Self-employed Workers and Taxes

The deadline for filing your tax return was two weeks ago, however, if you or your spouse is self-employed, the deadline is June 15, 2025.

In recent months, our experts have been asked the following questions on numerous occasions:

• Am I self-employed or an employee?
• What expenses can I claim to maximize my tax credits?
• How can I anticipate the tax payable?

Here’s what you should know:

First of all, you may not be considered self-employed according to labour legislation criteria, but still be considered self-employed for tax purposes. This is why it’s important to determine whether you’re self-employed or an employee because your tax obligations are not the same.

Self-employed or employee: what is the difference?

• Self-employed workers are individuals who work for themselves to generate a profit. They are free to choose their clients and how the work requested will be carried out.
• Employees are individuals who work for an organization and earn a salary. Pursuant to a contract, employees undertake to work under the control of an employer for a period of time agreed upon by both parties.

Revenu Québec has defined six criteria to determine workers’ employment status for tax purposes:

• Subordination to an employer: If you are self-employed, you decide everything, such has the work location, methods, hours, etc.
• Financial or economic criterion: Self-employed workers can earn profits but also incur losses.
• Ownership of tools: Generally, self-employed workers own their tools and, therefore, cover the related utilization costs.
• Is the work an integral part of the organization’s activities: Are the services rendered part of the organization’s usual activities?
• Specific result of the work: If your services are retained to complete a specific task with a specific goal, you are self-employed. As a general rule, your business relationship ends when the results are achieved.
• Parties’ approach regarding the work relationship: This criterion refers to the agreement between the self-employed worker and the client or the employer and the employee. Click here to find out more.

Sometimes an employer may suggest that an employee become self-employed. However, just because the two parties have reached an agreement does not mean that the tax authorities will recognize the status of self-employed worker. If a worker and an organization cannot agree on the worker’s status, it is strongly recommended that a request for a ruling be submitted to Revenu Québec, using the following forms:

• Application for determination of status as an employee or a self-employed person (RR-65)
• Questionnaire for determination of status as an employee or a self-employed person (RR-65.A)

What expenses can you deduct?

As a self-employed worker, you are required to report all income earned. This also means you can deduct expenses incurred for the purpose of generating income. The expense must be legitimate, necessary for the conduct of your business, and expected to generate profits or save you money. As a self-employed person, you have a great deal of latitude with respect to your tax deductions.

However, you must be able to provide supporting documentation when requested by the tax authorities. Even if an expense is legitimate, you must have a proof of purchase. So, keep your receipts! Here are some examples of eligible and non-eligible expenses:

Eligible expenses

• Equipment;
• A portion of your electricity if you have a home office;
• A portion of transportation expenses (vehicle leasing, repairs);
• Telephone purchase or leasing;
• Training expenses;
• Entertainment expenses to develop a clientele or retain clients.

Non-eligible expenses

• Personal expenses (housing, food, clothing);
• Fund outlays;
• Capital expenditures or losses;
• Reserves (also called contingent accounts and sinking funds) unless their deduction is specifically permitted under the Taxation Act;
• Expenses incurred to create a business prior to commencing operations.

To make it easier to manage your eligible expenses, make sure they satisfy one of the following criteria:

1. First, the expense must make it possible for you to generate a profit;

2. Second, the sole beneficiary of the expense is the business and not the individual;

3. Then, the purpose of the expense is to develop a clientele or retain clients.

For more information on eligible expenses, refer to Raymond Chabot Grant Thornton’s Tax Planning Guide by clicking here.

Who is required to make GST/QST remittances?

Aside from the information you need to provide on your tax return, you may need to open a GST/QST account and register for GST/QST. How does this work? First, if you earn $30,000 or more in self-employment income, you must register for GST/QST. Then, once registered, you are responsible for making GST and QST remittances. These remittances must be made on a monthly, quarterly or annual basis. You will be able to determine the frequency of your remittances when you register. Click here to view the remittance schedule so you can avoid penalties for a late payment or failure to file. Note that you can register for GST/HST even if your self-employment income is less than $30,000. However, once you register, you are required to make remittances within the stated deadlines.

For greater clarity, when you are a GST/QST registrant, you are required to:

• Collect GST/QST when invoicing all your clients;
• Calculate the GST/QST amounts you paid for all expenses deducted for tax purposes;
• In your remittance, report all GST/QST collected and paid.

Once you have prepared your remittance return, you will know if you are entitled to a refund or have to make a payment to Revenu Québec. You should consider this return as a way to recover the taxes paid on expenses incurred with respect to your business.

Lastly, instalments

Do you feel like you’re paying more taxes since you’ve been self-employed?

Clearly, instalments should be viewed as a deposit in anticipation of taxes owing. Let’s be clearer! In general, an employee pays taxes on each paycheck through amounts deducted at source by the employer. Payroll deduction is a tax withholding technique. The withheld amount is paid to the tax authorities. A self-employed person has no withholding tax. Remember? You’re the boss! It’s therefore to your advantage to anticipate your tax liability by putting money aside. It’s up to you to decide how much. This amount can represent 20%, 25% or 30% of your earned income. You can decide or have a tax expert advise you.

In short, there is so much to know and understand. This article only provides an overview of the subject. If you have any other questions, please feel free contact our experts! But above all, remember to deduct your expenses, it’s your right!