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

What is a legitimate business in CRA’s view?

“Since I’m a business owner, I can right off all kinds of stuff, like gas and groceries, right?”

I get variations of this one a lot. Businesses are allowed to write off expenses that are incurred in the operations of a business. That much is true. But first you have to convince the Canada Revenue Agency that you actually have a business. Initially, this seems easy. You tell CRA that you have a business and they say nothing, but allow you to file your tax return year after year. It may seem like they don’t care, or trust you implicitly, but the truth is, they are just ponderously slow. But make no mistake: if you have business losses for many years, the giant will awaken.

What the CRA considers a business:

A business is pretty much any undertaking you can imagine that is carried on for profit. And here is the kicker: there must be a “reasonable expectation of profit“.

In other words, if you don’t think you can make money in a business but plan to just start one solely with the intention of writing off business losses against your income from another source (like your job) then you do not have a legitimate business in the eyes of the CRA. If you start one of these “pseudo” businesses, and after several years of operating at a loss (and writing off those losses against other income), the CRA can and will reassess your tax returns and disallow all those losses you claimed in past years. They may or may not hit you with a penalty, but they will definitely charge you interest and send you a nice bill for those taxes owing from past years.

What does “reasonable expectation of profit” mean anyways?

It is CRA’s way of saying that within a reasonable amount of time your business must show a profit, otherwise it is not a business. So what is a reasonable amount of time? That depends on the industry. A restaurant business may be six months, but an oil and gas company could be ten years. The CRA will compare your business to others in the industry, and if things look dodgy you will have to prove why you are sticking with something that is obviously a failure.

No relationship joke intended.

Go here for more details.

August 20, 2011 Posted by | Random Questions, Starting Your Business | , , , | Leave a comment