How to Report Mixed Income: Freelance and T4 Jobs

What exactly is mixed income?

When you have mixed income, each type is handled differently at tax time:

• Employment income is money you earn from an employer. They do most of the tax work upfront: deducting income tax, CPP contributions, and Employment Insurance (EI) premiums from each paycheque. At the end of the year, they issue a T4 slip summarizing your earnings and deductions.
• Self-employed income, on the other hand, puts you in the driver’s seat. With no employer deductions, you're responsible for tracking all revenue and expenses, setting aside money for taxes, CPP contributions, and possibly GST/HST.
• Once your self-employment earnings surpass $30,000 within any rolling 12-month period, you must register for GST/HST with the CRA. For example, if you started your business on June 1, and your total revenue hits $30,000 by February 14 of the following year, you’re required to register within 30 days—by March 14. From then on, you'll collect GST/HST from your clients and regularly remit it to the CRA.

How does T4 employment work?

With employment income, your tax responsibilities are largely automated, but this simplicity comes with both advantages and trade-offs. Every paycheque has income tax, CPP contributions, and EI premiums deducted automatically, which your employer remits directly to the CRA. Because of this, your take-home pay represents your net income after taxes, simplifying your budgeting.

While employers also frequently offer additional perks like health insurance and pension plans, employment income also has less flexibility. Unlike self-employed individuals, employees typically can't deduct home-office expenses or business-use vehicle costs—reducing opportunities to lower their taxable income.

Are there different types of self-employment?

Being self-employed refers to anyone earning income independently (without an employer). You’ll report all business revenue and expenses on your personal tax return and are responsible for paying both the employee and employer portions of CPP contributions.

EI isn't automatic, but self-employed individuals can choose to enroll in the EI special benefits program, which provides maternity, parental, sickness, and compassionate care, and family caregiver benefits. As mentioned, GST/HST registration is mandatory if your self-employed income exceeds $30,000 within any rolling 12-month period.

Here are the different types of self-employment:

• Sole proprietor. This is a single individual running an unincorporated business. The same tax rules apply as for self-employed people: report income on your return, pay both halves of CPP, no EI unless you opt in, and register for GST/HST if you pass the $30,000 threshold.
• Freelancer. You typically work on short-term projects for multiple clients. You are still considered self-employed—meaning no T4, no employer benefits, and you handle your own taxes, CPP, and GST/HST once you cross the income threshold.
• Independent contractor. This is similar to a freelancer but often with a longer-term agreement for one client. The tax rules are the same, though—you’re not on payroll, so you remit your own taxes, pay CPP in full, and charge GST/HST once over $30,000 in sales/earnings.
• Gig worker. This is a term for on-demand work (rideshare, delivery apps, etc.). For tax purposes, this type of work is treated the same as being self-employed. All gig workers follow the $30,000 GST/HST rule, but rideshare drivers must register and charge GST/HST from the first dollar earned. CPP is fully your responsibility, but EI doesn’t apply unless you opt in.

How to report your mixed income

Reporting mixed income can feel overwhelming, but breaking it down into clear steps helps make it more manageable. Here’s a simple primer to walk you through what documents you need, what to report, and how to file with confidence.

Step 1: Gather your documents

Before you start your return, collect the essentials:

• T4-slips. Shows your wages/salary, taxes withheld, CPP contributions, and EI premiums. Employers must issue these by the end of February.
• T4A slips. Some clients or platforms issue a T4A for freelance income. If you don’t get one, you still need to report all your self-employed income using invoices, payout summaries, or bank deposits.
• Form T2125. Used to report self-employed income and claim business expenses.
• Receipts and records for business expenses. Home office, supplies, vehicle costs, phone/internet, software, advertising, professional fees, and more.

Step 2: Report your employment income (T4)

You'll enter your T4 slip details directly into your tax return. If you had more than one employer, report each T4 separately so your employment income and withholdings are accurate.

TurboTax is on standby to help simplify the filing process.

Step 3: Report your self-employed income (Form T2125)

Use Form T2125 to report your business revenue and claim allowable expenses. The form calculates your net income (revenue minus expenses) and the result is automatically added to your return.

