Self-employed individuals have to manage their own income taxes, and understand how CPP, EI, and other programs work.

For example, while you may be responsible for paying CPP and CPP2 contributions, you can take advantage of tax credits and deductions to offset your liabilities. Additionally, while paying into EI is optional for a self-employed individuals, you may find that the special benefits available after joining EI are truly worth the cost.

We can help you navigate the complex world of taxes and take advantage of the benefits that best apply to your professional and personal goals.

You can be self-employed when you contract to earn income directly with businesses rather than working for a specific employer who pays you a regular salary. Self-employed individuals do not typically earn paid vacation time and do not have employer-sponsored benefits such as health and dental benefits, group registered retirement or pensions plans, and do not typically receive pay stubs. Typically, invoices need to be issued for work completed during a certain period in order to earn income for that period.

Common types of self-employed individuals include:

• Freelancers, who produce deliverables to various clients. Typically, freelancers work in the creative and technology industries in roles such as graphic designer, website developers, wedding planners, etc.
• Gig workers, such as rideshare drivers, handymen, delivery workers, and couriers.

The Canada Revenue Agency (CRA) considers the following factors when determining employment status:

• Who exerts control over the workers’ activities
• Who provides the tools or equipment
• Whether there is freedom to subcontract or hire assistance
• The responsibility for investment and management over completing the deliverables
• Worker’s opportunity for profit
• Written contracts

Being self-employed means working for yourself and earning income by contracting directly with a business rather than working for a specific employer who pays you a regular salary. In Ontario, you do not need to register to work as a self-employed person.

As a self-employed individual, you can optimize your tax returns by claiming expenses for your work, reducing your tax burden while maximizing the benefits that are relevant to you. However, you need to be aware of your obligations towards the Canada Pension Plan (CPP), Employment Insurance (EI), and income tax. Navigating the world of self-employment taxes in Canada can seem like a daunting task, but with the right knowledge, it becomes manageable.