Things you need to know about running your own business in Canada. What you need to do when you need a financial consultant.
- Call Reality Capital Management for advice
- Small Business or Corporation
- Who keeps your books?
- What role do you play?
Sarting Your Own Business
Do you have a great business idea but aren’t sure where to start?
- You can get essential start-up information from Canada Business, which has information from many sources, including the federal, provincial and territorial governments.
- Canada Business provides information and resources on the basics of business planning for starting a business, including guides and tools to help you develop a detailed business plan.
- The Canada Revenue Agency provides registration requirements, guides and resources for registering a business as well as information and resources on the Business Number.Online services are also available from provincial, territorial and federal governments.
- If you are interested in hiring staff for your new business, Canada Business provides important information on a variety of topics, including hiring procedures, pay and benefits information and labour standards.
- As a new business owner in Canada, you may be eligible to apply for grants and financing to support you.Self-employed people who register for the Employment Insurance (EI) program through Service Canada will be able to access EI special benefits. The four types of EI special benefits are maternity, parental, sickness, and compassionate care benefits.
Home Office Expenses :
Lately, a significant number of employees work at least part-time from their homes, the employer's costs of maintaining office space, usually in expensive urban markets, can go down.
As working from a home office has become more common, a certain degree of mythology has also grown up around the tax treatment of expenses related to maintaining a home office. In the most optimistic (and unrealistic) of such scenarios, virtually all household expenses, including the mortgage, are transformed into tax deductions, reducing one's tax liability to miniscule amounts. It goes almost without saying that such is not the case. Deductions are certainly available, but the tax rules governing what's deductible and when are specific and detailed.
It's important, when dealing with the question of the deductibility of home office expenses, to distinguish between deductions claimed by employees and those claimed by the self-employed. As is almost always the case in such matters, the self-employed enjoy a greater degree of latitude in the deductions which may be claimed. That said, both the employed and the self-employed must meet the same basic two-part test in order to be eligible to deduct home office expenses, and that test is as follows:
- the home office must be the place at which the taxpayer principally performs the duties of employment or must be the taxpayer’s principal place of business:
- the home office must be both used exclusively for the purpose of earning income from employment or from the business and must be used on a regular and continuing basis for meeting customers or clients of the employer or the business.
A self-employed taxpayer who meets these criteria is entitled to claim (on Form T2124(E) (Statement of Business Activities)) expenses such as property taxes, rent or mortgage interest (but not mortgage principal amounts), insurance, utilities costs etc. However, such expenses are not deductible in their entirety: rather, the taxpayer must apportion the expenses based on the percentage of the total space which is used as a home office. For example, a self-employed taxpayer whose home office takes up 10% of available floor space and who incurs $1000 each year in qualifying expenses would be entitled to deduct $100 ($1,000 times 10%) in home office expenses for that year. There is one further caveat, in that the amount of home office expenses claimed in a year cannot be greater than the amount of income from the business. It's not, in other words, possible to run a business which produces $2,000 in income for the year and to then claim $5,000 in home office expenses relating to that business. However, where home office expenses exceed business income in any given year, the excess expenses can be carried over and claimed in a subsequent year in which there is sufficient business income to offset those expenses.
One of the benefits which is commonly supposed to exist for home office workers is the right to claim depreciation (or capital cost allowance (CCA), in tax parlance) on one's home for tax purposes. For employees, however, such a claim is simply not allowed. And , while the self-employed may be entitled to claim CCA on a home, making such a claim can create short-term benefits with longer term costs. Making a CCA claim on one's home is likely to erode the principal residence exemption from capital gains tax which is claimable when a home is sold, and that exemption is almost always more valuable than any CCA claim which might have been made.
File Tax When There Is No Income
This is very common question, why should I file my tax return when I don't have income or taxable income or tax owing. You will usually have to pay tax if your taxable income exceeds the amount of the basic personal exemption. There are other circumstances which also may require a tax return to be filed, such as you were requested by the Canada Revenue Agency (CRA) to file a return, or you have withdrawn amounts from your RRSP under the Home Buyers' Plan or the Lifelong Learning Plan, and have not yet repaid the entire amount or you claimed a capital gains reserve on your previous year's tax return. While preparing your return, be remember that you must include your worldwide earnings in your taxable income.
Even if you are not required to file a tax return, it will often be to your advantage to do so, for some of the following reasons:
Why You Should File Your Taxes:
- You have had tax withheld from your income, and want to receive a refund
- To get benefit of federal government and provincial refundable tax credits, which are payable to you even if you have no earnings and have paid no tax. Such as Working Income Tax Benefit, Ontario Property and Sales Tax credit.
- Illo inventore veritatis et quasi architecto beatae
- You want to apply for the GST/HST credit – If you are 18 years of age or older, you should file a tax return even if you have no income, in order to apply for the GST credit. You must be 19 to receive the credit, but if you will turn 19 before April 1 of the following year, you should apply now so that you will receive your first GST payment as soon as possible after you turn 19
- For seniors who are receiving the GIS (Guaranteed Income Supplement), filing of their annual income tax return automatically renews the GIS (Guaranteed Income Supplement) eligibility.
- If you have a non-capital loss, which you can carry back to prior years or carry forward to future tax years.
- You want to apply for the CCTB(Canada Child Tax Benefit), UCCB(Universal Child Care Benefit) – In order to receive or continue to receive CCTB and UCCB (Eligible kid should not be over 6 years of age) payments for your children, you and your spouse must both file tax returns
- If you have unused tuition, education and textbook amounts that you would like to carry forward to use in the future.
Attribution Rules On Transfer To Minor Children
The attribution rules applicable to transfers of property to minor children are somewhat less comprehensive, in that income received on property transferred or loaned to a minor (under age 18) child from a non-arm's length person (which would include parents, grandparents, great-grandparents, aunts, uncles and siblings) is attributed back to the transferor, but capital gains arising on such transferred or loaned property are not.
There's virtually no limit to the creativity of taxpayers (and their tax advisers), and consequently the attribution rules contain a number of more specific anti-avoidance provisions to supplement the general rules outlined above. There are still some legitimate income-splitting strategies available, but use of those strategies generally requires consultation with a tax adviser familiar with your personal financial and tax circumstances.