Before we get into the less fun stuff…We were fortunate enough to get to attend Globalfest this past August, and I got some great pictures. If you are a fan of fireworks, I highly recommend checking it out next August.
Where are the days going, we decided to move the newsletter to the middle of the month, as the beginning is so busy, and here we are already the 23rd! The holidays are almost upon us, and then…..tax season
Today we will chat about issues that affect people who report self-employment income on their personal tax or those working from home. Some of these items do cross over into corporate tax.
If you are an employee working for a corporation that you either do not own, or own less than 10%, you may be eligible to claim some expenses against your income. If you need to travel for work, maintain an office at home, or entertain clients out of your own pocket, you can get a deduction on your tax return for these expenses. The first thing you will need is a T2200 form signed and filled out correctly by your employer. Some employers are reluctant to fill these out, even though there is no downside for them to take the time to do it. You cannot make a claim for business expenses without this form, and how it is filled out will determine if your expenses are deductible. If there are costs you are expected to cover on your own as part of your job, such as having a cell phone, or even the purchasing of safety or works specific clothing (scrubs, rubber gloves, ppe, etc.) you may want to ask your employer about filling one of these out for you. If it is a form they are not familiar with, we can send you a blank copy to go over with them. Once you have the form filled out to allow you to deduct whatever expenses you may have incurred, the next thing we will need is actual receipts. (Please remember that any document submissions to us MUST be in pdf format, the cost to convert documents submitted in other formats (.jpg, .gif, .bmp, etc.) is $10 per page)
If your T2200 allows you to claim any motor vehicle related expenses, you must have a mileage log. This log must contain all your mileage for the year, both business and personal. It must also have details about your work-related mileage, where you were going, and for what purpose. A common misconception when it comes to business mileage is that you can make a claim for the mileage you drive from your home to your office and back. This is not the case. Deductible mileage is from your office to other work locations, or from your office on work related errands, picking up supplies, visiting customers, or attending work events. If you cannot produce a correct mileage log, CRA will disallow ALL motor vehicle related expenses. There are some great apps you can use on your phone, just remember to turn them on or off Deductible motor vehicle expenses may include: fuel, insurance, registration, repairs, interest amounts on leased or financed vehicles. When you are submitting your motor vehicle expenses, please also include the year, make, and model of your vehicle, the original purchase price, and any lease or finance costs incurred during the year.
If you are a commission sales employee, you may be able to claim meal and entertainment expenses, please have a log of who you met with or the meal’s purpose. Also, it is only the meal portion that is deductible, no alcohol. You can make a claim for entertainment if you are entertaining clients – food, beverages, tips, entrance fees to sporting or other entertainment events, cover charges, or room rentals. If you are working more than 8 hours from home, and for a period of 12 hours or more, you can claim your own meals. If you are at a remote work site, you may be able to make a claim for groceries purchased while at that site. (This also holds true for claiming meals on your corporate tax)
If you are required to maintain an office in your home, or if you are self-employed, you may be able to claim a portion of your household expenses. According to CRA, your office space cannot contain common space (i.e. a kitchen or a bathroom). Also, if the CRA ever decides to perform a home visit to view your office space, you cannot be using it for non-business purposes. This means you cannot be using your designated office space to store personal items. To calculate the amount you are allowed to deduct, we will need the total square footage of your home and the square footage of your designated office space. We input the amounts into your tax return and then report the total amounts of your utilities, and maintenance paid during the year. Commissioned employees can also claim property taxes, and home insurance. If you have self-employment income, you can claim your mortgage interest.
What expenses you can claim are different depending on the source of your income:
Must Have A T2200 Waged T4 EmployeeCommssioned T4/T4A employeeSelf-Employedsupply purchases yessub-contractors yesadvertising yesyesmealsyesyesyesentertainment yesyesbad debt yesinsurance yesinterest & bank charges yesbusiness taxes, membershipsyesyesyeslicense yesyesOffice expensesyesyesyesoffice stationary and suppliesyesyesyesprofessional fees (legal & accounting) yesyesmanagement and admin fees yesoffice rentyesyesyesrepairs & maintenace yessalaries, and employee benefitsyesyesyestravel expensesyesyesyesdelivery, freight and express yesCell PhoneyesyesyesLong DistanceyesyesyesEquipment Leasing yesyesBonding Premiums yesyesTraining Costs yesyesThat’s all for this month – we are looking at running some workshops and seminars in the new space. We would love your feedback on what topics you are interested in, these are some we are working on right now:
Forming a Non-Profit
Digital Bookkeeping for home based businesses
Estate Planning from a tax perspective
Should you incorporate
Please let us know if you are interested in any of these, or send us suggestion on topics we can cover for you. We have space for 12-15 people if we are doing a work along workshop, and propbably 20 for seminars.
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