The Quickest Way to File your Self Employed Taxes & Tips on Writing Off Expenses

The Quickest Way to File your Self Employed Taxes & Tips on Writing Off Expenses

Many self employed individuals get scared when writing off expenses because the government hasn’t exactly given us an exact list of applicable expenses, so it’s usually a guessing game… sometimes even with those who are reviewing/auditing your taxes. 

PS. In case you’re not sure what claiming expenses do: claiming expenses for your business can basically offset the income you had coming in. So if you had $40,000 in self employed income but $10,000 in applicable expenses towards the business, you end up only paying taxes on $30,000 of that income.

To ensure you’re feeling confident in the expenses you’re claiming, I always recommend following:

 

The Three R’s: Reasonable, Receipted, Revenue Generating

Reasonable:

Simply put, it must make sense. If you get audited, you’ll want to make sure you can stand behind all the expenses you claimed. For example, claiming hair appointments as an actor is fine, but claim a hair appointment every two weeks and an auditor will most likely challenge that. Also, you may have to prorate certain expenses if they are incurred for both business and personal use. Check out our blog on what proration is and how to calculate it!

Receipted

You must keep your receipts for six years.

Receipt must show amount, date and purpose of the expense.

Write down the purpose of the expense on the receipt.

Keep day planners with written proof of meetings, ubers, meals, etc.

The more evidence you have, the better.

Related to Revenue Generation

You must be able to defend that each expense is made in an attempt to increase revenue for your business. It doesn’t have to be immediate, but you should be ready to explain how the expense could eventually lead to the generation of revenue.

COMMON EXPENSE EXAMPLEs

Expenses will vary based on your industry, but here is a list of some generally accepted expenses examples for self employed businesses.

  • Advertising/Marketing Fees

  • Gas (Keep a logbook of km’s driven specifically for work.)

  • Parking fees

  • Start-up costs

  • Bank fees (only for business accounts.)

  • Office supplies

  • Personal maintenance if it has to do with your business (hair appointments, gym memberships – for performers, trainers, etc.)

  • Accounting fees (Fees for advice + consultation, to keep your books & records, & to prepare & file your income tax + GST/HST returns.)

  • Union dues

  • Business fees

  • Membership websites for your industry

  • Private health services plan premiums

  • Equipment needed to do your job

  • Commissions Paid Out

  • Cost of labour & materials to repair + maintain property used to earn income

  • Meals & Entertainment (When taking a client out or discussing business with a partner. Claim 50% or a reasonable amount, whichever is less.)

  • Travel (Only in regards to work. Public transportation, hotel costs, conferences fees.)

  • Training, classes, coachings, workshops

You can have so many expenses (especially when starting) that you end up losing money on a business for a year; you can claim a loss. If you claim a loss on your self-employed business (spent more on your business than you made), that loss can be used against earnings from other jobs. Be aware that declaring a loss from your self-employed income (especially a few years in a row), can increase your chances of receiving an audit.

 

Anxiety Reducing Tip: 

Audits aren’t a thing to fear as long as you can back up and defend everything you claimed (using the three R’s)! The worst case scenario would be if the auditor didn’t agree with certain claims, resulting in a reduced refund, or more tax owing with potential interest.

Brittany Clough

Brittany Clough

Brittany is the founder and CEO of Real Adulting 101. She's dedicated to helping elevate her generation and those following through mentorship, education and empowerment. She knows everybody has the potential to live a beautiful and fulfilling life, but that only certain people were given the tools to create it.