Self-Employed in Brampton? Avoid These 5 Costly Tax Mistakes

Operating a business in Brampton, whether you are managing a commercial trucking business at Steeles Avenue, a brand on your home computer in Springdale, or even freelancing in downtown Brampton, is a great adventure. But with freedom comes a very big caveat: you are solely in charge of dealing with your business in relation to the Canada Revenue Agency (CRA). As opposed to the regular worker who automatically has their tax withheld from his/her weekly paycheck, when it is time to file your taxes, you may be surprised by hefty penalties and unexpected fees. You should visit the best accountant in Brampton. In order to ensure your bottom line, here are five mistakes you should not make as a self-employed person. 

Mistakes to Avoid as Self-Employed Person

Mistaking Your Filing Date for Your Payment Date 

This mistake is by far the most common one committed by self-employed individuals. If you or your spouse have received self-employment income, then your due date for submitting your T1 tax return is June 15.On the other hand, the CRA insists that any taxes owed should be paid in full by April 30. Anything less will result in your unpaid balance being charged with interest, which will be applied daily from May 1st onward. With interest rates being at all-time highs, this can very well cost you hundreds of dollars in interest charges that are totally unnecessary. 

Not Tracking and Registering for GST/HST 

Not tracking your income and failing to register for Goods and Services Tax / Harmonized Sales Tax (GST/HST) account when your income crosses a specific limit is another common mistake made by many businesses in Brampton province. Once your gross taxable revenue reaches $30,000 during one quarter in a year or over a period of four quarters in a row, then you need to register for GST/HST account.In most cases, business people in Brampton believe that they don’t have to register for the GST/HST account if they are making “just over” $30,000 per year. Once you cross the $30,001 mark without registering for the GST/HST account, you will be considered a “deemed supplier” and therefore the Canada Revenue Agency will calculate your 13% HST and ask you to pay it yourself. 

Using Gas Receipts Rather Than a Mileage Logbook 

For all the self-employed people in Brampton who are driving for their work – ranging from Uber drivers, courier services to skilled workers – car expenses deductions can be like manna from heaven.However, throwing your accountant a box filled with receipts is not going to get you off the hook in case of an audit, as the Canada Revenue Agency makes it explicit that you need a complete mileage logbook, either physical or electronic.Your logbook should have recorded the date, location, purpose of travel and number of kilometers driven for each travel done. Also, it needs to be noted that your commute to your office does not count as business expense. You must also know about the business loan in Brampton. 

Mixing Personal and Business Funds 

Having one personal credit card or personal bank account for paying both your grocery bills and your business bills is a bad decision. Mixing accounts makes it really hard to keep accurate records of your operating costs, which may lead to the missed deductions such as the percentage of home office costs or your internet connection costs.The most important thing is that mixing funds increases the likelihood of triggering an audit from the Canada Revenue Agency. They have a right to examine your personal financial statements and deny legitimate deductions due to poor record keeping. 

Forgoing Eligible Home Office Expenses (The “Business-Use-of-Home” Trap) 

Many self-employed people operate from their Brampton homes but fail to take advantage of substantial tax savings simply because they are afraid of the “Business-Use-of-Home” formula. At the other extreme, others overestimate the formula and invite an audit immediately.The amount of your rent, mortgage interest, property taxes, utilities, home insurance, and internet costs that you can write off depends on how much of your home is used exclusively for conducting your business meetings and operations. The catch here is to accurately determine what percentage of your home is being used for business purposes. Sticking unverified utility expenses into your tax files without determining that percentage is a sure way to get your deductions disallowed by the CRA. 

Conclusion 

Taking advantage of Canada’s tax rules as a business owner could turn out to be very profitable for you, but one mistake could cost you all your income. Do not try to figure it all out on your own by filling out difficult forms such as Form T2125. Partner up with a reliable expert and allow the best tax accountant in Brampton to help you do business right.