Canuckbusiness

Start a business, Do your taxes, Save money

Can I deduct safety deposit boxes on my 2013 personal taxes?

Yep! It’s still good. But starting in 2014 it’s a no-no. Here’s the details.

Oh, and in case you’re wondering, you enter it on Schedule 4. Scroll down until you see number III.

April 2, 2014 Posted by | Personal Tax, Random Questions, tax, tips | , , , | Leave a comment

Where do I enter a T5008 slip on my tax return?

“I have a trading account and my bank sent me a T5008 slip and a trading summary for the year. Do I have to enter both of these on my tax return or just one? If so, which one?”

Ack! Whatever you do, do not enter both! You’ll end up paying double the tax. Now that I have your attention…

So what is a T5008 slip anyway?

You mean besides a slip I absolutely hate? I know, hate is a strong word. I wish I had the vocabulary to come up with something stronger.

You see, the T5008 is not sent out by your broker or bank to “assist you in preparing your taxes,” despite what the letter says that accompanies the slip. The Canada Revenue Agency requires your broker to prepare and send these out to you whenever certain types of trades/transactions occur. And, of course, your broker must send a copy of the T5008 slip to the CRA. So, the T5008 slip is really just a sneaky way for the CRA to keep an eye on people selling stocks.

What information is on the T5008?

The selling price of the security is always on the slip. The CRA knows exactly how much you received in proceeds for dumping the latest dog. As for the cost of the security (or ACB, adjusted cost base in tax talk) sometimes it’s on the slip, sometimes it’s not. Occasionally it may even be accurate. Usually it’s not.

So…if the cost is not correct on the slip, how do I calculate my taxable gain on my tax return?

I know! Right?? This is further complicated by the fact that not all types of trades need to be recorded on T5008’s, so often they are not even an accurate portrayal of everything a taxpayer has sold in a given year. The taxpayer is required by law to calculate accurate ACB’s of any stocks bought and sold throughout the taxation year. Relying only on the flimsy T5008’s is a recipe for disaster.

So what do you use the T5008 for then?

I put my coffee cup on it. Works great. Then I use the trading summary to enter all my trades for the year on Schedule 3. Just remember to use a weighted average when calculating the ACB’s of any stocks sold in the year. I’ll talk more about that in another post since it deserves its own.

For now, just remember what to use the T5008 for.

Nothing.

 

March 28, 2014 Posted by | Personal Tax, Random Questions, tax | , , | Leave a comment

Can I scan and keep electronic copies of my business receipts?

My receipts fade and become unreadable after 6 months! Can I scan and keep electronic copies instead?

 

Yep! You can keep digital copies if you prefer. You just have to follow these rules (you knew there’d be rules, right?):

http://www.cra-arc.gc.ca/E/pub/tg/rc4409/rc4409-e.html

Check out Chapter 2: Keeping Electronic Records and specifically:

 

Requirements for an acceptable imaging program

You must keep the original version of records. You may, however, produce an electronic image of a paper document, which then can be accepted as the original record provided you follow certain procedures. Imaging and microfilm (including microfiche) reproductions of books of original entry and source documents have to be produced, controlled, and maintained according to the latest national standard of Canada. For more information, see Information Circular IC78-10R5, Books and Records Retention/Destruction, and GST/HST Memorandum 15.1, General Requirements for Books and Records. Also, refer to the Canadian General Standards Board (CGSB) publication, CAN/CGSB 72.11, Microfilm and Electronic Images as Documentary Evidence, and its latest amendment.

Businesses using commercial software for smaller scale electronic scanning of their paper records and supporting documents should ensure that their scanned records meet the rules and guidelines set out in the latest national standard of Canada.

You can destroy paper books of account and supporting documents if they have been imaged in accordance with the above CGSB publication. These images become the permanent records. If you have any doubt, obtain legal advice first.

If businesses cannot meet the Canadian General Standards, they must keep their original records.

