home business write offs help please

[Ken07AOVette]

Originally Posted by Redfrog

Get the accountant.

+1

[fishnut9]

I just called an accounting firm.they told me they don't do book keeping. They said to call a bookkeeper. I was also told that since I'm not incorperated they couldn't help me. Although my wife isn't incorperated she is contracted through stepping stones which is

[sco22]

Here is a link that will help you get started. http://www.cra-arc.gc.ca/tx/bsnss/tp.../menu-eng.html. Have a look through this and it will outline what you can and cannot deduct.

You do not have to be incorporated to claim business expenses. Most home based day cares are licensed, but not incorporated.

Anyhow, start with this link and don't panic. You have time.

Cheers.

[Pudelpointer]

Lots of good advice here Fishnut.

I have been running my own businesses for over 15 years now, and believe me when I say that a PROFESSIONAL accountant is an absolute necessity. The accountant you talked to either did not understand what you were looking for, or they do not want your business. Find another. Chances are you will only owe a fraction of that amount when they are done, hell I would wager you probably have a credit.

The fees you pay an accountant to prepare your taxes are 100% tax deductible. Right now you owe the CRA 6000, if it costs you 2500 dollars to get your taxes done (it won't, this is just an example), you will then owe them 3500. The important exception to this is GST - that does not get reduced by the full amount, just the GST they charge you.

I would rather my $$ go to a local community member to put his/her kids through school then fund Federal bureaucrats to scheme more ways to take away our rights.

As for how much it will cost you, my wife and I had both our businesses done, and our personal returns, for $1500. While that may seem like a lot, a good portion of that is because we showed up with a couple grocery bags full of receipts that someone had to sort and classify, and then we had to have a number of phone calls back and forth to get things sorted out. It was well worth it in the end.

Originally Posted by Pudelpointer

The fees you pay an accountant to prepare your taxes are 100% tax deductible. Right now you owe the CRA 6000, if it costs you 2500 dollars to get your taxes done (it won't, this is just an example), you will then owe them 3500. The important exception to this is GST - that does not get reduced by the full amount, just the GST they charge you.
.

Good thing you get an accountant to do your taxes The $2500 would come off of the taxable income....not the actual taxes owing. If the taxable income was say $40k, you'd deduct the $2,500 from that, reducing your taxable income to $37.5k......

[pikergolf]

X 50 on the tax accountant, we were in the exact same situation. Wife wanted to stay home with the youngest, so she went to an accredited day care provider got her training and became a day home. The first year we took our taxes to H&R block, when I saw how much she owed I said no way and took everything to a tax accountant. He looked it over and laughed, we ended up paying nothing and he told us we still had a lot of wiggle room. That was 15 yrs ago but I can't imagine things have changed all that much. By the way, props to her it's a tough way to make a buck.

[loyaleddie]

Great advice all

I am on the fence of getting a business started myself and was not sure of all the in's and out's thus far...but this is great info

this is what i have thought so far

1. Be incorporated (this way there is no personal assets associated with the business. Good thing if someone tries to sue you)

2. Get a good accountant (not sure what qualifies as a good accountant ..but I guess the one that saves you the most money)

3. Document, DOCUMENT, document….thee who had the most paperwork at the table WINS!!!

4. Get a good lawyer who knows contract law…(again, I don’t know what qualifies a good lawyer…but I guess one who keeps all your business assets where they belong…and that is with the business)

5. Read…Read… Read….http://www.programs.alberta.ca/Busin...px?N=772+11653

Just a couple short weeks ago I knew nothing about starting a business but now I have a better knowledge. And I can thank some AO members for added knowledge..

[Arn?Narn.]

I did my own...

Wrote off some renos, mileage, oil changes,two computers, fax machine, cell phone, clothes, paper, pens, ...

I was off by 5,000. but I found it

[New Hunter Okotoks]

Use Restaurant receipts that were used for " Business meetings "

If you have a dog as a "Security System" then write off all food and Vet. bills.

Whenever you go shopping,make sure to write off the mileage as you always pick up something for the business.

Kids need to watch videos,write off the DVD/BLURAY player. They need to watch those videos on something;write off the T.V.Sometimes they just watch T.V.;write off the cable/satellite bill

The driveway and walkway need to be kept clear for safety reasons;write off the shovels and ice-melt.

The wife needs to look professional when running a business;write off the hairstylist/manicure/pedicure/clothing/cosmetic bills.

Anything that CAN be used or is needed in order to run that business should be written off. A Professional Accountant can help you recognize the needs and costs associated with the business.

