Lesson plan: Working for yourself
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Learn about your taxes
Lesson plan: Working for yourself
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Overview
This lesson will help students learn about self-employment income and their tax responsibilities, how to manage their goods and services tax/harmonized sales tax (GST/HST) account, and how to report their income. Students will be able to test their knowledge through quizzes and practical examples.
The core question is:
- What are the tax responsibilities of self-employed individuals?
Learning objective: Students will develop an understanding of the tax responsibilities of self-employed individuals and how to report self-employment income. Students will also learn what a GST/HST account is and if they need to register for one. By completing this lesson, students will be better equipped to meet their tax obligations in the event that they are self-employed.
Skills to develop
- Explain what self-employment income is
- Identify different types of self-employment income
- Describe different types of businesses
- Determine when to register for a GST/HST account
- Identify common deductible business expenses
Background information
In Canada, employees and self-employed individuals need to fill out and file a tax return every year to report the income they earned or received during the year. They use the tax return to calculate if they owe taxes to the Canada Revenue Agency (CRA) or if they are entitled to a refund. Filing your taxes helps to ensure that each individual pays the correct amount of tax.
Generally, employers withhold tax when they pay their employees. Self-employed individuals, however, must report their income and then send their taxes to the CRA.
Self-employed individuals may also need to register for a GST/HST account if they are responsible for collecting GST/HST from their customers and then sending that amount to the CRA.
Self-employed individuals may also be able to claim various business deductions depending on the types of goods and services they provide.
Learning and activities
Required materials step 1
- Lessons: Working for yourself
- Quiz: Working for yourself
- Common tax terms
- Optional equipment:
- Computer
- Projector
- Printer
Warm-up exercises step 2
First exercise
Step 1: Ask students if they have ever thought about starting their own business or side gig.
Step 2: Ask students what types of side gigs are available. Give them a few moments to share their ideas.
Suggested answers could be:
- Driving for rideshare apps, like Uber or Lyft
- Working as a food courier for a company, like Uber Eats or SkipTheDishes
- Social media influencer
- YouTuber
- Selling items online, like on Etsy, eBay or Amazon
- Working as a freelancer
- Working as an independent tradesperson
Step 3: Explain to students that making money and receiving gifts from side gigs or their own business is considered self-employment income, and it has to be reported at tax time.
Step 4: Ask students to create a list the kinds of things, besides money, they could receive that would be considered income. After a few minutes, have the students share their ideas.
Suggested answers could be:
- Trips
- Clothing
- Products, like cosmetics or video games
- Event tickets, like to hockey games or concerts
- Meals
- Gift cards
Second exercise
Step 1: Explain to students that when they are self-employed, whether it is full-time or part-time, they may be considered a small business for tax purposes.
Step 2: Ask students to mind map the types of information and documents self-employed individuals may have to keep in order to report their income and claim their business expenses. After a few minutes, have the students share their ideas.
Suggested answers could be:
- Records of business purchases, like receipts
- Logbooks with mileage records
- Sales records, like invoices
- Profit and loss amounts, like bank statements
- Records of the GST/HST charged to clients
- Payroll records
Walk through the lessons step 3
Read through the lesson pages with the additional guidance provided below. Students can review material individually, in groups, or as a class.
Activity
This activity will continue through all three of the lessons in this module. Have students write down some or all of the terms that will be covered in this module. As students go through each lesson they should write down the definition of each term.
- Accrual method
- Barter transaction
- Business expense
- Calendar quarter
- Capital cost allowance (CCA)
- Cash method
- Class
- Commission agent
- Corporation
- Depreciable property
- Digital economy
- Employee
- Fair market value
- Goods and services tax/harmonized sales tax (GST/HST)
- GST/HST account
- Incorporation
- Input tax credits
- Late-filing penalty
- Loss
- NETFILE-certified tax software
- Partnership
- Platform economy
- Profit
- Remit
- Rideshare
- Small supplier
- Self-employed
- Sole proprietorship
Lesson A: Why you need a SIN or a tax number
Before starting the lesson
Advise students that all individuals in Canada require a SIN to work or to get benefits and services from the government. Depending on their residency status and their citizenship status, they may receive a permanent or a temporary SIN. An individual's SIN usually stays with them indefinitely.
