If you’ve found new ways to make money during the COVID-19 pandemic, you might be wondering “do I need to pay taxes on my end?” »
Narcity spoke with Gerry Vittoratos, National Tax Specialist at UFile, to find out when a side business becomes taxable and how much you may have to repay.
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“Every dollar you earn in your stampede should be included on your tax return,” Vittoratos explained.
He noted that essentially any side business, job, or project is potentially taxable “from the first dollar you earn.”
Your tax return must include all income you received during the year from all sources combined.
This year in particular, in addition to secondary pandemic-related turmoil, you must also report any COVID-19 benefits you received as income.
If you earn more than the basic personal amount threshold, which is $13,229 for 2020, you will have to pay tax on every dollar from there.
However, Vittoratos explained that there are ways people can reduce the tax they owe.
“Like anything else in life, the simplest solution is usually the most effective,” he said. “Track your expenses properly and get organized with your documents.”
“When it comes to any business, it is crucial to properly archive all documents relating to it, specifically the expenses incurred,” he said.
“Without proper archiving and tracking, you will not be able to claim qualifying expenses that will reduce your taxable business income and, therefore, your tax bill.”
He said it’s common for freelancers to track their business expenses “incorrectly,” so he advised investing in good accounting software to help.