The Top 5 Tax Concepts to Know to Be a Self-Employed Veterinarian in Canada
22 July 2021The Top 5 Tax Concepts to Know to Be a Self-Employed Veterinarian in Canada
As a self-employed veterinarian, you will enjoy a host of benefits, including a more flexible schedule and the hourly rate of your choice.
While the idea of running your own business is exciting, managing your finances might not be so. It can easily put a damper on your ambitions to start a new business.
All of that paperwork can seem like a chore, from the stress of filling out the right tax documents to knowing when to file your tax returns. Don’t let this get you down!
With knowledge of tax rules, regulations and the right tax concepts, you will be off to a good start in 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 self-employed veterinarian in Canada, your business income and your personal income are one and the same. Although there is no separate income tax for your business, you still face tax obligations.
You are required to report to the Canada Revenue Agency all income you receive that appears as part of your personal income on your tax form.
Thus, you will have to pay income tax (where each part of your income is taxed from 15% to 33% depending on your income as a veterinarian) and contributions to the Canada Pension Plan (CPP) (9.9 %) which will be used for your retirement.
Regarding consumption taxes, you are not required to charge taxes as a self-employed person unless you charge more than $ 30,000 during a period of 12 consecutive months. If you exceed this threshold, then you will be required to obtain a tax number and add this amount to your professional fee invoices. Note that employers recover a large part or even all of this amount each quarter.
Your hourly rate should help you meet your tax obligations
Paying taxes is part of your financial obligations as a self-employed veterinarian. You should therefore not align your hourly rate with that of your salaried counterparts.
In reality, it is their employer who takes care of the tax obligations of their business. It goes without saying that your hourly rate should be higher as a freelance vet.
Remember that you will have to pay, among other things, your accounting, insurance, rent and utilities costs. Therefore, you should be earning enough money to pay your taxes, expenses, and bring a good chunk of the money home.
Thus, to calculate your hourly rate, you must take into consideration your years of experience, your consultation and surgery skills but above all you should take stock of the income you generate at the veterinary establishment because it is on this index. that you can base your hourly rate.
Set Money Aside
It goes without saying that you will need to put some money aside so that you can afford to pay your taxes. Ideally, you could make a deduction on every check you receive.
Otherwise, you’ll have to offset a hefty tax bill at the end of the year. By setting aside a minimum of 25% of your income, you will be able to pay your taxes as a self-employed veterinarian.
Have your proof
As a self-employed veterinarian, you are required to keep all meticulous documents that document your expenses and the goods you have purchased.
These documents include bills, journals, receipts, mortgage documents, credit statements and financial adjustments.
With your important documents in hand, you can provide proof for a review by the Canada Revenue Agency or a tax audit.
Have the right accounting software
Even if you are a smart vet, you can’t do it all on your own. To ensure that you are managing your taxes well, it is best to tailor the best accounting software to your business practices.
This is a simple tool that will save you time and tell you how much tax you owe. FreshBooks, QuickBooks, and Sage Business Cloud are examples of accounting software that will save you the chore of filing returns.
The Bottom Line
There it’s done ! Tax concepts that will help you navigate your path as an independent veterinarian.
However, don’t forget to consult an accountant, who will advise you on the best way to process your tax returns. He will explain to you the issues relating to labor tax as well as the factors that make you competent for the taxation of income.
It can also help you fill out complex tax forms. An accountant will also explain to you the legal tax obligations (if any) you will face in your new practice.
You still need to earn the trust of your customers and build a positive professional reputation. This can only be done with a lot of hard work, dedication and passion for your career.
To find out if the professional corresponds to the status of self-employed worker or employee, see the article Employee or Self-employed? from the Canada Revenue Agency.
Are you looking for a way to simplify the management of your small self-employed veterinarian business?
We’ve got all the tools you’ll need to take your headache out of administration and finances and focus on what really matters – your professional practice.