How does owning own business at tax time work?

Only go into business for yourself if it pays off - if you're being asked to work as a contractor, charge more per hour than you would as an employee, because in Canada as a sole proprietor you're paying both EI and CPP for yourself AND the business share with is equal or higher than your individual contribution.

Also ignore any advice you get from Americans on this - the tax laws are different, and there's less to write off in Canada. Get a Canadian business accountant to walk you through what is and is not allowed to be deducted off profit. Expenses are not repaid - they simply lower your taxable income and taxes owed at the end of the year. But losses can accumulate over time as long as you're making a good faith effort to make money.

You don't "write off" your business expenses. You don't get refunded for those expenses. They simply reduce your taxable business profit. If you have no profit, you can't deduct the expenses.

Direct expenses you can write off to the extent you have income. But not everything.

You cant claim $8000 in income and $20,000 in expenses.

Make an appointment with an accountant to get you set up properly. You enter totals into Turbo, not each individual receipt. You already are in business since you're doing side jobs. You're supposed to be reporting that income and associated expenses. The rules regarding the write offs of fuel, meals, housing, and hotels are complex. It could cost you a lot of money if you do it wrong.

1) You decide to start a business. 2) You get an accountant. Our accountant charges us around $500/yr and he's worth every penny. 3) You get a business license with the city and open a business checking account. 4) You get a resale license with the state (this is why you get an accountant, to help you). That allows you to buy raw materials without paying sales tax on them. In return, you charge your customers tax and pay that to the state. 5) You register with the state and IRS as a business. As a business you are allowed to deduct all business expenses from your gross receipts. Rent, raw materials, tools, phone, bookkeeping, labor that you pay out to others. And more. This is not insignificant. As a carpenter your gross might be $75K and after you deduct lumber alone it might be $50K. That means that the $50K - or less - is your TAXABLE INCOME. A business without an accountant is one who is playing with fire.

Added: Turbotax is for homeowners. Quick Books is for business.

Taxes work the same whether you call it a sole proprietorship or side jobs. You must claim all the money you get as income, and the expenses to do the jobs as expenses, and pay tax on the profit only. No you can't claim your personal living expenses, and no they don't give the money back, you just pay tax on your profit not all the income. You are already your own boss 3 days a week, you just wouldn't be working for the other guy the other two - or you still could if you wanted to.

It means that anything used/bought/rented to do your business can be taken as write offs on your business taxes. That gives you a better final total.

Considering you have pension contributions and such, you'd be better off having a tax preparer do your first year's taxes for you - watch what they do and ask questions.

As for your boss, if you're ENTITLED to the claim then do it. What he wants or doesn't want has no bearing on it.