Self-employed business:
CRA reference:
https://solidtax.ca/wp-content/uploads/2022/09/t4002-21e-Self-employed.pdf
What is considered a self-employed business?
First, a business is an activity that you intend to carry out for profit and there is evidence to support that intention. A business can include:
- A profession
- A calling
- A trade
- Manufacturing
- An undertaking of any kind
- An adventure of concern in the nature of trade
Being self-employed simply means that you work for yourself. Some examples of self-employment include ridesharing services (Uber driver), food delivery services (Uber Eats) and contractors.
If you are a contractor who receives a T4A slip or does not receive any tax slips, you are typically considered self-employed.
It is very important to understand that even if you do not receive any tax slips, you can still be considered self-employed because if you fail to report that income on your income taxes, you may have to pay a 10% penalty for the amount you failed to report in that year or three years after. Additionally, you may have to pay a 50% penalty on the amount you failed to report if you knowingly omitted the self-employed income.
When can I start reporting income and start deducting expenses?
You should start reporting your income and deducting your expenses when your business begins a significant activity that is a regular part of your business or is necessary to get the business going.
For instance, if you decide to buy enough goods for resale or equipment to start your business, we would consider this to be the starting point of your business.
On the contrary, suppose you do research on how to start a business in the hope of getting started. We would not consider that a significant activity that is a regular part of the business and you cannot deduct any of the costs you have incurred for research.
If I lost or did not keep my expense receipts, can I still claim those expenses?
Typically, the CRA expects the business owner to keep original receipts and vouchers in case of a review, and CRA will not accept bank statements as proof of the expense. These receipts must include date of purchase, name and address of the seller or supplier, the name and address of the buyer, full description of the goods and services, and the vendor’s business number if they are a GST/HST registrant if the price is $30 or more before tax. However, you may still be able to claim these expenses, please book a phone consultation for further details.
