Self employment carries hidden costs
More than 43,000 Canadian jobs disappeared last month, suggesting that most companies continue to wait for more signs of a sustained recovery before they begin hiring again.
The job losses would have been even worse, but that big drop was offset by a gain of 27,500 in the nebulous "self-employed" category.If you’re one of those who've made the leap, keep in mind that your new job status brings with it a number of challenges, not the least of which is your tax situation. While writing off car and office expenses will certainly put money in your pocket, expect to be saddled with some unexpected costs.
CPP premiums are made up of equal amounts shared by the employer and employee. Which means now that you’re self employed, you’re responsible for both sides and have to remit the full amount to the CRA up front.
When you file your tax return, you’ll claim the employee's portion as a non-refundable credit, and the employer's portion as a deduction against income. The net result could be an additional tax bill of at least a couple of thousands dollars.
Then there's the cost of medical, dental and disability coverage. If you're leaving a decent package behind, it can cost you another $2,000 a year to match the level of protection you had while working.
The good news, of course, is that you don’t have to pay EI premiums any more since you’re no longer eligible to collect.But this could change if the Harper government does decide to allow those that work for themselves to access maternity and parental money available under EI. In this case, expect to pay roughly half the normal premiums to obtain these type of benefits.
Gordon Powers, MSN Money
Posted by: Howard | Nov 10, 2021 8:38:03 AM
I'm not sure where you come from but I pay alot less tax as a self employed person in Alberta. I may have to pay a little more on insurance and accounting fees but when you add up the wright offs and lower tax rate I'm alot farther ahead than others working for a wage. If your going to post this kind of article please do some research! Read any financial book and the first thing it says is go into business for yourself!
Posted by: Rich | Nov 11, 2021 8:57:32 AM
I completely agree with Howard's comments. I am self employed as well and the tax savings are very high and offset paying both sides of the CPP. Trying running a side-by-side tax return comparison of 2 people who make $60K - 80K/year. The self-employed person takes home more income, every time.
Posted by: wanda gillard | Nov 11, 2021 12:01:15 PM
I am single mother with tree little girls and it is not easy finding a job were i am living because i cant seem to find a babysitter for my kids. Ever day i cry my self to sleep because i don't now were i'm going to get the money to tack cear of my kids.My kids mean the world to me and i will do any thing to make there life right.
Posted by: wanda gillard | Nov 11, 2021 12:06:12 PM
I love my kids with all my heart and there's not one thing i would'ent do to help make there life a better one there father left us when they were just small kids and fore the last tree years i have been looking after them by myself it is not easy work but i do the best that i can.I would love to be working and making money to help tack cear of my kids.My life is heard by no means it's not easy.
Posted by: blossum | Nov 11, 2021 3:33:32 PM
You might have more disposal income however did you take into account that you won't have a company pension? What about holidays? In a full time position, you keep on getting paid. Even while on parental leave. By the time you start adding in those extra costs, you might not be bringing home so much money. For example I know of one teleworker who goes on vacation, works regular hours with an internet connection just to make sure that the consulting fee continues to come in.
Posted by: steve manby | Nov 12, 2021 10:15:05 AM
"If your going to post this kind of article please do some research! Read any financial book and the first thing it says is go into business for yourself"
LOL
Its you who needs to do some research.
while self employment can be quite beneficial,depending on the business....to be successful as a self employed person takes alot of behind the scenes work....compare apples to apples, go find that book to do the research required and come back in a year and tell us how it was.
both sides have pros and cons.