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Filing taxes when you work for yourself can be tricky, here are five things self-employed and gig workers should knowmediaphotos/iStockPhoto / Getty Images

The digital economy has created a new wave of gig workers, contractors and self-employed people. A recent survey by TurboTax found 23 per cent of Canadians have a side gig from their primary employer.

But the transition into this form of work doesn’t come with a handbook that warns how complicated your taxes are about to become.

The reality is that filing taxes when you work for yourself is a completely different ball game, and it’s highly recommended to work with a tax expert to ensure you don’t make mistakes on your return. We compiled some tips from experts below.

Make tax work a part of your schedule

This tip might be coming too late for people filing this year, but experts recommend setting aside time every week to take stock of all the expenses you’ve incurred in your work, whether that’s car repairs, a new internet provider or the purchase of equipment.

Using a bookkeeping software such as QuickBooks can be particularly helpful to keep track of every cost. If you’re well organized, then a tax expert can help you determine which of those expenses can be fully or partially deducted.

Consider startup costs

TurboTax spokesperson Jami Monte says most people don’t think of their gig work as a business at the beginning, and therefore don’t consider the cost of getting started. Equipment, legal advice and supplies can all be deducted when preparing your taxes. Even the cost of consulting an accountant for tax advice can be deducted.

Claim fees from financial institutions

Ms. Monte said an oft-overlooked expense is the cost incurred from banks and other institutions that process your payments. Any fees or charges for these services can also be deducted. Furthermore, if you’re borrowing money to support your work, the interest can be deducted.

Familiarize yourself with partial deductions

Not every business expense can be deducted in full. For example, when you make a large purchase such as a car, you don’t deduct the price of the car in year one, but rather the yearly depreciation based on a rate set by the government. If your business is based in your home, you can only claim a portion of housing and internet costs, not all of them.

Incorporating could be beneficial if you make enough money

Estate planner Cindy David said your income will be taxed at a lower flat rate as an incorporated business if you earn less than $500,000. If you make more than roughly $80,000 (depending on which province you’re in), you could benefit from the tax savings related to incorporating. However, if you make less than that, it may not be worth incorporating, as there are upfront costs such as legal fees to incorporate, and the services of an accountant can be more expensive when filing as a business rather than as a person.

Are you a young Canadian with money on your mind? To set yourself up for success and steer clear of costly mistakes, listen to our award-winning Stress Test podcast.

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