Guidance on Deducting Home Office Expenses
One of the benefits of having a home based business (for freelancers, self employed contractors and small business owners) is that you can deduct the expenses relating to the space that you use to work. This can result in a reduction in your tax bill for costs that you would incur regardless, which is certainly an incentive to being your own boss.
Criteria for Deductibility:
For home office expenses to be deductible, they have to meet the following criteria:
It has to be your principal place of business i.e. you cannot deduct home office expenses if you have another office that relates to your business, elsewhere, even if you work 22 hours a day or you check your blackberry in bed.
The space designated as your home office is used to earn business income and/or you meet clients or customers on a regular basis. You can deduct expenses relating to the workspace in your garage which is used for home improvement projects.
Are Clothing and Other Personal Attire Costs Tax Deductible?
Whether an expense is quite clear for the majority of expenses – salaries paid to employees, office rent, manufacturing supplies etc. , there are a handful of expenses that are more ambiguous. One of the more notable (and often asked) examples of this type of expense relate to personal attire including clothing, shoes and other personal maintenance costs (haircuts, beauty products etc)
How to Stay on Top of Your Tax Obligations
As an accountant I frequently receive panicked calls from business owners who have received ominous letters from the tax authorities requesting that overdue tax returns be immediately filed. Others receive notices of assessments for estimated taxes payable if they have an overdue tax return. Revenue Quebec, particularly will often send corporations or individuals assessment for several thousand dollars to scare people into filing their returns. In more extreme circumstances, the tax authorities have the power to freeze your bank accounts or initiate tax audits. This can be debilitating to a small business.
Frequently Asked Questions About GST/HST By Business Owners
For those of you who are starting a new business, it is essential to know your tax obligations. Every business owner must report their net profits on a either their personal tax return if they are unincorporated or a corporation tax return if they are incorporated.
In addition to income tax, it is essential to consider whether or not you should register and collect GST/HST and provincial sales taxes. There are a variety of questions around this topic:
How to File Your GST/HST Return Using CRA My Business Account
As of January 1, 2024 Revenue Canada will require all business (except for a handful of exceptions such as some financial institutions and charities) to file their returns electronically. This means that you can no longer use the paper form. The good news is that it is quite easy to file the return online and, in most cases, probably saves you time since you don’t have to put it in an envelope, affix a stamp and take a walk to a mailbox.
In this post, I will be reviewing how to do it via CRA My Business Account. Please note that this tutorial is for simple GST/HST returns. If you have more complex transactions, that I don’t discuss here and you are not sure, I recommend speaking to an accountant.
How to File T4s using Quickbooks Desktop
For all Canadian businesses that have employees on their payroll, the deadline to file your T4s is February 28th, The good news is that it has become much easier to prepare and submit the T4s particularly if you are submitting them electronically.. The Canada Revenue Agency (CRA) is encouraging businesses to file the T4s electronically and it should be noted that e-filing is mandatory for employers with more than 50 employees.
Guidance on Filing the RL1 Summary and CNESST Salary Declarations
The first important year end deadline for corporations, with employees, is the end of February. Salary declarations including T4 and RL1 (in Quebec) slips and summaries have to be filed with CRA and RQ. While there are numerous payroll software that handle the filing of the T4 and RL1 slips, the RL1 summary is usually left to the employer (and/or their accountants) to file. While a T4 summary is not specifically required if slips are filed electronically, an RL1 summary regardless of the method of filing the RL1 slips i.e. manually or electronically. Additionally, employers in Quebec also have to prepare a year end declaration for CNESST which is Quebec version of workers compensation. As someone who has filed numerous slips, declarations and summaries for clients over the years, I have enumerated some tips on preparing these documents::
What is the Difference Between Zero Rated, Out of Scope and Exempt and how do you choose in QBO?
In QuickBooks Online (QBO), the terms "Zero Rated," "Out of Scope," and "Exempt" refer to different classifications of transactions for GST/HST and QST (in Quebec). Each one of these transactions results in $0 tax being added to the transaction, and if you use them interchangeably it is probably not a huge problem. That being said, there are a couple of reasons you might want to ensure that you get this right:
ensure accuracy in their books
avoid the small possibility that an a government (Revenue Canada) auditor might nitpick at it or
make your sales reports more accurate
The differences between the three classifications, which despite their somewhat technical names, are actually not that complicated.
Know Your Small Business Tax Deadlines For 2024
As we approach the new year, it will be time soon to start working on everyone’s favourite activity i.e. getting your tax stuff in order :) . Below are the deadlines that all small businesses need to know for 2024.
Download our free Canada unincorporated business tax deadline calendar for 2024 (both Federal and Quebec).
How to Enter Opening Balances in QBO Using a Journal Entry
There comes a time for many small businesses or self employed workers when they decide that their current accounting system is no longer working for them. This can be stressful as learning any new software is often tedious and more importantly you have to ensure proper continuity and a smooth transition.
Small businesses might decide to transition to a new accounting software for a variety of reasons:
You are currently using spreadsheets which have become difficult to manage
Your spreadsheets do not provide the data that you require to properly analyze your business
Your current accounting system is too technical and/or not user friendly
Your current accounting system does not have the features that you require
You want to be able to access your data online rather than through your desktop
See our detailed review on whether QBO is the right online accounting software for your small business
10 Tips for Setting up Your QBO File for the first time
The idea of using an accounting software can be a bit intimidating for some new business owners. Others are put off by the cost when a simple spreadsheet is both free and easy. In some cases a spreadsheet makes sense when you have a simple business with very few transactions per year. However, if your business requires you to invoice your clients and customers , you want to be able to analyze the performance of the business and your time is at a premium, the monthly cost of an accounting software can be well worth it.
Quickbooks Online (QBO) is the most popular software used by small businesses. And while QBO has its pros and cons that should be evaluated before signing up, once you have decided to go ahead with it there are certain best practices that should be followed when setting up your file.
Is QuickBooks Online the Right Accounting Software for Your Small Business?
The search for accounting software can be a confusing and overwhelming process. A Google search for “small business accounting software” yields over 250 million results. Trying to get recommendations from other business owners often results in passionate discussions about why a particular program is great while another one is inadequate and lacks functionality. Your accountant might point you in the right direction, but will sometimes recommend a program that they are comfortable with using, but might be too technical and not necessarily be the best solution for your business. With so many choices out there, it can be difficult to know what to do.
Guidelines For Deducting Conference and Training Expenses
Attending conferences and investing in ongoing training can be a great way for small business owners and the self employed to keep current on industry developments, ensure ongoing professional development and improve their skills. It also allows for networking opportunities and occasionally includes trips to exotic locations, which can be a welcome change in environment from working at your office. As an added bonus ,the cost of conferences, conventions and seminars as well as corresponding travel expenses are deductible against your business income, subject to specific guidelines.
A Guide to Navigating Taxes in the Gig Economy
In a recent study by H&R Block, nearly 28% of Canadians reported taking on a side hustle in the “gig economy” to boost their income. This is a significant increase from 2022 in which the analogous percentage was 13%. This is likely a result of inflationary pressures and the expansion of opportunities available for flexible work.
The gig economy, popularized by Uber, refers to work that is flexible and usually incorporates digital apps or platforms.
Gig workers tend to be independent contractors who usually decide when they are going to work, often bring their own “tools” (such as a car or a computer) and are required to report their earnings to tax authorities.