01. Tax Filing Requirements for Sole Proprietors

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• Reporting Income and Expenses: Declare all revenue and expenses accurately.

• Key Forms:

    o T1 Personal Income Tax Return (business income included here).

     o T2125 Statement of Business Activities.

• Deadlines: File by June 15th, but taxes owed are due April 30th to avoid interest.

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02. Understanding Tax Rates

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• Sole proprietors pay personal income tax rates, which are progressive.

• No small business deduction is available, often leading to higher taxes on profits.

• Provincial tax rates vary, influencing overall tax burden.

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03. Canada Pension Plan (CPP) Contributions

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• Pay both employer and employee portions on net business income above thresholds.

• Increases overall tax cost but builds future retirement benefits.

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04. GST/HST Registration and Collection

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• Required to register if revenues exceed $30,000 in any quarter or four-quarter period.

• Charge GST/HST on sales, file returns, and claim input tax credits.

• Non-compliance can result in penalties.

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05. Practical Tips from Financial Experts

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• Maintain meticulous records using accounting software or bookkeeping services.

• Plan tax payments through quarterly instalments to avoid year-end surprises.

• Consider incorporation as profits grow for tax and liability advantages.

• Maximize business deductions while ensuring compliance.

• Work with professional accountants or tax advisors.

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Conclusion

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Understanding and managing sole proprietorship taxes carefully reduces stress and ensures financial health.