|Special to The Globe and Mail Published April
Last-minute checklist for self-employed
If you're a free-lance writer, consultant, professional or other self-employed taxpayer, here's a last-minute checklist for filing your tax return:
Revenue. Make sure you have included all of your revenue for the year. But be careful not to double count your revenue.
In some cases, client businesses will send you a T4A slip to report the amount that they have paid. For example, if you have received a royalty of $5,000 for writing some material, the publisher will most likely send you a T4A as part of the process of reporting to the government.
If you have already recorded the income in your records, you are in danger of paying tax on the income twice - once when you report the T4A and again when you total the income from your books.
If you are a self-employed salesperson and have won a contest related to your selling activity, you will need to include in your income the value of the prize. This may be a vacation trip won in a sales contest.
Expenses. Self-employed individuals are allowed to deduct expenses incurred to earn income. These expenses typically include a home office (where no other office exists), transportation (with specific rules for allowable automobile deductions) and entertainment (you are allowed a 50-per-cent claim).
| You can also deduct expenses for travel, advertising in
Canadian media, salaries and some benefits (ensure that you have remitted the
proper T4 slips).
Receipts are needed for all of the expenses claimed, and these should be kept for six years.
Spouses can be paid a salary provided that it is for legitimate work, and the amount is reasonable for the tasks per- formed. Appropriate withholding taxes must be deducted from the salary and remitted, and T4s must be prepared.
Use a good accountant. It's not advisable to complete your own tax return if you are self-employed. Good accountants can ensure that your return is prepared properly. They can work to help minimize the work required to maintain records and act as a sounding board for your business.
Bad debts. If you have money owing to you at the end of your fiscal year that will not be paid promptly, set up a reserve for doubtful accounts. It must be specifically related to invoices - it cannot he a general reserve. This reserve "I reduce your income earned for the year and reduce your taxes. If the money is subsequently paid, you reverse the reserve at that time and pay tax after you have received the money.
Instalments. A common problem with many self-employed individuals is that they do not make appropriate quarterly instalment payments. The government sends you a letter telling you what it believes is the right amount. If you do not pay on a timely basis, you will be charged interest. Make sure to pay all of your tax owing by April 30 to avoid other charges.
Capital equipment. If you bought computer equipment in 1998 to be Year 2000 compliant, you can deduct the entire expenditure from your income for last year. Other capital equipment spending on items such as cellphones, desks, office equipment, fax machines and copiers should be reported as such and an appropriate capital cost allowance claimed to reduce 1998 income.
Look at previous year's return. Before filing your current year's return, review the previous year's return to see whether there is some revenue or expense items that you have forgotten.
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