TurboTax Canada offers a specific version of its tax software tailored for self-employed individuals. This version, known as “TurboTax Self-Employed People,” is designed to assist self-employed Canadians in preparing and filing their taxes accurately. Here are some key features and information about TurboTax Canada Self-Employed:
1. Comprehensive Tax Guidance: TurboTax for Self-Employed People provides step-by-step guidance and prompts to help self-employed individuals navigate the tax filing process, ensuring that they report all their income and claim eligible deductions.
2. Income and Expense Tracking: The software allows users to enter their self-employment income and track business expenses throughout the year. This feature can help maximize deductions and reduce taxable income.
3. Business Expense Deductions: TurboTax Self-Employed helps users identify and claim various business-related expenses, such as office supplies, advertising costs, vehicle expenses, and professional fees, among others.
4. CPP Calculation: The software calculates the Canada Pension Plan (CPP) contributions based on the user’s self-employment income, ensuring compliance with CPP requirements.
5. NETFILE and NetFile Québec: TurboTax for Self-Employed People supports electronic filing through NETFILE and NetFile Québec, making it convenient to submit tax returns to the Canada Revenue Agency (CRA) and Revenu Québec.
6. Maximized Tax Refunds: TurboTax (Self-Employed People) reviews the user’s tax return for potential credits and deductions, aiming to maximize their tax refund or minimize the amount owed.
7. Accessibility: TurboTax (Self-Employed people)is available for various platforms, including Windows, Mac, iOS, and Android, providing flexibility for users to prepare and file their taxes on the device of their choice.
8. Free Version for Simple Returns: TurboTax Canada offers a free version of the software for self-employed individuals with straightforward tax situations. This option allows users to file their taxes without incurring any costs.
9. Expert Assistance: For those who may need additional support, TurboTax offers paid plans that include access to TurboTax experts who can answer tax-related questions and review tax returns before submission.
What does “self-employed” mean?
If you’re self-employed, you work for yourself. You probably have self-employment income if you work as a freelancer, run a home-based business, are an adviser, or do side jobs.
For tax purposes, the CRA says you are self-employed if you work as a freelancer, a sole owner, or a partner in a business and expect to make money from the service or product you provide. Self-employment can be broken down into three main groups:
- Independent Contractor: On a contract basis, you perform a specific job for another person.
- “Sole proprietor” means that you are the only person who runs your business.
- Partnership: Two or more people run your self-employed business together.
If you aren’t sure whether you are an employee or a self-employed person, the following will help you decide:
- Types of Work Relationships
- Control Level
- Having ownership of tools and equipment
- Possibility of Making Money or Losing Money
How do taxes work when you’re self-employed versus when you’re an employee?
When you work for someone else, they give you a T4 slip and take taxes out of your paycheck. If you’re self-employed, your boss doesn’t take taxes out of your pay. Instead, you pay your own expected taxes every three months and can write off work-related business costs.
Ronald Watson, a chartered accountant in Fort Erie, Ontario, says, “The CRA lets self-employed people claim a lot of expenses as long as they are reasonable and used to make money.” “Income tax rates for people who work for others are the same as rates for people who are self-employed.” But there is one small change, Watson says. “People who own their own businesses can deduct more than people who just make a living.”
Also, keep in mind that you can be both self-employed and hired at the same time. During the same tax year, you can work for someone else or for yourself.
As a self-employed person, how do I calculate my taxes?
If you work for yourself, you’ll need to include all of your income and spending on your personal tax return. So, you can file one tax return that includes both self-employment income and regular income from a job if that’s how your income was split.
It depends on where you live and the federal income tax rates for the year that determine how much tax you have to pay.
To keep track of your business costs, you should keep all of your receipts and bills. You can then get the most tax breaks and maybe put the money you save back into your business.
What kinds of costs can Canadians who are self-employed claim on their tax return?
You can subtract your business costs no matter how much money you make as a sole proprietor. “There is a very broad brush stroke that can be used” when it comes to deducting business costs from company income, says Watson. Everything I use to make money could be tax-deductible.”
You can claim a part of those necessary costs that helped you make money, whether you have a home office where you do your extra work or you drive your car to meet clients (during off hours, of course).
It’s important to include all of your business-related costs on your tax return, no matter how much they cost. You are not only lowering your tax bill, but you are also getting the most true picture of the health of your business as a whole.
Some common costs for people who are self-employed are:
- Costs that a business has to pay to run, like advertising fees, shipping or delivery fees, office materials, cell phone and internet plans
- Costs related to vehicles, such as gas, repairs, upkeep, insurance, lease payments, and registration fees
- Starting up Costs that include any inventory, gear, or tools that your business needs to start running normally
- Fees for lawyers, accountants, and other professionals
- Travel costs, such as fees for public transportation, hotels, and conferences
Things to consider when picking tax software
When looking for tax software in Canada, here is a list of important things you should think about.
Simple to use
You’ll need free, easy-to-use tax tools if you don’t know a lot about taxes. Not having to pick and choose which tax forms you need is helpful. It would be nice if tax software had a helper built in. That way, the program will help you pick the right tax forms, even if you don’t know much about them.
Compatibility with OS
You’ll also need tax software that works with the running system on your computer. You shouldn’t have any trouble finding tax software that works with Windows. You might not have as many options if you use a Mac.
Free version restrictions
It is important to make sure that the free tax software you choose has all the features you need. Take rental income as an example. Keep in mind that not all free tax tools will be able to handle that. If you want to make a more complicated tax return, you may have to pay extra. Some software lets you do your tax return for free.