[CaberTosser]

Pay the accountant. With the Gov't you can arrange installments; with the accountant you want to keep on their good side

[sco22]

There are lots of good suggestions here, but some are getting to a point where the risk is not worth it. It makes me laugh when people think some accountants know a secret hand shake or have a secret handbook of ways to not pay CRA. The bottom line is that there are rules in place for everyone and a professional accountant will advise you of those rules. From there it is up to you as to how aggressive you are willing to be. No professional accountant is going to (or should anyhow) provide advice that is unlawful in nature including claiming items that are not of a genuine or defendable business nature. Making "business meetings" out of restaurant receipts is a very easy way to get busted by the tax cops. None of us like to pay any more tax than we have to, but saving yourself $15 in tax by making a "business meeting" out of a $100 restaurant tab for you and your wife is silly. It is also one of the first places CRA will look at an overly aggressive tax return. Remember, the one of the key elements for CRA to allow deductions for a business is the presumption of profit. In order to deduct anything, the business has to have this presumption of profit - not necessarily in the first year(s), but at some point. Now I realize that some people on this board will say that they have been deducting certain items for years or that they have never been audited. . .non of this will help you when you are sitting across from an auditor. The "my buddies told me I could deduct beers at the pub as strategic long term planning sessions" won't keep you from penalties and interest along with the payment of the tax owing.

Where the professional advice should be focused on is ensure all of your bona fide deductions are included and that you have a full understanding of the long term consequences of current tax strategies.

Well said sco.....I've been self employed for 30 years and have gone through a couple audits without a hiccup. There are loads of legitimate deductions and a good accountant will help you take advantage of all of them.

[MountainTi]

Originally Posted by sheephunter

Good thing you get an accountant to do your taxes The $2500 would come off of the taxable income....not the actual taxes owing. If the taxable income was say $40k, you'd deduct the $2,500 from that, reducing your taxable income to $37.5k......

Correct. Sure would be nice if it actually worked the way he said wouldn't it.

[eric2381]

A good accountant and paying your taxes every year is the way to go.

Write off everything you can. But, don't take it too far. A good accountant will know the difference.

Originally Posted by MountainTi

Correct. Sure would be nice if it actually worked the way he said wouldn't it.

LOL..yup. I'd happily give the money to my accountant vs the tax man....she's much cuter....

[Arn?Narn.]

One final thing from me...

If you do it right and "pay yourself" and the tax man all year long, tax time is not so scary.

I have seen a couple small businesses wait til tax time to figure out the tax....it's a hard way to do things.

[MountainTi]

Originally Posted by sheephunter

LOL..yup. I'd happily give the money to my accountant vs the tax man....she's much cuter....

Mine isn't, sounds like I should probably change

[winged1]

Just so you know, this thread went from good advice to poor advice, several posts back. So now it's tainted and not worth continuing.

Get an accountant

[mr.pike]

Originally Posted by ditch donkey

But anything that is associated with the running of the buisness can be a write off.
2 rolls of toilet paper a week- seems reasonable
7 rolls of toilet paper a week- might raise a flag

Not if you live in Regina,lol, sorry couldn't resist!

[Pudelpointer]

Originally Posted by sheephunter

Good thing you get an accountant to do your taxes The $2500 would come off of the taxable income....not the actual taxes owing. If the taxable income was say $40k, you'd deduct the $2,500 from that, reducing your taxable income to $37.5k......

Siks munce ugo I cutnt evin spel Akowntant, now I hav won!

Look, if you are going to point out my ignorance, you better have a lot more free time on your hands! And yes, that is exactly why I have an accountant.

Jerk.

p.s. When are you coming down to do some Yote hunting?

Originally Posted by Pudelpointer

Siks munce ugo I cutnt evin spel Akowntant, now I hav won!

Look, if you are going to point out my ignorance, you better have a lot more free time on your hands! And yes, that is exactly why I have an accountant.

Jerk.

p.s. When are you coming down to do some Yote hunting?

LOL.....ummm...when I get invited

[sco22]

Originally Posted by winged1

Just so you know, this thread went from good advice to poor advice, several posts back. So now it's tainted and not worth continuing.

Get an accountant

Actually, I think this thread is pretty good for both the accurate information as well as the inaccurate. Taxes and "advice" can be dangerous and this conversation is certainly highlighting it.

Cheers.

[wwbirds]

Just got back from my friendly neighborhood sheep farmer who is just starting to lamb and there are no coyotes in southern Alberta.

As a few have pointed out what started as good advise has turned bad. The accountant can advise on legitimate business expenses and will not advise aggressive strategies which could come back to bite you in the *****.

I retired from RCCE in 2002 after nearly 25 years and believe me the ones who were "inventing" business meeting lunches with beer were the same ones that missed piles of legitimate expenses. We called it creative accounting. Might last 2 years might last 4 but you wil in all likelihood get the big surprize bill eventually. Misrepresenting expenses is usually fueled and caught by greed.
Get a professional who will stand behind their advice and their work.

[winged1]

I had a few drinks with a friend of a friend over the holidays, who works in the feds GST investigations. It was darn right frightfull how tenacious this fellow was in his zest for exposing improprieties.

I feel very lucky that my last audit years ago was performed by a fellow who in comparison, was very well mannered.

[wwbirds]

Auditors and investigators are two different branches.
Audit examines and proves records. if a serious breach of the law is discovered by audit the file goes to investigations for both civil and perhaps even criminal prosecution.
Done both jobs and audit is more relaxed sometimes too relaxed and investigations is much more interesting for you are only dealing with big cases with maximum potential for fraud.

