Sole Proprietor Tax Returns

Question is “Are you a business?”

It might seem like a straightforward question, but the Canada Revenue Agency (CRA) has specific criteria for what qualifies as a business for tax purposes. The CRA defines a business as any activity carried out with the intent to make a profit, and there must be evidence to support this intention. Special considerations apply to industries such as farming, fishing, or operating a home daycare. According to the CRA, the small business tax deduction increased to 18% on January 1, 2018, and to 19% as of January 1, 2019, resulting in small business tax rates of 10% and 9%, respectively.

Note: A self-employed individual is often considered to be running a business and is subject to specific tax obligations as their own employer. So, Yes! Sole proprietors are considered as businesses

What do I need to know as a business?

Managing small business taxes can feel overwhelming. You must keep track of all income your business generates. This includes more than just sales revenue; any form of income, such as goods, services received, or property, must be documented. These records are essential for preparing accurate tax returns.

Do I need to charge GST/HST?

The Goods and Services Tax (GST) applies when a consumer purchases goods or services for domestic use. Customers pay the GST to the business, which must then remit that tax to the CRA. Not all businesses are required to charge GST. Exemptions include insurance, real estate, certain educational services (like music lessons), legal aid, and healthcare provided by licensed practitioners. Additionally, if you are classified as a small supplier—a business with total revenue under $30,000 in any calendar quarter or for the last four fiscal quarters—you are not required to charge GST. Charities with gross revenue under $250,000 are also considered small suppliers.

If your business is not a small supplier and you provide non-exempt goods or services, you must register with the CRA to charge GST. You will also need to file returns and remit the GST collected to the government regularly. We can assist you in setting up your GST account and ensure your returns are filed accurately.

Should I incorporate?

One of the most frequent questions business owners ask is whether they should incorporate. Corporate tax rules are more complex and differ significantly from individual tax rules, so the decision to incorporate should be made carefully. If you’re considering incorporation, contact Adept Bookkeeping Services to determine if it’s the right choice for your business. Your decision will depend on your specific situation and long-term goals.