Roughly 13 per cent of Canadians are self-employed, with a June 15 tax-filing deadline.natasaadzic/iStockPhoto / Getty Images
The June 15 deadline for self-employed workers to file their income tax returns is approaching, and some clients may need a nudge to get their books in order on time.
“People are either very organized and are on the ball, or they procrastinate and delay, delay, delay,” says Greg Loskutov, a chartered professional accountant (CPA) at Omega Squared Professional Corp. in Toronto.
He says giving self-employed workers until June 15 to file their tax returns makes sense, as document-gathering is more cumbersome than for employees with a T4 slip.
According to Statistics Canada, roughly 13 per cent of Canadians are self-employed.
Gabriel Lalonde, principal and certified financial planner (CFP) at MDL Financial Group in Ottawa, is self-employed and appreciates having six extra weeks to file his tax return. He makes an estimated tax payment by April 30 to avoid interest charges and then files his return for June 15.
“I essentially use the extended filing deadline as a planning lever to help optimize the overall tax situation,” he says.
His accountant also appreciates the flexibility to prioritize the rush of employee returns before April 30.
“He knows that [self-employed] clients have a bit of extra time to finalize things properly,” Mr. Lalonde says.
Brenda Hiscock, CFP at Objective Financial Partners Inc. in Markham, Ont., has her clients do a mock return with estimates of what they’ll claim.
“We’re trying to front-end these [issues],” she says of clients who aren’t sure if they may owe taxes, but weren’t ready to file by April 30.
Mohammed Al-khooly, CPA at CoPilot Tax LLP in Toronto, is sympathetic to his self-employed clients’ plight, noting many don’t intend to file their taxes late but are busy running their businesses. Many of his sole-proprietor clients have less than three years of experience.
“They’re not used to bookkeeping or tracking income and expenses and filing as a sole proprietor,” he says.
“I suspect some want to just focus on the business, and think of [taxes] as secondary.”
Keeping track of business expenses can also be a challenge, says Sandra DaCosta, a CPA in Toronto.
“It becomes difficult to provide a [balance] estimate accurately without expenses provided,” she says.
Mr. Al-khooly’s more seasoned clients have built processes so they can file before April 30, which he recommends. Like Ms. Hiscock, if he has an idea of their actual income, he’ll provide them with an estimate to pay the Canada Revenue Agency (CRA) by April 30.
Most clients fall into two camps, Mr. Al-khooly says: those who file and pay their balance owing by April 30, and those who file after June 15 and pay their balance owing late.
“That’s why I encourage them to [file and pay] at the same time,” he says.
Stefanie Ricchio, CPA at SRBC Inc. in Toronto, says self-employed people need bookkeeping and other tools in place to help them navigate tax timelines.
“It shouldn’t take you six months to close your books,” she says. “Without systems, you will subject yourself to additional interest and penalties.”
She notes that paying a balance owed to the CRA late means 7 per cent in annual interest compounded daily. Should the sole proprietor not file by June 15, there’s also a late-filing penalty of 5 per cent.
The spouse of a self-employed person can also file their taxes on June 15, but unless they’re self-employed, there’s not usually a benefit, Ms. Ricchio says.
If anything, she advises spouses to file by April 30 to ensure there’s no delay in receiving income-tested benefits such as the Canada Child Benefit, which pays out a monthly tax-free sum to parents.
“The CRA needs to assess both spouses’ tax returns to determine your eligibility. The incentive to file by April 30 and not be delayed is great,” she says.