Monty: Yes, of course that's a very sensitive issue. Somebody gets sick or a family member gets ill and they go through a lot of expense. Then all of the sudden, they have a surprise. Canada Revenue Agency the CRA doesn't recognize that.
Cleo: Right. So you have to be prepared for that. Some of the other questions we're getting are for self-employment. Again, it's been a rough year for some people and if they've lost their job and haven't been able to find work, they've been venturing into the self-employment avenue. It could be somebody who's maybe you were a framer or a carpenter working for a household builder and you got laid off. But you know what, you have a trade and you can use it and you just have to go into business. That seems to be another interesting area. People are not really familiar with what it means. They know how to do the work but they're not quite sure how to handle the tax situation, so you've got to be really careful here. Anyone who goes into self-employment and calls himself a full proprietor, they're not incorporated and going through the legal avenue of creating a limited partnership or a limited company. If you're just going to be Joe Smith Carpentry, any income that you make is considered part of your personal tax return. When you file your return, you don't have to do anything special. You just need to fill in an extra form. You report your income and you've got your expenses, like the supplies you bought and maybe you have motor vehicle expenses because you're driving from job to job. You're keeping a small office in your home, you can have some expenses to that. The challenge is if you're successful, the income that you make is going to be taxed at your personal tax rate. In Canada, we have a federal tax rate and a prudential tax rate. If we speak specifically federally, the minimum tax rate you have to pay is 15% on the first $40,000 in income. The minute you jump up above the $40,000, you start paying 22%. If you get over the $80,000 limit, you're going to pay 26%. If you get over $126,000, you're going to pay 29% plus whatever your province charges. As a full proprietor, if you're just starting out and you maybe make $30,000 in the first year, but you're seeing yourself getting more business and probably making more money, you may want to consider whether or not it's feasible for you to then incorporate. Create a separate entity, separate business, and then you can pay yourself out of your business. Definitely something you want to talk about to a tax professional about to see if it's worth it. Don't forget as well that as a self-employed person, you actually have to register for GST as well sometimes. Those are questions that people really need to know and get the right answer.
