Filing Taxes as a Self-Employed Small Business Owner

Being a self-employed small business owner comes with both responsibility and rewards. While you enjoy the freedom of being your own boss, you also need to file your taxes correctly. Here’s a simplified breakdown of the key points you need to know.

1. Are You Really a Small Business Owner?

You are considered a small business owner if you operate a business where you are the business. This could be anything from freelancing, consulting, ride-sharing, or even selling at local markets. Whether you have a storefront or not, if you run your own business, you are self-employed.

2. Understanding Your Business Structure

Many self-employed small businesses start as sole proprietorships, where you run the business on your own, and all income or losses are reported on your personal tax return. For those who incorporate their business, they need to file a separate corporate tax return.

3. Maintaining Good Records

Effective record-keeping is critical. Regularly organize your receipts, track income and expenses, and consider using accounting software to simplify the process. This will ensure that you accurately report your business earnings and deductions.

4. Preparing Your Tax Return

Your tax return will include several sections:

• Identification: Business name, address, and industry code.

• Business Income: Report all earned income before any deductions.

• Business Expenses: Deduct eligible expenses such as supplies, advertising, office expenses, and vehicle costs if used for business purposes.

5. Claiming Expenses

Be sure to claim all your business-related expenses. Common expenses include:

• Office supplies

• Advertising

• Vehicle expenses

• Home office expenses (if applicable)

These expenses reduce your taxable income and provide an accurate picture of your business's profitability.

6. Common Myths About Small Business Taxes

• No Profit, No Filing: Even if your business didn't make a profit, you still need to report it, and you may be able to apply losses to other income.

• Income Under $5000, No Filing: You still need to file, especially for Canada Pension Plan (CPP) contributions.

• Students are Exempt: Students running businesses are still required to report income and file taxes.

Conclusion

Self-employed small business owners need to stay on top of their taxes by maintaining good records and understanding which deductions apply to their business. Filing your taxes may seem complicated, but with the right preparation and knowledge, you can keep more of your hard-earned money.