Did you know that almost 3 million of Canada’s population is self-employed? Whether it is online or a physical store, those who engage in a business relationship with clients who pay are self-employed. Compared to those who work for a company, individuals who are self-employed are in charge of when what and how the payer is going to pay for the goods or services that they offer. Such terms of business may involve incorporation while there are others who choose to be sole proprietors of their business.
Self-employed individuals are taxed by the government too. And although this fact is often overlooked, it is essential that they know the items that are taxed and those that may be exempted. How are the self-employed taxed?
It must first be stated that the nature of the job of a self-employed can be quite complicated. They can earn income in any number of ways and is not limited to just one. They may own a business, paid through the practice of profession, commission, fishing or even farming. When it comes to the definition of their business income, it can happen from some sources. Income is earned from any activity that is carried out with an expectation of payment, whether for output or services rendered.
Such activities may include products that are sold in retail in a physical store or through online. Consultation for professional services is also included in the many forms of businesses where income is expected. It does not matter whether it is for landscaping or repainting of a house, the consultation itself is paid and thus it is considered a source of income. But how does a self-employed report income?
The declaration of all income generated by a self-employed is made through the individual’s tax return form. This is different from those who are part of a corporation because the corporation must declare the income first before the individual does. The net income is calculated by subtracting all expenses from the gross income. The net income is then taxed at the marginal personal tax rate. This means that the income is divided over thresholds that are charged at a higher rate.
How do you know if the income that you earned is taxable? Or whether you are under-declaring? It is essential that you consult with tax accountants in Edmonton that you can trust. They can help you identify income and work it against ones that are taxable. There are some accounting firms in Edmonton, Alberta so finding one shouldn’t be that hard. Before you get charged for something you under declared and pay up higher fines, it is best to consult with the tax expert.