Hi Lake Girl,
I have been nudged into temporary self-employment as the result of having been laid off from a long-time job earlier this year. I found freelance work right away, and the employer intends to take me on full time in a few months.
In the meantime, however, because I am not on the payroll (I invoice for the work, and tax and CPP are not being deducted at source), CRA considers me to be self-employed.
In all likelihood, my self-employment stint will last about four months. I do not intend to continue with "the business" once a staff position becomes available.
1. What should I be doing to prepare for my 2011 tax return, and what are my options come tax time?
2. Am I required to declare myself a sole proprietor for these few months or can I just declare the earnings as additional income and be prepared to pay the tax and CPP?
3. Are there benefits to short-term self-employment such as this? I work from a home office and have been using my personal computer and office equipment, so very few additional costs have been incurred.
Thanks very much for any advice!
In answer to your questions:
1. I don't give out tax advice ... however my series on Tax Planning Opportunity - Home Business Taxes
may be of interest to you.
2. Yes you must complete form T2125. This schedule flows through to line 162 and line 135 of your T1 jacket - page 2.
3. Yes there are benefits to being self-employed. Read the series I recommended in question 1 to find out more.P.S. I would like to remind you there is a difference between information and advice. The general information provided in this post or on my site should not be construed as advice. You should not act or rely on this information without engaging professional advice specific to your situation prior to using this site content for any reason whatsoever.