Self-employed, or working full-time but still hustling on the side, that’s great. You’ve got a side hustle: smart. With the new mortgage stress test, rising cost of living, slow salary growth and more, the need for a second stream of income has grown exponentially. However, this also means that you have more income to declare when you file your taxes at the end of this month (April 30th).
If you’re working for a business that deducts income tax from your paycheque, they are required to issue you a T4 so you can successfully file your tax return. But if you’re self-employed you won’t usually get a T4, so tax time can become a bit confusing. The key to filing your taxes is to understand your side hustle income and related expenses. It’s always best to hire a professional to help you navigate the ins and outs of filing your side hustle income. After all, you can claim this cost as a professional expense and get a tax deduction the following year.
However, if you want to handle it yourself then the following are some basics to get you started:
Understand Your Income:
Ensure you include ALL of the income you earn from any source on your tax return – this could even include cryptocurrency. If you’ve received a T4 what you need to look for is your Employment Income in Box 14, and file this income on Line 101 of your federal tax return. Additional income that isn’t in Box 14? You have two options: for tips or occasional income file it under Line 104 of your federal tax return; for expanses for earning your side hustle you should file this income on a T2125 (a form for the Statement of Business or Professional Activities). It’s a little bit more work but it’s worth it if you’re eligible for a tax deduction.
Claiming Expenses:
If you incur expenses, be sure you track them just like you would any income. You enter your expenses in your T2125 form (as mentioned above), then complete the form and the rest of your return and file normally.
Extra Help:
Your side hustle income and expenses can easily add up, and things can often get confusing or run away from you. Sometimes, this has you left with a large tax bill at the end of the year. If this happens you have a few options: you can contact a professional for extra help, you can arrange to pay your bill in installments, or you can check to see if you can amend your tax return.
This can all be overwhelming, luckily it’s not too late to reach out to a tax professional. However, personal tax returns are due April 30th. If you’re self-employed you a have a little more time: June 15th.
Be sure to contact KBH for all your hustling needs: info@kbh.ca