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Thread: First time filing taxes as an independent contractor in Canada

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    Default First time filing taxes as an independent contractor in Canada

    So I'm filing taxes for the first time, and I'm really not sure how to go about it. I've calculated my income by adding up all the deposits I've made into my chequing/savings accounts and it's come out to about 25,000 (I don't work often, haha). Unfortunately, I'm a complete idiot & did not keep track of my receipts from lingerie/shoe purchases so I'm not sure whether or not I can list those as deductibles (though I know roughly how much was spent on them). Finally, because this is my first time, I believe the CRA wants me to file by mailing in the paper forms. But I can't find the form for independent workers.

    If you know any accountants in Montreal or Toronto who are stripper-friendly, I'd love to use their services. If not, I would really appreciate advice concerning what forms to use/how deductibles work.

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    God/dess shanna dior's Avatar
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    Default Re: First time filing taxes as an independent contractor in Canada

    You need receipts for your expenses, so unfortunately you're out of luck for 2016. If you get audited, you will have to provide proof of the expenses and actual receipts are all that count; bank or credit card statements aren't enough.

    You need to file Form T2125, which is available here, along with some guides to help you out: http://www.cra-arc.gc.ca/formspubs/t...fssnl-eng.html
    Here is more information on expenses: http://www.cra-arc.gc.ca/tx/bsnss/tp.../menu-eng.html

    If the CRA has your date of birth on record, then you can file online. I'm not sure how to determine whether they do or not short of calling them or trying to make an online account, but it might be worth looking into because then you can use a free online program like SimpleTax or TurboTax, which helps you find all the right forms and guides you through them.

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    Default Re: First time filing taxes as an independent contractor in Canada

    Thank you, this is just what I need. Unfortunately I can't use SimpleTax because I don't have any previous tax returns (which the CRA requires to make an online account) but the form will really help!

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    Default Re: First time filing taxes as an independent contractor in Canada

    Luckily, well my accountant told me I could estimate zero earnings on my first return. But, you don't want to upset the tax man.

    Better news. You can put as much as whatever percentage towards a retirement annuity and not pay any tax on that. So then your taxable income will be INCOME MINUS RETIREMENT ANNUITY CONTRIBUTION.

    Best advice is have a separate bank account for income (ALL THE MONEY YOU EARN LEGALLY REGARDLESS OF HOW) and all business expenses. So basically you put every dollar you make into that account and pay for all of your business expenses with that card even if you have business ideas like selling lingerie (it will be a loss and tax deductible from total income if it fails). You will also have entertainment expenses like if you have to buy another dancer lunch or a drink in order for her to work with you = entertainment expense. Money spent on building business relationships = entertainment expenses.

    You can't deduct lingerie and makeup as a business expense because you can wear it for occasions other than work. It's sad.

    You will be taxed on all income. If you did not get any receipts for house fees or tipping the dj, you cannot deduct that from your total taxable income. Income as a stripper = all the money that you receive in your hand. Exception to this is if the club takes it's cut or fees before they give you the rest at pay out. So don't think you don't have to pay taxes on the money you give to the cm or house mom or whoever if you have no proof that you paid those fees.

    I was lucky to have worked at a club where they gave us tax invoices/statements of all the money we paid them.

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    Default Re: First time filing taxes as an independent contractor in Canada

    Quote Originally Posted by Lucida View Post
    You can't deduct lingerie and makeup as a business expense because you can wear it for occasions other than work. It's sad.
    In Canada you can. We basically have it made as strippers- if you can remotely connect it to the job, good to write off.

    OP if you've made any purchases online that you have invoices for (most websites you have an account with you can access old purchases) or confirmation emails, print those off and you can use them. Also if any of your makeup is from sephora, they keep track online of all your purchases both instore and online so I just print that off instead of sending every receipt.

    I can't help with accountant references but I wouldn't really stress to hard about it- 99% of accountants aren't going to care about what you do, they just want the money for preparing your taxes. Find one that has good reviews working with self employed people and start there. Accounting services are also a write off so that's not something I try to do myself. I'd probably miss out on as much money as they cost.

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    Default Re: First time filing taxes as an independent contractor in Canada

    Quote Originally Posted by Lucida View Post
    You can't deduct lingerie and makeup as a business expense because you can wear it for occasions other than work. It's sad.
    You can deduct costumes and theatrical makeup. Use the right NAICS code so the IRS knows what to look for. As much as possible, get receipts that say costumes or theatrical makeup. Don't think you're going to deduct drug store makeup or thongs from J.C. Penny.

    You will be taxed on all income. If you did not get any receipts for house fees or tipping the dj, you cannot deduct that from your total taxable income. Income as a stripper = all the money that you receive in your hand. Exception to this is if the club takes it's cut or fees before they give you the rest at pay out. So don't think you don't have to pay taxes on the money you give to the cm or house mom or whoever if you have no proof that you paid those fees.
    The best way to handle this is you deposit your income nightly into the business account. That is your top line income number then. The house fees and the like have already been taken out. So, no deduction, but your income is reduced by teh amount of the house fees and tip outs and you don't have to worry about receipts which you will never get.

    HTH
    Z

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    Default Re: First time filing taxes as an independent contractor in Canada

    Quote Originally Posted by Lucida View Post
    Better news. You can put as much as whatever percentage towards a retirement annuity and not pay any tax on that. So then your taxable income will be INCOME MINUS RETIREMENT ANNUITY CONTRIBUTION.
    This must be a South African thing (I'm guessing, since that's what it says your location is), so not really relevant to the OP who is located in Canada.

    OP, you can put money into an RRSP (Registered Retirement Savings Plan) and then deduct it on your taxes, but with a 25k annual income, it isn't really worth it. You get the greatest benefit from the RRSP by contributing when you're at a higher tax rate than you will be when you draw from it. Once you get into the second tax bracket (around 45k), then start looking into RRSPs.

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    Default Re: First time filing taxes as an independent contractor in Canada

    Quote Originally Posted by shanna dior View Post
    This must be a South African thing (I'm guessing, since that's what it says your location is), so not really relevant to the OP who is located in Canada.

    OP, you can put money into an RRSP (Registered Retirement Savings Plan) and then deduct it on your taxes, but with a 25k annual income, it isn't really worth it. You get the greatest benefit from the RRSP by contributing when you're at a higher tax rate than you will be when you draw from it. Once you get into the second tax bracket (around 45k), then start looking into RRSPs.
    RRSP's are far far better for your taxes than a checking account or savings account at any income level. And you can withdraw from your RRSP for a first mortgage penalty free so it's definitely still worthwhile!

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    Default Re: First time filing taxes as an independent contractor in Canada

    Quote Originally Posted by vanessa_mtl View Post
    RRSP's are far far better for your taxes than a checking account or savings account at any income level. And you can withdraw from your RRSP for a first mortgage penalty free so it's definitely still worthwhile!
    If you're earning a low income, a TFSA is the way to go, not an RRSP. Other than tax-sheltered growth, the benefit of an RRSP comes from taking the money out when you're in a lower tax bracket than when you paid it in. If you've maxed out your TFSA and are still in a low tax bracket, sure, go put money into the RRSP because at least the growth is sheltered from taxes unlike unregistered investments, but until then, TFSA is the way to go. Checking/savings accounts shouldn't even factor into this since you can't manage investments in either of those -- those are just for daily use and maybe storing an emergency fund.

    As for the first-time home buyers plan, you can only withdraw up to 25k, and you still have to pay that back to yourself within around 15 years. It's a great option for sure, but you can take money out of your TFSA as well -- without having to pay it back.

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