Navigating Tax Filing if you have a Side Gig

If your earnings from your side gig were below $30,000 last year, take a deep breath and relax. While you still need to fulfill your income tax obligations, there’s no need to worry about collecting or remitting GST or HST to the Canada Revenue Agency (CRA).

However, if you exceeded the $30,000 threshold, don’t fret. You’ll simply need to register with the CRA and be mindful of the increased tax responsibilities during the filing process. It’s worth noting that if you’re a taxi driver or work for a rideshare service, registration is a must, regardless of your income level. Skipping this step might lead to penalties, including fines.

Easing Your Taxable Income:

If you find yourself on the edge of tax brackets, there’s a friendly solution to potentially lower your taxable income and reach a more comfortable tax rate. Consider contributing to a Registered Retirement Savings Plan (RRSP). This can not only decrease your taxable income but also open doors to qualifying for a lower tax bracket.

The maximum contribution is calculated based on your income from the previous year, your deduction limit, and any unused contribution room from prior years. For the 2022 tax year, the deduction limit is 18% of your income, with a cap at $29,210. In 2023, it rises to $30,780. This limit is influenced by your past contributions and current employment status. The good news is you still have time to reduce your taxable income for the 2022 tax year – until March 1, 2023 – by contributing to your RRSP.

Considering GST and HST Registration:

Even if your business earned less than $30,000, embracing the idea of registering for a GST and HST number could bring some benefits, especially if your business incurs significant expenses. It might seem a bit tedious and time-consuming, but it could be worth it. Jamie Golombek, the Managing Director of Tax and Estate Planning at CIBC, suggests that registration may not be necessary unless your expenses reach substantial amounts, allowing you to recoup a meaningful sum of GST or HST.

Claimable Business Expenses:

Here’s a friendly tip for managing your financial responsibility: Deducting business expenses from your taxable income can make a real difference. Common items that can be claimed as business expenses include rent, fuel costs, repairs, and travel. Just remember to tread carefully and avoid being too aggressive in labeling expenses to steer clear of audits and potential rejection of claimed expenses.

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