Tax time! What do I need to know as an ISW for submitting taxes?

Disclaimer: ISWN is not a tax specialist service and does not have expertise in tax-related matters. The ISWN does not give tax advice, and the information below is only based on general experience as an ISW and offers general Canadian tax resources. For professional or personal tax advice, please consult a tax expert.

So it’s tax time. The feelings of dread, confusion, and uncertainty have risen again. If you are new to self-employment, this may be especially daunting. Even if you are not new to this work, this time of year can be challenging trying to figure out where all the receipts are, remembering what you can claim and what you can’t claim, all while still trying to focus on providing high-quality services and support to people who hire you. Organizing your taxes at this time of year can take anywhere from 3 hours to 3 days, depending on your specific situation and the way you store your documents. We know this is a common area for anyone who is self-employed to experience anxiety about. You are NOT alone. Together, we can help each other find resources and figure out a way to make this time of year less stressful. Taxes are one of the most common areas we get questions about at the ISWN. We are here to help gather information from each other, build best practices and share with each other so that we can all thrive in our work.

Here are some of the best practices that we have gathered in our network. I also include some general tips (not personal tax advice) from Lyle Saunders at Peterborough Disability Tax Services when he was a guest at one of our network meetings this past year. Lyle was very clear that he was not giving specific tax advice but rather sharing information about typical process’ and resources for tax time.

The first question to answer is: Am I self-employed, or am I an employee?

Just because you are paid directly, and even if you have a contract stating you are self-employed, does not guarantee you are not an employee of a family or person with a disability. Confused? Yeah, we were, too! We found this helpful guideline to figure out the difference. https://www.bdc.ca/en/articles-tools/employees/recruit/are-your-workers-employees-or-independent-contractors . It is really important to know if you are classified as an employee from the CRA and Employment Standards perspective.

An important resource to start with:

Did you know that the Canada Revenue Agency (CRA) has a free tax liaison service to answer questions from self-employed people (or small business owners) about ANY tax issue? “The Liaison Officer service is available across Canada to help you understand your tax obligations. A visit from a liaison officer is 100% confidential; the information you choose to discuss with a liaison officer will not be shared with other areas of the CRA, or anyone else.” You can find information or even book a phone meeting easily on the website here:

https://www.canada.ca/en/revenue-agency/programs/about-canada-revenue-agency-cra/compliance/liaison-officer-initiative-loi.html

I only do ISW work part-time. Do I still need to claim it?

Yes, in most cases, you still need to claim ANY income you receive. If in doubt claim it. The CRA will only tax income earned about a certain amount, but they (or your tax specialist)know best how to calculate that. if you do not claim it and CRA finds out about it some other way, you may be penalized with more than just an extra bill. It all adds up. If you earn $100.00 every week as a self employed person that would be $5,200 per year

What about GST/HST?

Do I need to pay HST/GST and do I owe this at tax time for my self-employment income? This is one of those areas you definitely want to talk to the tax liaison office about. We did find the following information here about respite work and GST/HST tax exemption: https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/21-3/respite-care-services.html.

What tax form. do I need to use?

Download the form used for report either business or professional income and expenses from the CRA here: https://www.canada.ca/en/revenue-agency/services/forms-publications/forms/t2125.html . Part 4 of this form is also helpful to determine categories to organize your expenses/receipts throughout the year and to submit to your tax specialist at tax time. You will also see an area to claim expenses for using your living space as part of your business and also an area to claim expenses for your vehicle use.

What good does it do to claim “expenses”?

Every “expense” in self-employment reduces “income”. Taxes are calculated on the income you earn. The less income you earn, the less taxes you pay.

Helpful tips.

Keep ALL of your self-employment-related receipts and invoices and label/organize them right away according to what category they relate to. This makes it SO much easier at tax time.

At the end of every month, check and make sure they are organized (we get busy and this is easy to fall behind in).

Use a software program to help keep track through the year.

Claim as MUCH as you can. If you had an expense that was related to doing something for the person you work with, managing your self-employment, marketing yourself, or improving your work (professional development etc.,) then you may be able to claim it.

You claim many expenses (or portions of) related to your work such as:

• Mileage/car maintenance expenses,

• portions of the rent/mortgage, if you use your home as an office, or for respite or teaching skills etc. (based on the square footage you use)

• potions of your utilities, if you use your home as an office, or for respite or teaching skills etc. (based on the square footage you use)

• any office supply costs (software, paper, printer, etc.).

• Administrative fees (tax consultant or tax service fees etc).

• “Capital expenses” like computer and other more expense tools etc.

• any supplies or tools we might purchase to do the job (i.e., sensory engagement supplies, cooking equipment is teaching skills etc.).

• car insurance

• liability insurance

• professional association fees (if you have one)

Vehicle expenses- keeping a “log book”.

One of the best suggestions we have heard if an ISW is using their vehicle is to keep a book of some sort to track what mileage is used for business and what expenses they have for their vehicle. Record the starting mileage in your book at the beginning of your identified tax year. Keep your personal use mileage on one side and your self-employment/business mileage on another, or find another way to separate the two.

• Add the date, destination, purpose and kilometres driven for self-employment. This makes it easier if you are ever audited by CRA as well.

In a different section, begin recording and adding gas expenses (it’s helpful if it has a little pocket to keep gas receipts in, too). In a third section you can keep other vehicle expenses recorded along with keeping receipts. This would include tires, tire changes, oil changes, brake work, etc. At tax time, you can claim a portion of the expenses you had based on the mileage you used for your self-employment.