Are you self-employed? Know your tax obligations
April 7, 2021
Canada Revenue Agency
The COVID-19 pandemic is affecting everyone, including self-employed individuals. The Canada Revenue Agency (CRA) understands you may have faced many challenges this past year, and we’re focused on supporting you this tax season. To get ready for a tax filing season like no other, we’ve put together helpful tips and information for self-employed individuals.
Sign up for direct deposit and file online to reduce impacts and delays
Due to COVID-19, it may take the CRA 10 to 12 weeks to process paper returns. For this reason, the CRA encourages you to sign up for direct deposit and to file your income tax and benefit return online to get any refund for which you may be eligible faster and avoid delays.
Using the CRA’s digital services is the fastest and easiest way to view and manage your tax and benefit information. The CRA also encourages you to sign up for My Account and My Business Account ahead of time, and gather all your information for filing your return. The CRA’s Get Ready page has information on online filing, deadlines, and other helpful links.
The impact of COVID-19 benefits on your return
If you received the Canada Emergency Response Benefit (CERB), Canada Emergency Student Benefit (CESB), Canada Recovery Benefit (CRB), Canada Recovery Sickness Benefit (CRSB), or Canada Recovery Caregiving Benefit (CRCB) payments, these are considered taxable income, and you will have to enter the total of the amounts you received on your return. You will receive a T4A (for benefits issued by the CRA) and/or a T4E (for benefits issued by Service Canada) tax slip in the mail with the information you need for your return. You can view tax slips online as of February 8, 2021 in My Account. Residents of Quebec will receive both a T4A and RL-1 slip.
These benefit payments are not considered self-employment income.
In addition, you may owe tax when filing your return. This will depend on your personal circumstances, and the type of COVID-19 benefits you received:
- If you received the CERB or CESB, no tax was withheld when payments were issued, and you may owe tax when filing your 2020 tax return.
- If you received the CRB, CRSB, or CRCB, 10% tax was withheld at source. However, this may not be all the tax you need to pay. When you complete your personal income tax return, you may need to pay more (or less), depending on how much income you earned in 2020.
Also, you may have received federal, provincial, or territorial government program assistance such as the Canada Emergency Wage Subsidy (CEWS), the Temporary 10% wage subsidy or the Canada Emergency Rent Subsidy (CERS). You are responsible for reporting the amount of assistance received through these programs when you file your income tax return. Government assistance income is taxable and will either be included in business income or, if you elect, will reduce your business expenses. You may also have received a government loan. The loan itself is not taxable, however, any part of the loan that is forgivable is taxable in the year in which the loan is received.
There may be other impacts to filing your tax return that are specific to the COVID-19 benefit you received, or if you are a resident of Quebec.
It is important to file on time if you receive COVID-19 recovery benefits such as the CRB, CRCB, or CRSB. The CRA uses information from both your 2019 and 2020 returns to confirm your eligibility to receive these benefits. Filing on time avoids having your recovery benefit payments stopped while we validate your eligibility.
We recognize that for some individuals, repaying these benefits could present significant financial hardship. For this reason, payment arrangement parameters have been expanded to give Canadians more time and flexibility to repay based on their individual financial situations. Also, taxpayer relief is available if you can’t meet your tax obligations because of circumstances beyond your control. The CRA may cancel or waive penalties or interest under certain conditions.
Also recently announced, individuals who have filed their 2020 income tax and benefit return, will not be required to pay interest on any outstanding income tax debt for the 2020 tax year until April 30, 2022 as long as they had a total taxable income of $75,000 or less in 2020 and received income support in 2020 through one or more of the following COVID-19 measures:
- the Canada Emergency Response Benefit (CERB);
- the Canada Emergency Student Benefit (CESB);
- the Canada Recovery Benefit (CRB);
- the Canada Recovery Caregiving Benefit (CRCB);
- the Canada Recovery Sickness Benefit (CRSB);
- Employment Insurance benefits; or
- similar provincial emergency benefits.
The CRA will automatically apply the interest relief measure for individuals who meet these criteria.
Providing additional income support to self-employed individuals
Announced on February 9, 2021, self-employed individuals who applied for the CERB and would have qualified based on their gross income will not be required to repay the benefit, provided they also met all other eligibility requirements. The same approach will apply whether the individual applied through the CRA or Service Canada.
Some qualifying self-employed individuals whose net self-employment income was less than $5,000 may have already voluntarily repaid the CERB. The CRA and Service Canada will return any repaid amounts to impacted individuals.
If you need to make a payment to the CRA, there are online options that are faster, easier, and more secure than mailing a cheque.
There are many ways to make a payment:
- using your financial institution’s telephone or online banking service
- using the CRA’s pre-authorized debit service offered through My Account and MyCRA, which lets you:
- set up a payment to the CRA from an account on a pre-set date
- pay an overdue amount or make instalment payments
- through the CRA’s My Payment service, which lets you make payments online. You can use this service if you have Visa® Debit, Debit MasterCard® or Interac® Online at a participating financial institution
- by credit card, PayPal or Interac e-Transfer through a third-party service provider
If you still wish to make a payment in person, you can pay:
- at any Canada Post outlet, using cash or a debit card, along with a QR code that you can generate using My Account or MyCRA
- at your Canadian financial institution with a remittance voucher
To see all the payment options, go to canada.ca/payments.
Things to keep in mind
- On your return, you have to enter your income from any business you run yourself or with a partner.
- In Canada, generally a self-employed individual must register for GST/HST if their revenue (along with the revenue of all associated persons) from worldwide taxable supplies is more than $30,000 in one calendar quarter or over the last four consecutive calendar quarters.
- If you own a business or engage in commercial activities, keep thorough records. Your records must have enough information so you can figure out the tax you owe and support any deduction or credit you claim. Your records have to be supported by original documents. Electronic documents are acceptable.
- In case the CRA reviews your return, keep your documents even if you don’t have to attach certain supporting documents to your return or you are filing online. The CRA may ask you to prove your claims for deductions or credits with documents like cancelled cheques or bank statements.
- Keep supporting documents and all required records for six years from whichever date is later:
- the end of the tax year to which they relate
- the date your return was filed (if you did not file your return on time).
- If you earn income that has no tax withheld, or does not have enough tax withheld during the year, you might have to pay tax by instalments. This may happen if you:
- have rental, investment, or self-employment income
- receive certain pension payments
- have income from more than one job.
Canada Revenue Agency
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