Our Logo

Rotaru CPA

< back to search

How do I keep track of my earnings and expenses as a Canadian freelancer or business owner?

To effectively track earnings and expenses as a Canadian freelancer or business owner, set up a "My Business Account" with the CRA for managing taxes, understand deductible expenses such as advertising and office supplies, choose between cash or accrual accounting methods, and utilize CRA resources for guidance on financial reporting and expense claims.

2 min read
Written by Peyton Bieda on August 20, 2024
Canadian Tax Obligations for ResidentsForeign Income Reporting ObligationsTax Residency Classification

Managing your earnings and expenses as a freelancer or business owner can be a daunting task, but with the right tools and knowledge, it can become a seamless part of your routine. Here are some practical steps and resources provided by the Canadian government to help you keep track of your financials effectively.

Setting Up Your Business Account

One of the first steps you should take is to set up a "My Business Account" with the Canada Revenue Agency (CRA). This online service allows you to manage various aspects of your business taxes. With My Business Account, you can:

  • Make payments online or set up pre-authorized debit agreements.
  • File or amend information returns.
  • Manage authorized representatives and view mail from the CRA.
  • Track the progress of files and download reports1.

    • This platform is essential for keeping your business finances organized and ensuring you meet all tax obligations.

    Understanding Deductible Expenses

    As a freelancer or business owner, knowing which expenses you can deduct is crucial for maximizing your net income. The CRA provides comprehensive guidelines on deductible business expenses. Generally, you can deduct any reasonable expense incurred to earn income, including:

  • Advertising costs in Canadian media.
  • Business-use-of-home expenses.
  • Office supplies and equipment.
  • Travel and motor vehicle expenses.
  • Salaries, wages, and benefits3.

    • It's important to maintain detailed records of these expenses to substantiate your claims during tax filing.

    Choosing the Right Accounting Method

    The CRA allows you to choose between the cash method and the accrual method for reporting your income and expenses:

  • Cash Method: You report income in the fiscal period you receive it and deduct expenses in the fiscal period you pay them.
  • Accrual Method: You report income in the fiscal period you earn it, regardless of when you receive payment, and deduct expenses in the fiscal period you incur them, regardless of when you pay them2.

    • Selecting the appropriate method depends on your business's nature and financial transactions.

    Utilizing CRA Resources

    The CRA offers numerous resources to assist business owners and freelancers. For example, their guidelines on business expenses provide detailed information on what can be claimed and how to claim it. Additionally, they offer tools like the General Index of Financial Information (GIFI) to help standardize financial reporting23.

    By leveraging these resources and tools, you can efficiently track your earnings and expenses, ensuring that your business remains financially healthy and compliant with Canadian tax laws.

    Citations

    1. https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/rc4110/employee-self-employed.html
    2. https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/t4002/t4002-5.html
    3. https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/sole-proprietorships-partnerships/business-expenses.html