnings.

All taxpayers are entitled to a tax-free allowance ($12,069 in 2020). This means that you can earn up to this amount without paying federal tax on your income.

Canadian tax rates are progressive — the more you earn (over the tax-free allowance), the more tax you’re obliged to pay. Federal tax deductions start from 15 percent on the first $47,630 of taxable income, with the provincial tax (applied in addition to federal tax) depending on the province in which you work.

Federal tax rates and income brackets

Tax Rate Bracket
15% $12,069 — $47,630
20.5% $47,630 — $95,259
25% $95,259 — $147,667
29% $147,667 — $210,371
33% $210,371 and over

Provincial tax rates

Alberta provincial income tax rates

Tax Rate Bracket
10% first $131,220
12% $131,220 — $157,464
13% $157,464 — $209,952
14% $209,952 — $314,982
15% over $314,982

British Columbia provincial income tax rates

Tax Rate Bracket
5.06% First $40,707
7.7% $40,707 — $81,416
10.5% $81,476 — $93,476
12.29% $93.476 – $113,506
14.7% over $153,900

Manitoba provincial income tax rates

Tax Rate Bracket
10.8% First $32,670
12.75% $32,670 — $70,610
17.4% Over $70,610

New Brunswick provincial income tax rates

Tax Rate Bracket
9.68% First $42,592
14.82% $42,592 -$85,184
16.52% $85,184 — $138,491
17.84% $138,491 — $157,778
20.3% Over $157,778

Newfoundland & Labrador provincial income tax rates

Tax Rate Bracket
8.7% First $37,591
14.5% $37,591 — $75,181
15.8% $75,181 — $134,224
17.3% $134,224 — $187,913
18.3% Over $187,913

Northwest Territories provincial income tax rates

Tax Rate Bracket
5.9% First $43,137
8.6% $43,137 — $86,277
12.2% $86,277 — $140,267
14.05% Over $140,267

Nova Scotia provincial income tax rates

Tax Rate Bracket
8.79% First $29,590
14.95% $29,590 — $59,180
16.67% $59,180 — $93,000
17.5% $93,000 — $150,000
21% over $150,000

Nunavut provincial income tax rates

Tax Rate Bracket
4% First $45,414
7% $45,414 — $90,829
9% $90,829 — $147,667
11.5% Over $147,667

Ontario provincial income tax rates


Tax Rate Bracket
5.05% First $43,906
9.15% $43,906 — $87,813
11.16% $87,813 — $150,000
12.16% $150,000 — $220,000
13.16% Over $220,000

Prince Edward Island provincial income tax rates

Tax Rate Bracket
9.8% First $31,984
13.8% $31,984 — $63,969
16.7% Over $63,969

Quebec provincial income tax rates

Tax Rate Bracket
15% First $43,055
20% $43,055 — $86,105
24% $86,105 — $104,765
25.75% Over $104,765

Saskatchewan provincial income tax rates

Tax Rate Bracket
10.75% First $45,225
12.75% $45,225 — $129,214
14.75% Over $129,214

Yukon provincial tax rates

Tax Rate Bracket
6.4% First $47,630
9% $47,630 — $95,259
10.9% $95,259 — $147,667
12.8% $147,667 — $500,000
15% over $500,000

Canadian Pension Plan

While there are lots of positives to being self-employed, you can include ‘Canadian Pension Plan (CPP) contributions’ on your list of cons.

CPP provides contributors and their families with partial replacement of earnings in cases of retirement, disability, or death. Almost all individuals who make over $3,500 a year working in Canada (outside Quebec, which has its own system) contribute to CPP.

Employees contribute 4.95 percent of their gross pay in CPP for each pay period. This amounts to half of the contribution, with the employer paying the other half. However, if you’re self-employed, you will have to pay the full CPP amount (9.9 percent) by yourself.

It’s important to note that you will only need to pay CPP on income you earn from $3,500 – $55,300. In other words, if you earn under $3,500 you will not need to pay CPP contributions. And you will not need to deduct any CPP from earnings you make over $55,300.

It’s also important to keep in mind that you must report details of your CPP contributions on your tax return.

Employment Insurance (EI)

The EI program provides temporary income support to unemployed workers while they look for employment or to upgrade their skills. The EI program also provides special benefits to workers who take time off work due to illness, pregnancy, caring for a new-born or newly adopted child (and more).

