As an independent contractor in Canada, it`s essential to understand your tax obligations and filing requirements. In order to stay compliant with the Canada Revenue Agency (CRA), you`ll need to complete and submit the appropriate tax forms each year.

The tax form you`ll need to file as an independent contractor in Canada is called the T2125 Statement of Business or Professional Activities. This form is used to report your income and expenses related to your self-employment activities.

When completing the T2125, you`ll need to provide information such as your business name (if applicable), your business number (if you have one), and the type of business or professional activity you`re engaged in. You`ll also be asked to provide details on your income and expenses, including any travel expenses, office expenses, and capital cost allowance (CCA) claims for business assets.

It`s important to keep accurate records of your income and expenses throughout the year so that you can easily fill out the T2125 at tax time. This may include keeping receipts for business-related expenses and tracking your income in a spreadsheet or accounting software.

In addition to the T2125, you`ll also need to file a personal income tax return each year using the T1 General form. On this form, you`ll report your total income from all sources, including any self-employment income reported on your T2125.

As an independent contractor, you may also need to make quarterly instalment payments throughout the year to cover your income tax and Canada Pension Plan (CPP) contributions. This requirement applies if your net tax owing (including CPP contributions) is more than $3,000 in either of the two preceding tax years and is expected to be more than $3,000 for the current tax year.

To calculate your instalment payments, you can use the CRA`s online calculator or refer to Form T1206. It`s important to make these payments on time to avoid interest charges and penalties.

In summary, as an independent contractor in Canada, you`ll need to file the T2125 Statement of Business or Professional Activities each year to report your self-employment income and expenses. You`ll also need to file a personal income tax return and may need to make quarterly instalment payments. By staying on top of your tax obligations, you`ll ensure that you stay compliant with the CRA and avoid any penalties or fines.