Support for languages
If you’re reading this, it’s likely that you can understand English pretty well. But if you want to find tax software in a language other than English, you might have a harder time. Still, a lot of software these days comes in more than one language. Before you go, make sure that the language you feel most comfortable with is accepted.
NETFILE authorized
The last thing you’ll need is income tax software that works with NETFILE. A tool called NETFILE lets you send your tax return to the Canada Revenue Agency (CRA) from your computer in a safe and secure way. As soon as the CRA gets it, they’ll let you know. It’s likely that the income tax software you’re using is NETFILE compatible, but it’s still a good idea to make sure.
TurboTax for Self Employed People
It might seem hard to do your own taxes, but it doesn’t have to be. There is now a lot of free tax return software to choose from, making it faster and less scary to file your taxes on your own.
When you use tax return software and file your taxes yourself instead of hiring a tax expert, you save the most money. You will save money every year if you do your own taxes.
In general, it only makes sense to file your own taxes if your return is pretty simple. You might be better off getting a tax expert if it’s hard. Many of the free programs can handle rental income and self-employment, but if you don’t know how taxes work, you might miss out on tax credits and deductions that you’re eligible for. This would make the money you saved by doing your own taxes useless.
Tax software TurboTax
TurboTax lets you do your taxes the way you want, whether you own a small business, work as an independent contractor or freelancer, or have a side job. You can keep the money you make.
Important Things
CRA Certified: Yes
Encryption: TLS
Cost: $0.00 – $90*
Pros
- Lots of plans to choose from
- Free version available
- Tax return program that is easy to use
Cons
- You may have to pay more than other companies.
Many Canadians use TurboTax, which is tax software that is easy to use, and for good reason. The kinds of apps that are out there: TurboTax has paid and free versions that work on Windows, Mac, iOS, and Android.
Before you get too excited, it’s important to know that the free version doesn’t let you move tax information from previous years, but it does let you file your taxes for free, with no strings attached.
TurboTax has a cheap Standard plan that you can get for just $20.99 if you want to import your tax information from earlier years.
You can file your own taxes for free if you are younger than 25 years old.
Maximize Your Tax Refund Potential
The Standard plan not only lets you move tax information from previous years, but it also lets you look for over 400 tax credits and deductions, which can help you get the biggest tax refund possible. In the end, nobody would ever want to miss a chance to save money!
If you’ve never filed your taxes online before, you should definitely choose the Assist & Review plan or the Assist & Review Self-Employed plan. With these plans, TurboTax experts will answer any tax questions you have.
If you have never done this before, TurboTax’s professional team can also help you fill out your tax return and look it over before you send it in. Overall, TurboTax is the best tax software because it is cheap and easy to use.
Based on your net income from self-employment, TurboTax Self-Employed figures out how much you need to pay into the Canada Pension Plan (CPP). Usually, the CRA wants payments based on how much tax you owe over three years.
But installments aren’t needed for people who just started their own business. You might want to open a different bank account to save money for taxes.
All provinces and regions can use TurboTax. There are forms and schedules in all versions of TurboTax that you need to fill out and send in your federal and local tax returns through NETFILE and NetFile Québec.
Please note that the availability of specific features and pricing may vary from year to year. It’s recommended to visit the official TurboTax Canada website to get the most up-to-date information on TurboTax Self-Employed People and to determine the version that best suits your needs for the current tax year.
FAQS
1. What does “self-employed” mean in Canada?
In Canada, being self-employed means that you work for yourself and have the goal of earning income from your services or products. This includes freelancers, sole proprietors, and partners in a business.
2. How do taxes work for self-employed individuals compared to employees in Canada?
Employees in Canada typically have taxes deducted from their paychecks by their employers, and they receive a T4 slip for tax reporting. Self-employed individuals, on the other hand, are responsible for calculating and paying their own taxes. They must also keep track of business-related expenses and can deduct these expenses to reduce their taxable income.
3. When are taxes due for self-employed individuals in Canada?
The tax return for self-employed individuals in Canada is typically due on June 15th of each year. However, any taxes owed must be paid by April 30th to avoid penalties and interest charges.
4. How do I determine if I am self-employed or an employee in Canada?
The determination between being self-employed or an employee depends on factors such as the type of work relationship, the level of control you have over your work, ownership of tools and equipment, and the potential for financial gain or loss. The Canada Revenue Agency (CRA) provides guidelines to help individuals make this determination.
5. What expenses can self-employed Canadians claim on their tax returns?
Self-employed Canadians can deduct various business-related expenses from their income to reduce their taxable income. Common deductible expenses include advertising fees, office supplies, vehicle-related expenses, startup costs, professional fees, and travel expenses.
6. Is there tax software available for self-employed individuals in Canada?
Yes, there are several tax software options available for self-employed individuals in Canada. TurboTax is one such software that offers both free and paid versions. It can assist with filing taxes, maximizing deductions, and ensuring compliance with Canadian tax laws.
7. Are there specific tax considerations for self-employed individuals regarding the Canada Pension Plan (CPP)?
Self-employed individuals in Canada are responsible for paying into the Canada Pension Plan (CPP) based on their net income from self-employment. The CRA may require installment payments based on tax owed over three years, but this may not apply to those who have just started their own business. It’s advisable to set aside funds for CPP contributions.
8. Can self-employed individuals from all Canadian provinces use TurboTax?
Yes, TurboTax is available for use in all provinces and territories in Canada. It provides the necessary forms and schedules to complete federal and provincial/territorial tax returns and allows for electronic filing through NETFILE and NetFile Québec.
