By Melanie Buffel BA Psych, MBA Candidate

When people choose self-employment, they are often attracted to the challenge and excitement of creating a business they are passionate about. They may look forward to a more flexible work schedule, or the possibility of earning more than they did as an employee. The one thing most people don’t get excited about is keeping track of all their expenses and planning for their income taxes.

But procrastination in handling the financial side of your business can result in frustration, or even panic, as the tax deadline looms.

There are some real tax challenges for the self-employed:

• Your income may vary month-to-month making it difficult to estimate annual earnings and thus the appropriate tax rate.
• A varied income also makes it hard to create a cash flow plan.
• Even if you create a plan it can be difficult to honour it when cash flow is tight.

Then there are the pitfalls of inexperience:

• Losing track of receipts.
• Mixing personal expenses with business expenses.
• No clear sense of how much to set aside for income taxes.
• Falling behind and still trying to catch up on last year’s taxes owing.
• Missing the filing deadline and incurring penalties.
• Not using a bookkeeper or professional accountant to help with your tax preparation/filing.

So what do you do if you find yourself unprepared for this year’s return? Continue reading →