Contributing to the EI program is optional for all self-employed people in Canada and the rate is 1.66 percent of earnings

GST, HST, and PST – what’s the difference and do I need to pay it?

GST – General Sales Tax

PST – Provincial Sales Tax

HST – Harmonized Sales Tax

Some provinces have combined their GST and PST into a single tax – HST. Others charge them separately.

If you earn more than $30,000 of net taxable income in a year you will be required to collect federal sales tax and send it to the government. However, you’ll be considered a ‘small supplier’ if you earn less than this amount. Small suppliers are not required to collect GST/HST/PST.

If you are required to collect federal sales tax you will need to apply for a GST/HST/PST number.

Once you have your number, you will need to organise a payment plan with the CRA. These taxes are paid to the Canadian government on either an annual, quarterly, or monthly schedule.

Can I use any business expenses to reduce my tax liability?

Yes! If you’re self-employed in Canada there are a number of business expenses you can include on your tax return.

Some common examples of business expenses include:

Legal and accounting fees

Telephone and utilities

Meals and entertainment

Motor vehicle expenses

In general, it’s possible to deduct any reasonable expense you incurred in order to earn your business income.

However, personal expenses are not eligible. For example – if you work from home and you use your internet connection for business 70 percent of the time and personal use 30 percent of the time, you can only deduct 70 percent of your internet bill.

If you intend to deduct expenses from your tax bill it’s vital that you keep good records and your receipts in case you are subject to an audit from the CRA.

How to pay and file your tax

Employees in Canada have tax automatically deducted from their wages for each pay period. But if you’re self-employed you will have to make your own tax deductions.

So how much should you deduct?

Exactly how much you will have to pay will depend on your tax bracket (see tax rates above) and the deductions you qualify for. However, it’s generally advisable to set aside 25-30 percent of everything you earn through your business in order to pay your tax bill.

Key documents

Below are the three government documents that every self-employed person in Canada will need to be familiar with.

T-1 General – the form used in Canada by taxpayers to file their personal income tax return.

The below types of income must be declared on this form:

  • Employment income
  • Self-employment income
  • Foreign income
  • Interest
  • Dividends
  • Capital gains
  • Rental income

Income you earn from self-employed should be listed on Line 104 of the form. After applicable deductions, the net income and taxable income are determined, and federal and provincial or territorial tax are calculated to give the total payable amount.

Form T2125 – you’ll need to file this form in order to detail all of your business activities during the year to the CRA. You also use this form to list your deductible business expenses.

T4A slips – if you’re an independent contractor, you’ll receive a Form T4A, Statement of Pension, Retirement, Annuity, and Other Income from every client you worked with during the year. The client fills out one copy of the form, reporting how much they paid you, and submits it to the CRA. They fill out a second form, and send it to you. Using your T4As for the year, you can determine how much revenue you earned from each client, and therefore also a total sum of earnings from all clients.

These slips should prove useful when it comes to keeping tidy financial records.

It’s important to note that, if your client does not file a particular T4A slip, it will still be your responsibility to report the income.

Filing your return

Paper – you can choose to print out a paper form, fill it in, and mail it to the CRA.

Electronic – or you can fill it out online. This is much faster and easier than printing and mailing the forms yourself.

Agent – confused about the tax filing process? Why not enlist the help of a tax agent like Taxback.com? Their tax team will file your tax return for you and ensure you are 100 percent compliant with the Canadian tax authorities.

Paying your taxes

There are a range of options for paying your taxes – whether through online debit or credit card payment, or via a financial institution or wire service.

Tax Deadlines

Here are the most important tax deadlines that every self-employed worker in Canada should keep in mind.

January 31

If you have a GST/HST number and you make quarterly payments, this is the deadline for remitting payments for the previous quarterly reporting period.

February 20

This is the first day you can file your taxes online or by phone.

March 15

If you pay income tax in installments, your first quarterly payment is due on this date.

April 30

This is the tax filing deadline for individuals and sole proprietorships who are not self-employed full-time. Regardless of when you file, all sole proprietors must also pay their taxes by this date.

If you have a GST/HST number, this is the deadline for remitting payments for the previous quarterly reporting period.

June 15

This is the tax filing deadline for full-time self-employed people (you must still pay your tax by April 30).

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