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Freelance Jobs and How To Pay Taxes in 2024

November 28, 2022 Andrew AdolphAudits

When it comes to freelance jobs, it can be confusing to pay the government come tax time. Here’s how it works… 

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Many people think a freelancer is a part-time job you do on and off, a side hustle, if you will. However, for many, it is their sole income, and just like any other job, you must pay taxes. 

How? 

In this blog, I’ll go over the nuances of taxes and freelance jobs. 

Freelance Jobs: When It’s No Longer A Side Hustle 

If you didn’t already know by now, freelancer income is taxable… Sorry to be the bearer of bad news, but the CRA will always come to collect. The good news is just like anybody else who’ is self-employed, you can claim deductions for things like your business travel, meals, office supplies, and your home office. If you make over $30,000 dollars a year, you may have to register for a GST/HST number. For more on GST/HST registration, click here. 

  

  

So You Are Self-Employed. What Now? 

You must keep track of all money coming in. If you want to claim business expenses (who wouldn’t?), you will need to keep track of those as well. Then you have to report your net income come tax time. This is much different than reporting standard T-4 employment, where your employer simply tells the CRA how much they paid you.  

Just to be sure, here is a list of things that would make you self-employed in the eyes of the government. 

  

  • Selling products and being paid for your products or services 
  • Driving for a rideshare company 
  • Working as a part-time freelancer 
  • Even walking dogs on the weekend would fall under the category of “freelance jobs.” 

Yes, I know it’s a pain in the butt; however, if any of these pertain to you, get ready to file some taxes! 

  

What If You Are Employed AND do Freelance Jobs? 

If you are doing freelance jobs in your spare time, then there is no doubt you will earn some extra money. On the other hand, this also could put you in a higher tax bracket. 

If you earn $50,000 from your full-time job and $50,000 from your freelance job, you will pay the same amount of tax as someone who makes $100,000 a year! Dollars you earn above $100,000 are taxed at 26%. Your first $50,000 is taxed at 15%. This is the marginal tax rate, the rate of tax for each additional dollar received. 

The KICKER is that you your employer is withholding the right amount of income tax on your job earnings, but YOU are going to have to put money aside for tax.  

  

How to Avoid Paying Taxes on Freelance Jobs 

Let me start with the bad news first: you can’t. However, you can lower the taxes you by writing off your business expenses against the income. I’ve got a whole blog dedicated to what you can claim as a tax-deductible expense, so if you’re interested, just click here. Remember that you must always provide proof when you are claiming a deductible. I also go over that in the blog. 

  

Do freelancers Need to Charge GST/HST and PST? 

As I said at the beginning of the blog, if you make more than $30,000, you MAY have to register for a GST/HST number.  

Some freelancers do work through a platform that takes care of the collection and remittance of sales taxes from your end-user customers. Some platforms offer to do this, some do not.  

If you do have to register, it’s a good idea to keep any collected GST/HST/PST in a separate account. I can’t hammer home enough that this money is not yours; it’s the CRA’s. 

The good news is you can claim input tax credits (ITCs) when you do this. I’ve got a blog dedicated to input tax credits, so if you’re curious, give it a look here. Basically, ITCs allow you to reclaim the sales taxes you’ve paid on business expenses. 

Bottom Line 

You can’t escape taxes, but you can minimize the damage to your bank account if you follow the correct steps. As a former CRA auditor, I have seen a full array of different taxpayer preparedness for an audit. Now I work on the other side, for you. 

If you frequently do freelance jobs and need help, I’d be more than happy to help. You can book a free meeting with me, call me at 604-240-6173, or email me at andrew@gatewaytax.ca. I can answer any financial or tax-related questions and help you set a profitable financial plan. You can also visit the Blog for additional tax-related resources. 

 

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Andrew Adolph

Andrew Adolph is a CPA and former CRA auditor with 25 Years of experience. He helps businesses to not par any more in sales taxs than the law says they must and acts as an advocate for you if you are being audited, so you can fous on your business.