[Digger1]

Originally Posted by Lonnie

x2 on the tax acountant you will usualy get 2x more back than a taxs shop and shop around as I found one that was semi retired only did a few buisnesses but he kept the books up to date I would give him all the paper work at the end of the month he figured out how much i owed in gst every month & taxes at years end. cost was $60 a month but well worth it

X3! WELL worth the money, and not expensive. Better than HR-

[bigdaddy37]

There is some good advice here, but some things are missing... such as:

what ever portion of your mortgage you claim as a business expense, you will have to claim as capital gains when you sell your house down the road. If you're incorporated and you "rent" a room to your corporation, you must claim that as income on your personal taxes for that year. Best not have CRA find such errors in an audit.

You don't write of the entire puchase price of assets (computers, fax machines etc), you write of the depreciated value each year as outlined in the tax code as a capital cost allowance. (http://www.cra-arc.gc.ca/tx/ndvdls/t.../menu-eng.html)

If you own your vehicle and use it partially for business, you must track each KM in a log book, calculate the % of business use and % of personal use and claim accordingly.

Incorporation has pros and cons for both liability and tax benefits. Speak with an accountant and lawyer familiar with it to determine if it's beneficial for you.

If your business shows $30k or more in income during any consecutive 12 month period (not just a single year), you must have a GST number and charge GST. Incorporated or not. Once this occurs, you must charge and collect gst until the business no longer exists. (http://www.cra-arc.gc.ca/tx/bsnss/tp...ndtry-eng.html)

Also, there is mandatory WCB coverage requirements for dayhomes, even if it's only one person working there. (https://ds.wcb.ab.ca/wcb.ratemanual.....aspx?ID=82801)

The best suggestion is take your tax stuff to an CA or CPA, not a bookkeeper, and invest in good software for tracking, such as simply accounting.

[avb3]

Originally Posted by bigdaddy37

There is some good advice here, but some things are missing... such as:

what ever portion of your mortgage you claim as a business expense, you will have to claim as capital gains when you sell your house down the road. If you're incorporated and you "rent" a room to your corporation, you must claim that as income on your personal taxes for that year. Best not have CRA find such errors in an audit.

That is not entirely correct; if the OP were to write off CCA against the house, then a recaptured depreciation would kick in. Writing off a portion of the interest does not trigger any recaptured depreciation issues.

If your business shows $30k or more in income during any consecutive 12 month period (not just a single year), you must have a GST number and charge GST. Incorporated or not. Once this occurs, you must charge and collect gst until the business no longer exists. (http://www.cra-arc.gc.ca/tx/bsnss/tp...ndtry-eng.html)

The income referred to here is not net profit but revenue. Day homes are usually exempt from GST. See CRA guidelines on day homes

The best suggestion is take your tax stuff to an CA or CPA, not a bookkeeper, and invest in good software for tracking, such as simply accounting.

There is no such thing as a CPA in Canada, that is a U.S. designation. Not all CA's, CGA's or CMA's, which are the 3 designated accountant types in Canada are able to do taxes, as their professional associations require them to have specific guidelines in place. Think of lawyers; a good corporate lawyer probably will know next to nothing about divorce law, and vice-versa.

A public practice accountant will cost anywhere between $150 and $275 an hour. Staff that work on your file will be at a lessor rate.

If your books are not in reasonable shape, then the accountants staff will have to bring them up to date, and you will be paying a minimum of $75 an hour to have them to that.

You are better off having a good bookkeeper do your books, and if the issue is complex, they can refer you to a designated accountant who deals with tax issues.

We really need to be careful what "advise" we give on these forums. If we don't know what we don't know, we should perhaps find out first.

[BeerSlayer1]

Originally Posted by sheephunter

Well said sco.....I've been self employed for 30 years and have gone through a couple audits without a hiccup. There are loads of legitimate deductions and a good accountant will help you take advantage of all of them.

It sounds like you're under the gun and a good accountant might be the way to go, but...................

I've been self employed for 29 years myself and the best thing that ever happened to me was when I walked into an accountant's office in 1983 and asked him to do my "books". He looked at my documents for a while and then pushed them back accross the desk and told me I could do it myself. I guess he didn't need my business.

I did a lot of reading, educated myself and have been doing my own bookkeeping/tax returns ever since. Remember, the CRA people are there to answer your questions. Use them, they're a free resource but also get other opinions.

How much money did I save over the years? Lots, plus I have an excellent understanding of how the whole self employed/home office system works.

2007/2008 GST and income tax audits resulted in an extra $28 refund from CRA, I think that's pretty good when we are dealing with hundreds of thousands. In the end I had a bill, document, or realistic explanation for every question the auditor asked.

Others have given some good advice, listen to them and avoid the guys who tell you claim your wife's makeup and restaurant meals as "business meetings".

[bigdaddy37]

abv3

Thanks for your clarification. Looks like the bookkeeper I stopped using last year is no better than the accountant I'm going to be ending a relationship with on monday.

Anyone know a good tax accountant in Calgary?