The Top 5 Tax Concepts to Know to Be a Veterinarian Self-Employee in Canada22 July 2021
The Top 5 Tax Concepts to Know to Be a Veterinarian Self-Employee in Canada
As a veterinarian locum, you will enjoy an array of advantages including flexible work hours and advancement possibilities.
While the idea of running your own business is exciting, handling your finances may not be as thrilling. This may dampen the idea of a new business venture.
Everything from the completion of the right tax documents to knowing when to file your returns may seem like a chore. But it doesn’t have to be!
With the knowledge of the tax rules, regulations as well as the right concepts, you will enjoy your career as a self-employed veterinarian.
Here are the top 5 tax concepts to know to be a veterinarian self-employee in Canada:
Learn how taxes work
As a veterinarian self-employee in Canada, your business earnings and personal income are one and the same. While there is no separate income tax for your business, you are still faced with tax obligations.
You are expected to report all of the income that you receive to the Canada Revenue Agency, which appears as part of your personal income on your tax form.
Thus, you will be required to pay income tax (where every portion of your income is taxed 15% to 33% depending on your earnings as a vet) and the Canadian Pension Plan (CPP) contributions (9.9%) that will cater to your retirement.
Regarding consumption taxes, you are not required to charge taxes as a fall worker unless you charge more than $30,000 for 12 consecutive months. If you exceed this threshold, you are required to obtain a tax number and charge the corresponding consumption taxes to your province.
Your hourly rate should help you meet your tax obligations
Part of your financial obligations as a locum vet include the payment of taxes. As such, you should not match your hourly rate to that which your employed counterparts receive.
The reality is that their employer takes care of their company’s tax-related obligations. Needless to say, your hourly rate should be higher as a self-employed vet.
Remember, you will have to pay for your accounting fees, insurance, rent, and utilities amongst other fees. Therefore, you should make enough money to pay off your taxes, expenses and take a good chunk of money home.
Thus, to calculate your hourly rate you should take into consideration your years of experience, any internship that you have completed as well as your capabilities (such as dental or orthopaedic cases). ‘
Set Money Aside
It goes without saying that you will need to set money aside so that you can afford to pay your taxes. Ideally, you could make a deduction from every cheque that comes in.
Otherwise, you will have to offset a hefty tax bill at the end of the year. Setting aside a minimum of 25% of your income will allow you to pay your taxes as a veterinarian self-employee.
Have your proof
As a self-employed veterinarian, you are responsible for keeping all meticulous records that showcase your expenses and any assets that you purchased.
These documents include invoices, journals, receipts, mortgage documents, credit statements, and financial adjustments.
With your important documents in hand, you can provide proof in case of a Canadian Revenue Agency review or a tax audit.
Have the right accounting software
Now, even as a smart veterinarian, you cannot do it all yourself. To ensure that you get your taxes right, it is best to adapt the best accounting software into your business practices.
This is a simple time-saving tool that will report on the amount of taxes that you owe. FreshBooks, QuickBooks, and Sage Business Cloud are examples of accounting software that will take the hassle out of filing your returns.
The Bottom Line
There you go! Tax concepts that will help you get through your journey as a self-employed veterinarian.
However, do not forget to consult an accountant as they will advise you on the best way to handle your tax returns. They will expound on employment tax issues as well as the factors that make you competent for income taxing.
They can also assist you in filling out complicated tax forms. An accountant will equally take you through the legal tax obligations (if any) that face you in your new practice.
You still have to gain client trust and build a positive professional reputation. This only comes with hard work, dedication, and a passion for your career.
To know if the professional’ is working as an independent contractor or employee, refer to the article Employee or Self-employed? from the Canada Revenue Agency.
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