Once you've filed your taxes, you'll learn whether the CRA will be writing you a cheque or the other way around.
We'll walk you through how to handle either situation with financial finesse.
If you receive money from the CRA, here are a few useful ways to use the money:
Pay down debt - Particularly high-interest rate debt such as credit cards, lines of credit, or personal loans.
Create a vacation fund - How good would it feel to have your vacation funded at the beginning of the year? With that out of the way, you can focus on saving for your future. We'd recommend keeping a separate "vacation fund" (such as a Wealthsimple savings account) so that you're not tempted to spend the money on everyday things.
Fund your TFSA - TFSAs are great tax-advantaged accounts for savings. You can withdraw the funds tax-free at any time. Just make sure to keep within the contribution limits found here.
Fund your RRSP - Now that you've received your 2018 Notice of Assessment, you know exactly how much 2019 RRSP contribution room you have and can start contributing! Make sure you keep track of how much you contribute so that you stay within the limit for the year.
If you owe money to the CRA: It's best that you pay it right away. The late penalty is 6% interest and 5% penalty for any amount owed, plus 1% for each month you're late.
Unfortunately, it's quite common for self-employed individuals to underestimate the amount of HST, income tax, and CPP contributions owed. Make sure you're proactive about setting money aside this year. What do you need to know?
Self-employed individuals must pay the following:
13% HST on your sales if you earn more than $30,000 a year
Income-tax on your net income (net income = sales minus deductible expenses)
Canada Pension Plan (CPP) contributions of 9.9% (half of which is tax-deductible)
Learn more about paying taxes as a self-employed individual here.
Once you've completed your RRSP contribution, tax filing and tax refund/ payments, you've conquered tax season and are free for (almost) another year 🙌.