![]() The late filing penalty continues to accrue interest until paid in full. The CRA issues late filing penalties based on the number of T5018 slips filed late and the number of days late. Payments to independent contractors and subcontractors can be reported on either a calendar-year or fiscal-year basis, and are due 6 months after the reporting period.Ī T5018 slip must be filed for any payment over $500. One T5018 slip is filed for each independent contractor and a summary slip is also reported to the CRA.įailing to file a T5018 will result in penalties, which can get costly. If you’re an individual, partnership, trust, or corporation and more than 50% of the business’ income comes from construction, and you make payments to subcontractors for construction services, you need to report the amount paid or credited. It also takes time for businesses to understand the tax essentials of self-employed contractors.Ī good example is understanding what needs to get reported on the T5018 information return. It can take a lot of time for self-employed workers and independent contractors to navigate Canada’s complex tax legislation. If you unsure of what to do, or when you need to complete certain filings, speak to a professional tax provider. Keeping up with your tax obligations can be challenging. To set up a business number, a GST/HST account, and any other account you may need (for example, a payroll deduction account), you can visit the CRA’s online Business Registration at your convenience. ![]() Incorporated? You may already have a business number and a corporate income tax account. This will act as your business ID for all CRA dealings. Before you register for a GST/HST account, you will first need to obtain a business number. If you do not have a GST number yet, it’s easy to obtain one. However, you may choose take advantage of optional reporting periods as well. When you register for the GST/HST, the CRA will usually assign an annual reporting period. You then need to file GST/HST returns to the CRA. If you earn more than $30,000 a year (or four consecutive quarters or a single quarter) you also need to charge and collect GST/HST. If you’re in farming or fishing, you’ll have to fill out industry specific versions of this form (T2042 or T2121). List your business expenses and capital cost allowance to calculate your taxable net business income or loss.Your cost of goods sold and your gross profit.business and professional income earned.You must also complete a separate T2125 “Statement of Business or Professional Activities”. If you’re a sole-proprietor, self-employed or a certain type of partnership*, you must fill out your T1 General, that’s your standard personal income tax return. Read more on the differences between being an employee and a self-employed contractor I’m a self-employed contractor. For the most part though, this is why independent contractors charge a higher rate than employees are paid. Unless this was negotiated into a contract. Should you become unemployed, you won’t be able to collect EI because you didn’t pay into it.īecause the work is contracted, you do not receive benefits, sick pay, or holiday pay. If you lose a job or are terminated by the company that contracted you, you are going to be left without severance. You have no guarantee of steady income and may either make a profit or incur a loss. When you’re a contract employee, there is little to no job security. Because you’re not on their payroll, they don’t have to deduct taxes, make EI and CPP contributions, or follow employment standards legislation.Īll that freedom comes with risks. You don’t have anyone overseeing your activities and you’re free to work when, and for whom you choose, and may provide your services to different payers at the same time.īeing a self-employed contractor can also make it easier for those you work for. Self-employed contractors set their own terms and decide how and when to perform the required work. What is a self-employed contractor in Canada? If you’re working as a self-employed, independent contractor or thinking of becoming one, here are some things you should know. There’s a big difference, and understanding the differences between the two can have a significant impact on your income tax. Are you an employee or self-employed contractor?
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