To accurately fill out Form T2125 and maximize deductions, follow these key tips:

• Keep clear records of invoices and deposits.
• Categorize expenses correctly (home office, supplies, vehicle, etc.).
• Claim only the business-use portion of shared costs, like internet or mileage.

Step 4: How to enter GST/HST

GST/HST registration is something you must determine separately, ideally before preparing your personal tax return—since the GST/HST return is filed independently. But you do need to enter the total GST/HST collected on Form T2125 at tax time. Here's how the process works:

• If your self-employed revenue exceeds $30,000 in any 12-month period, you must register for GST/HST, charge it on taxable sales, and file returns (monthly, quarterly, or annually).
• Did you make below $30,000? Registration is optional, but voluntary registration lets you claim GST/HST on business expenses.
• Some activities (like rideshare driving) require GST/HST registration from the first dollar earned.

Step 5: Understand your CPP and EI contributions

Calculating CPP contributions

Employees have CPP automatically deducted by their employers, but self-employed individuals must cover both the employee and employer portions themselves. CPP contributions are calculated based on your net self-employment income (revenue minus allowable expenses), and your tax return will do these calculations for you. You'll also receive deductions and credits designed to help offset the additional cost of paying both portions.

Decide if you want EI coverage

As mentioned earlier, EI isn't automatic for self-employed individuals. Consider voluntarily enrolling in EI special benefits if you anticipate needing coverage for events such as parental leave or extended illness. See EI special benefits for self-employed for details.

Step 6: Report any additional income

Don’t forget other income streams. Common examples include:

• Investment income (T5s, T3s)
• Employment Insurance (EI) benefits
• Foreign income (converted to CAD)
• Rental income (Form T776)

Step 7: Maximize your deductions and credits

Mixed income often means more ways to reduce your overall tax bill. Claiming allowable deductions lowers your taxable income, potentially decreasing how much tax you owe. Personal credits directly reduce the amount of taxes payable, often resulting in a bigger refund or a smaller tax balance owing.

• Employment deductions. Union dues, eligible work-from-home expenses.
• Self-employed expenses. Home office, supplies, vehicle, phone/internet, advertising, subscriptions, travel (business portion only).
• Personal credits. Basic personal amount (BPA), Registered Retirement Savings Plan (RRSP) contributions, medical expenses, donations, tuition, and child care.

Step 8: Review and file with confidence

Do a final check, then file your return. Remember your:

• Payment deadline. April 30 (interest and penalties start accruing after this date if you owe).
• Filing deadline for self-employed individuals (and their spouses). June 15.

If you’re estimating what you owe, pay by April 30 to avoid interest, then file by June 15 to finalize your numbers.

Step 9: How your employment taxes can help offset freelance taxes owed

If you earned both employment and self-employment income, taxes deducted from your paycheques throughout the year, as reported on your T4 slips, might help offset any taxes you owe from your freelance work.

When you file, your total taxes payable are calculated based on your combined income sources, and any amounts already deducted from employment income are credited against your total tax bill. Depending on your situation, this could lower—or even fully cover—the amount of additional taxes you owe on your freelance income.

When is the self-employed tax deadline?

For most Canadians, the tax filing deadline is April 30. However, if you (or your spouse) earned self-employed income, you have a little more time—your filing deadline is June 15. But here’s the catch: Even if your filing deadline is later, any taxes you owe must still be paid by April 30 to avoid interest charges.

To avoid surprises at tax time, here’s some extra guidance:

• Estimate taxes early. Throughout the year, regularly track your income and expenses. By year-end, you'll have a rough idea of what you might owe, helping you avoid last-minute scrambling.
• Consider instalment payments. Instalments spread your tax payments evenly throughout the year, helping you avoid one large payment at tax time—and potentially avoiding interest or penalties.
• Pay by April 30. Whether or not you pay instalments, send any outstanding estimated payments to the CRA by April 30. This prevents interest charges from accruing, even if your return isn’t due until June.
• File by June 15. File your return by June 15 to officially calculate your exact tax balance. If you've overpaid through your estimates or instalments, you'll receive a refund. If you’ve underpaid, you'll owe only the remaining difference.

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