After finishing the lesson
Stress to students the importance of keeping their SIN safe. Discuss the consequences of a compromised SIN, such as fraud or identity theft, and the long-term impacts this can have.
Lesson B: The differences between being an employee and a self-employed individual
Before starting the lesson
Explain to students that there are important differences between being an employee and a self-employed individual. Generally, an employee is hired to perform specific tasks under the direction of a company or individual. A self-employed individual controls their own tasks and offers their services to others. Each status has a different impact on your entitlement to employment insurance (EI) and your tax obligations.
After finishing the lesson
Stress to students the importance of knowing their employment status. Remind them if they are unsure of their employment status they can ask the CRA to complete a Canada Pension Plan and employment insurance (CPP/EI) ruling.
Lesson C: Understanding self-employment income
Before starting the lesson
In this lesson students will learn what self-employment income is and common types of self-employment income. Students will be introduced to the basic types of businesses and the tax responsibilities of self-employed individuals. Remind students to complete their word bank as they go through the lesson.
Activity
Before beginning the lesson, ask students the following:
Mary has a YouTube channel where she posts videos of herself teaching crafts like calligraphy and scrapbooking. She earns ad revenue yearly. Mary is also sent free products from suppliers to use in her videos. Does she have to report the value of these free products as well as the money she makes from advertising on her tax return?
Have students write their answer down.
Before going to the final page of the lesson, ask students to write down if their answer to Mary’s situation has changed and their reasoning.
Complete the “Test yourself” question on the final page of this lesson to get the correct answer.
After finishing the lesson
Remind students that there are personal and societal benefits to reporting their self-employment income. Ask students what some of the benefits to individuals and to the community are. Give them a few moments to share their ideas.
Suggested answers could be:
- Increases the amount of money they could borrow from a financial institution
- Increases RRSP contribution room
- Allows them to pay into the Canadian Pension Plan or Quebec Pension Plan
- Funds healthcare
- Funds emergency services
Lesson D: Managing a goods and services tax/harmonized sales tax (GST/HST) account
Before starting the lesson
This lesson will introduce students to GST/HST accounts. Students will learn when self-employed individuals need to register for a GST/HST account, charge GST/HST, and send it to the CRA.
Remind students to complete their word bank as they go through the lesson.
Activity
Explain to students that when they earn a certain amount of income from a business, or if their business falls under a certain category, they will need to register for a GST/HST account with the CRA.
Ask students to create a list outlining the steps or actions to take once they have registered for a GST/HST account.
The answers include:
- Charge GST/HST when providing a taxable service or product
- Keep track of the business expenses they had to pay to be able to provide a service or product
- Keep track of the GST/HST they paid on those expenses
- Be responsible for the GST/HST tax they collected until they send it to the CRA
Lesson E: Reporting your self-employment income
Before starting the lesson
In this lesson, students will gain an understanding of the importance of keeping business records, types of records to keep, and other helpful tips when reporting self-employment income. Students will also be introduced to common deductible business expenses.
Remind students to complete their word bank as they go through the lesson.
Activity
Before beginning the lesson, ask students to write a list of what type of deductions they think self-employed individuals can claim. Give them a few moments to share their ideas.
Suggested answers could be:
- Advertising
- Insurance
- Office expenses
- Travel expenses
- Motor vehicle expenses
At the end of the lesson, have students add any expenses they did not include to their lists.
After finishing the lesson
Remind students that self-employed individuals can claim different deductible business expenses depending on their eligibility and the goods and services they provide.
Bring it all together step 4
Direct students to complete the quiz to assess their understanding.
Discuss the importance of knowing their tax obligations as a self-employed individual.
Ask the students how the type of goods or services they provide can affect their taxes as a self-employed individual.
Some points may be:
- The type of business they are considered for tax purposes
- What counts as income
- If they need to charge GST/HST
- If and when they need to have a GST/HST account
- Types of business deductions they can claim
- Types of records they need to keep
- Classes of capital costs they can claim
Reiterate the benefits of understanding what the tax obligations of a self-employed individual are, in case students decide to start their own business or start a side gig. This understanding will make sure that they are paying the correct amount of tax, meeting their tax obligations, and allow them to claim the business deductions they are eligible for.
Page details
- Date modified:
- 2024-02-12