The standards are available to view at selected libraries in Canada. The standards are also available for purchase from the CGSB:

By mail:

Sales Centre
Canadian General Standards Board
Gatineau QC K1A 1G6

In person:

Place du Portage
11 Laurier Street
Phase 3, 6B1
Gatineau QC

By Internet: e-Store

By telephone, fax, or email:

National Capital Region: 819-956-0425 Rest of Canada: 1-800-665-2472 Fax: 819-956-5740

Email: ncr.cgsb-ongc@pwgsc.gc.ca

 

May 19, 2013 Posted by | Random Questions, Running Your Business | Leave a comment

What can servers deduct at tax time in Canada?

I got a good questions from a server recently and thought I’d share the answer with everyone, since I’m sure there are lots of you out there wondering the same thing.

“Hi!  Came across your site randomly and really appreciate what you do!  I am a server and I’ve always wanted to know, but didn’t know how to find out about what servers can write off at the end of the year as expenses.  I’ve heard that we can write off clothing, toiletries, haircuts, etc, whatever we spend on our appearance as it is part of the job.”

Well, I’m afraid I have a whole lot of bad news and only $160 worth of good.

Servers are in most cases employees, and employees are usually not allowed to write off any of these things. If they could write off things that “enhance their appearance” than any office worker could also argue that, because they have to wear suits to work, they should be allowed to write off the cost of their clothing. This is not the case. Employees are expected to pay their own costs for clothing and uniforms. In other words, looking good is not tax deductible.

To offset these types of costs, all employees are allowed to claim the “Canada Employment Amount, which is a non-refundable tax credit. In 2011 this was 15% of $1,065 (which equals about $160 in your pocket). Strictly self-employed people cannot claim this amount.

Special exceptions for other types of employees:

If you are a commissioned salesperson, or your employer requires you to pay certain job-related expenses AND they have given you a form T-2200 specifying what these expenses are, you may be entitled to claim some deductions on your tax return under Form T777: Statement of Employment Expenses.

However, I can’t see this happening much with an employee who is a server. And did I say I only had $160 worth of good news? Sorry, I meant $159.75.

October 18, 2012 Posted by | Personal Tax, Random Questions | , , | Leave a comment

Where do I enter tips on my tax return? What percentage do I report?

Where do I enter tips on my Canadian tax return?

Put them on Line 104: Other Employment Income. But before you do this, double check that your employer does not report any of your tips on your T4.  Some employers pay a set amount of tips to their employees and will usually include these amounts in Box 14 on your T4 slip. Sometimes they may include those amounts that customers leave as tips on credit cards. Having to report them once is bad enough.

Do not enter tips on Line 130: Other Income, unless you’ve got a crush on your local CRA auditor. (Hey, it could happen).

What percentage of my tips do I have to report?

100%. If you don’t know exactly how much in tips you received during the year, estimate as accurately as you can. Don’t estimate it as 10% of your annual wages (Gross Pay) because Stan Superserver told you that’s what he does, and he has never had a problem.

Read this post on tips for more details.

Help out your fellow servers by taking this 1-question survey about how much your tips are.

February 6, 2012 Posted by | canada, Personal Tax, Random Questions, tips | Leave a comment

How do I write off gifts for clients?

Where do I record gifts for clients on my tax return?

Thanks for e-mailing and asking Jean. I’m sure you’re not the only one wondering this right about now. I have seen gifts put into two categories on the T2125 by small business owners, but there really is only one correct (and by that I mean “advantageous to the business owner”) place to put it.

Meals and Entertainment Expense:
This is the category most often used for entertaining clients. The problem with putting a gift of something like a bottle of wine in here, is that the total of this category is reduced by 50% before being calculated as an expense on the T2125. So for a $20 bottle of wine, you only get a $10 deduction.

Advertising Expense:
This is the best place to put gifts for clients, or people you “hope” will someday be clients. You get a 100% deduction in this category.

What if I don’t have a business but I buy my accountant a bottle of wine for Christmas–can I write it off somewhere?

Nope. But don’t let that stop you 🙂

December 15, 2011 Posted by | Random Questions, Running Your Business, tax | , , , | Leave a comment

Employee or Self-employed contract worker?

As a small business owner you will often need to hire outside workers for short periods of time. Generally, it is much “easier” (interpret that as “cheaper”) to hire a “contract worker” because you pay them a fixed amount and don’t have to worry about payroll deductions, like CPP contributions, EI, and income tax withholdings. Unfortunately, there are rules about how to determine whether a worker is an employee or a self-employed contract worker.

