Thursday, December 13th, 2018

The Taxing issue of Business Deductions

By Cathy Watters on Mar 15 2010 • Filed under Money

Canada Revenue Agency has a full library of useful business information available online to help you figure out which taxes, and tax write-offs, apply to you. It has everything from figuring out payroll deductions to filing tax for your sole proprietorship or corporation, and even explains record keeping requirements for businesses

“As a rule, you can deduct any reasonable current expense you paid or will have to pay to earn business income,” says Bradley Alvarez, Communications Manager with the CRA, via email. 

Some things that can be claimed as Business Expenses include advertising costs, office supplies and insurance. 

WORKING FROM HOME 

In Canada, you can deduct expenses for the “business use” of a work space in your home, as long as you meet one of these conditions: 

  • it is your principal place of business; or
  • you use the space only to earn your business income, and you use it on a regular and ongoing basis to meet your clients, customers, or patients.

You can deduct a portion of your home's maintenance and other costs, such as: heating, home insurance, electricity, cleaning materials, property taxes, mortgage interest and capital cost allowance. To calculate how much you can deduct, figure out how much space your business takes up in your home. For example, if you had a 1000 square foot apartment or condo, and your office took up 250 square feet, then you'd deduct 25% of your maintenance expenses.* 

If you use part of your home for both your business and personal living, you'll need to do some math to figure out how much you can deduct, based on how much time you use the space for business. For example, if your office is in your living room, you'd need to figure out how many hours you use your living room for business versus personal activities.* 

For full details, visit the CRA's information page on: Business-Use-of-Home expenses.  

TAX FORMS 

Self-employment income is reported on the T1 General return on lines 135 to 143 and may be earned from a business you operate yourself as a sole proprietorship or with someone else as a partnership. For tax purposes, being self-employed, a sole-proprietor or a contractor all mean the same thing. 

Judi Wang, a Certified General Accountant (CGA) in Vancouver, notes that in addition to using your personal income tax return (T1 General), you'll also need to report your business or professional expenses using T2125 – Statement of Business or Professional Activities.

For information on how to calculate the income to report on your income tax return, read the guide T4002 – Business and Professional Income 2009.

Wang advises hiring a professional to do your taxes for you. 

“The tax savings usually exceeds the cost,” she says. When choosing a professional, ask your friends and members of your business network who they use, and look for a “designated” accountant, such as a CGA.  

TAX-SAVING LOOPHOLES 

Learn about tax myths, the underground economy, tax shelters and ‘gifting programs’, tax avoidance, aggressive tax planning and other things that may sound like a good idea, but could actually end up costing you money! 

TAX INFORMATION BY CATEGORY 

Corporations, click here.

Sole-proprietorship and Partnerships, click here.

Information on GST and HST, click here.

How to register for GST and HST, click here.

For common adjustments and how to avoid them, click here.

For information on resolving disputes, click here

TAX SEMINARS 

General tax seminars across Canada, click here.

HST seminars for Ontario, click here.

HST seminars for British Columbia, click here.

HST seminars/webinars Online, click here.  

HOW TO ACCESS YOUR INFORMATION ONLINE 

My Account connects you to your personal tax and benefit information online, and allows you to check your tax refund, RRSP limit, GST/HST credit payments, and also lets you see information about your previous income tax returns. 

My Business Account is for business owners, partners, directors and officers.  

My Payment is an electronic payment service, accessed through the CRA website, that allows individuals and businesses to send payments directly to the Canada Revenue Agency (CRA) from an account at a participating financial institution. 

DEADLINES 

Finally, after you've hired an accountant or done your own paperwork, you need to make sure everything is filed on time. 

If you or your spouse/common-law partner was self-employed in 2009, you must FILE your income tax return on or before June 15, 2010.  

However, if you owe tax money to the government then you have to PAY on or before April 30, 2010. Also, this is the deadline to file a return for anyone who was not self-employed, whether or not they owe taxes. 

If you have questions, contact the Canada Revenue Agency directly: 

Individual Inquiries: 1-800-959-8281

Business Inquiries: 1-800-959-5525

T.I.P.S. (Tax Information Phone Service): 1-800-267-6999

Website (English or French): www.cra-arc.gc.ca 


NOTE: Examples in this article is supplied for information purposes only. Do your own research, call the CRA or visit their website, or speak with a professional tax expert to ensure you get the best information for you and your particular business.


1 Comment

  1. If your biz is located in Canada and you’re trying to figure out how to charge tax on your online sales when doing e-commerce, check out this article by Susan Ward on About.com

    http://sbinfocanada.about.com/od/pst/a/PSTecommerce.htm

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