6 years ago to date, I began filing my own taxes.
I’d like to say this initiative was derived from my desire to understand our bureaucratic system and take control of my finances.
In actuality and as the adult I am not, I had caused a scene when the (heartless) woman at H&R Block in Toronto informed me that the whole process would cost a ridiculous $750 (that I did not have).
I’m sorry miss. Do my crippling student loans, every-night ramen noodles and 1 bedroom + den apartment that I split between 3 people suggest I owe the government $750? Does my BFA in Performance Dance suggest that I am going to have the kind of funds to pay you people $750 yearly? (Or, in the year to follow, English Literature degree no less?) This is an actual robbery and honestly probably illegal.
In any case, I am not welcome back at H&R Block’s Parliament Street location.
The moral of the story (aside from the fact I am a raging nightmare) is that from this day on, I became the Archimedes of the young Canadian freelancer’s tax return. (A stretch). But in all honesty, I have figured out a couple tips along this broke journey and am feeling profoundly generous this week…
Sorry Americans, your system is terrifying, and I have an irrational fear of the IRS knocking down my door. This love letter is addressed only to my cute freelance Northerners.
1. If you do not already have a CRA account, make one.
This, people, is your lifeline. Seriously, the first time you file your own taxes is like being dropped into the center of the ocean – you are in an environment of unsettling things that you cannot see or understand. Your CRA account is your floatie. It doesn’t solve the problem, but, if you tread water anything like me, is vital to your survival.
I am hoping most of you who lived off of CERB and EI during the pandemic-summer already have Step 1 on lock.
If not, go here and do so.
Your CRA account will show you everything, from when you can expect your next GST/HST credit, to your RRSP deduction limit and TFSA contribution room.
It will also save your returns as you go so you have a neat little online record of all adult/financey things in one place. Most of your T4s, T4As, other random number-letter combinations, will all be entered here.
One of my life’s truest loves. I cannot say that this is my favorite platform seeing as it is all I’ve ever used. But if my nervous 18-year-old self found it manageable, I am certain anyone can navigate it. (Editor’s note: I use StudioTax, if you’re feeling nostalgic for the blocky, outlined aesthetic of early 2000s computer programs!)
This platform is free (there is a payment option but don’t do it – you are both artist and accountant now) and the bright website colors almost make you feel like your taxes aren’t a capitalist jail cell.
The best feature of this platform is a little something called “Auto-fill my return”.
Basically, this imports your tax information directly from the CRA (hence Step 1).
If your greatest fear (aside from general failure, rejection and spiders) is getting audited by the government for misfiling your taxes… this alleviates part of that stress.
Autofill inputs all of the income the government has on file under your name, so you can have peace of mind knowing you haven’t missed anything.
*(Please still make sure you go through all your T4 income forms. Sometimes an employer may not have entered this information and we are not out here trying to be liars and thieves but rather, self-sufficient tax-completing sovereigns).
The platform further keeps track of how much you owe or is owed to you on the top left corner as you go along. It is like a gameshow. You put in your income: a negative dollar sum appears in red. You put in your deductions: a positive dollar sum appears in green. It is all very exhilarating.
Finally, with TurboTax, you are able to submit your taxes online to the CRA with the click of a button. I have never been confident in my ability to mail things correctly, so this portion was a win for me.
Also, my printer is broken.
3. Scraping for pennies.
This is the spot where I realized H&R Block was out to scam me. They didn’t care to add in the cost of that $3 fake blood I had to purchase for acting class. But guess what? That’s another ramen noodle dinner right there that I was not about to waste.
The comfortable cannot possibly understand the desperate.
And lucky for you, you’re reading the words of an original desperate.
Your taxable income is your net income, which is:
The total amount you earned in the last calendar year minus your total deductible expenses.
If you’re a freelancer, you have spent 365 days paying no tax on your income, meaning, you are sitting on a lump sum that has not a single deduction taken out of it. This could place you in an entirely different tax bracket: i.e. the difference of paying 15% or 20.5% tax back.
4. Oh, you work from home?
According to Canada’s tax laws, you can deduct the costs of running your home office. And seeing as 95% of the population was locked inside this year and spent every cent of their CERB money that is about to blow up in their face since it was untaxed…this is very good news.
The idea is that you have to calculate what percentage of your home bills are used for business needs.
For example: if your home office occupies 20% of your home’s square footage, you can claim 20% of your home bills as deductible expenses:
- Phone/internet bill
- Home insurance
- Heating bills
- Water bills
*If you work from home – even partially – and your employer requires you to pay expenses to earn your income, file a T777.
5. There is no such thing as algebra in real life. But there is a T2125.
My self-employed kiddies: this is your playground. If you spend money on your career, you can most likely deduct it.
Classes? Union dues? Parking at auditions? You bought a ring light? The 15% of every paycheck that goes to your agent? Gas money for driving to set? That one wino dinner with your girlfriends where you couldn’t shut up about how bad that boy was in that movie? (Maybe not, but meals and entertainment that you need as part of your business can be written off). New headshots? The habit you bought from the dollar store because you were auditioning for the role of a nun? Fake blood for acting class?
This is obviously geared towards actors but applies in its own way to any freelance profession.
A T2125 is going to be listed under the Income – Self-Employment tab on TurboTax. Once you scroll to the bottom you will find the “Expenses” section and – well – go crazy.
And by crazy, I mean don’t write off anything that you don’t have receipts of (online or physical) or anything that doesn’t apply to your business. No actors, your yoga membership does not count.
6. Contribute to your RRSP and TFSA – you’ll thank yourself.
It is too late to contribute to these for this 2020 tax year.
However, it is one of the most fiscally responsible moves you can make as a freelancer to save yourself the heartache of paying, say, $750 to the government.
I screamed about this for three weeks in a row, which you can find:
I don’t know what has gotten into me this week, it must be the spring air and daylight savings.
In any case, this is an open invite to email me any and all of your burning tax questions: email@example.com
I will do my darndest to write an article answering the best Q’s next week.
Until next time.
Click this link, if you’re so inclined, to subscribe for your weekly finance updates! (But please do, it will help my rep): https://madelyngrace.substack.com