So, when you’re drawing up a “contract worker” agreement for your kid to come in and clean your office, you might want to keep the below differences in mind.

If you are in doubt, you can always ask CRA to make a ruling on your particular case. For more info go here.

 

Indicators that the worker is an employee

  • The relationship is one of subordination. The payer will often direct, scrutinize, and effectively control many elements of how the work is performed.
  • The payer controls the worker with respect to both the results of the work and the method used to do the work.
  • The payer determines and controls the method and amount of pay. Salary negotiations may still take place in an employer-employee relationship.
  • The worker requires permission to work for other payers while working for this payer.
  • Where the schedule is irregular, priority on the worker’s time is an indication of control over the worker.
  • The payer determines what jobs the worker will do.
  • The worker receives training or direction from the payer on how to do the work. The overall work environment between the worker and the payer is one of subordination.
  • The payer chooses to listen to the worker’s suggestions but has the final word.

Indicators that the worker is a self-employed individual

  • A self-employed individual usually works independently within a defined framework.
  • The worker does not have anyone overseeing them.
  • The worker is usually free to work when and for whom he or she chooses and may provide his or her services to different payers at the same time.
  • The worker can accept or refuse work from the payer.
  • The working relationship between the payer and the worker does not present a degree of continuity, loyalty, security, subordination, or integration, all of which are generally associated with an employer-employee relationship.

RC4110(E) Rev. 11

November 4, 2011 Posted by | Random Questions, Running Your Business | , , , | 2 Comments

Is my website an asset or expense?

Before answering this question we need to specify what costs we are talking about. Having a website generally incurs the following costs:

  1. Site Design Services
  2. Domain Registration
  3. Ongoing Hosting
  4. Site Updates/maintenance

There are different ways to look at these, and if you were to ask two different accountants you would probably get varying responses, but generally this is what I do:

Site Design Services
You kick out $2,000 to have someone design and put up a site for you. You plan to use this site for more than a year, so it is definitely a capital asset. You need to amortize this (depreciate its cost over a number of years). Usually, I would put it in Class 8 (20% deduction per year).

Domain Registration
You “buy” a domain name. Usually this is a paltry amount ($10-$20 per year) that you have to pay every year or two. I would just put this under Advertising Expenses. However, if you paid more than $400 for this name (because someone knew you were going to need it and beat you to it, then sold it to you) you will need to capitalize it under “licenses” or classify it as an “eligible capital expenditure”. Talk to your accountant if this is the case.

Ongoing Hosting Fees
Add up the amount you pay during the year and put it in Advertising Expenses.

Site Updates/maintenance
I’m going to summon up my Magic Rule #1 to help me here. If you pay less than $400 to have someone work on your site during the year, put it in Advertising Expenses. If you have the entire site revamped and have to pay more, then add it to Class 8 (or whatever class you originally put the website under).

October 20, 2011 Posted by | Random Questions, Running Your Business | 8 Comments

When do I have to register for GST/HST?

What is the GST/HST process for small businesses?

Imagine yourself as a modern Sheriff of Nottingham, without pillaging rights, and you will have a good idea of the process. First, you charge your customers GST/HST on what they buy from you (tax the serfs). Then, at the end of the period, you take the total amount of GST you collected and deduct any GST you paid when buying stuff for your business (horses and ale for your men). Then you submit the balance to Prince John, I mean the government (or get a refund if you paid out more in GST/HST than you collected).

Do I have to register for GST?

If your business meets one of these conditions you MUST register and begin collecting GST/HST for the government.

    1. If sales from your business exceed $30,000 for any single 3-month period (one quarter).
    2. If sales from your business exceed $30,000 for any consecutive 12-month period (4 quarters).
    3. If you are a taxi or limousine operator whose fares are regulated by law, no matter how much your sales are.

Voluntary registration

You can register even if you make less than $30,000 in sales. Why would you wish to do this? The only reason I can think of is your business purchased a lot of things in its start-up phase and you wish to get the HST/GST back on these things. Otherwise it is probably going to be a waste of time.

Here’s a link for more details.

 

September 22, 2011 Posted by | Random Questions, Running Your Business, Starting Your Business | Leave a comment