Академический Документы
Профессиональный Документы
Культура Документы
by
Sunny Widerman
Introduction _________________________________________ 3
Is this booklet for you? _______________________________________ 3
What this booklet covers ______________________________________ 3
What this booklet does not cover ________________________________ 3
About the workbook __________________________________________ 3
Disclaimer _________________________________________________ 3
Feedback __________________________________________________ 3
Reporting expenses on your tax return ____________________ 4
First step: organize your receipts _______________________________ 4
The Gist of GST ______________________________________ 5
Do you need to include GST in your expenses? ____________________ 5
To exclude the GST from expenses and calculate the GST paid _______ 5
Using the workbook ___________________________________ 7
Adding another row to the spreadsheet___________________________ 7
What expense goes where ______________________________ 8
Look out for the 'exceptions and exclusions' symbol ________________ 8
Capital Expenses ____________________________________________ 8
Business-use-of-home expenses ________________________________ 8
Last check before you begin ___________________________________ 9
Government Expense Categories _______________________ 10
Conclusion _________________________________________ 14
If you still don't know where an expense goes ____________________ 14
A final note________________________________________________ 14
Who to contact for help ______________________________________ 14
About Sunny Widerman ______________________________ 15
and Personal Tax Advisors ____________________________ 15
The booklet is particularly aimed at people involved in the arts, because their needs and special
expenses aren't usually covered in the standard materials produced by the Canada Revenue
Agency (CRA). It is not for incorporated individuals.
If you do not have the workbook, you can request one by sending an email to
info@personaltaxadvisors.ca.
Disclaimer
Personal Tax Advisors has made every effort to ensure that the information contained in this
booklet is accurate according to Canadian tax laws as of January 2009. We cannot be held liable
for inaccuracies in tax returns filed using this information, or for changes in tax law that may occur
in the future.
This book is a guideline only, and does not replace the advice of a qualified tax preparer or
advisor. When in doubt, consult your Tax Advisor.
Feedback
This guide is designed to be easy to use, easy to understand, and reasonably fun to read. We
appreciate any feedback on how to make it better. Please send your comments, questions and
suggestions to feedback@personaltaxadvisors.ca .
CRA materials are generalized for people with more common businesses like doctors and
limousine drivers, and often don't include types of expenses unique to professionals who work in
the arts.
If you are not registered to collect the GST include the GST in all
your expenses
If you are registered to collect the …on the quick method include the GST in all
GST and are… your expenses
If you're still not sure, call the Canada Revenue Agency's GST and self-employed department at
1-800-959-5525 and ask.
To exclude the GST from expenses and calculate the GST paid
The charts on the following page show the formulas you use to calculate the cost of an item
before GST, which you will need to fill out your Expense Workbook. They also show you how to
calculate how much GST you paid for that item, which you will need to complete your GST return
(not covered in this booklet).
Item on which GST is charged, [total price you paid] x 0.952 [total price you paid] x 0.048
but no PST (e.g., reference
books)
Item on which GST is charged, [total price you paid] x 0.943 [total price you paid] x 0.057
but no PST (e.g., reference
books)
Item on which GST is charged, [total price you paid] x 0.934 [total price you paid] x 0.065
but no PST (e.g., reference
books)
The workbook provides space to enter your expenses in each of the categories listed in the
CRA's form. All you need to do is enter the type of expense and the amount, and the workbook
will add up your totals automatically. Enter each amount in dollars and cents, without the dollar
sign.
Do not use dollar signs ($), letters, commas, or any punctuation (other than the decimal
point) in the 'amount' column, or the workbook won't add the numbers up properly. The
workbook will add dollar signs and thousands separators (commas) as necessary.
Example:
Advertising
Can include: ads, business cards, flyers, website maintenance, etc.
type amount
Business cards $60.00
Promotional pens $350.00
Yellow Pages ad $1,500.00
[Capital Expenses
Speaking of exclusions, this one applies to every category. Do not include capital expenses in
any of the categories outlined below. They're handled differently, with calculations you do on
page 3 of the T2125 Statement of Business or Professional Activities.
To figure out if something is a capital expense, ask yourself: is it something that I use up, or that
expires regularly, or that has to be bought or renewed every year? If the answer to any of those
questions is 'yes', then it's not a capital expense.
Examples:
Capital expenditures have special rules. To learn how to handle them, read the government guide
to the T2125 Statement of Business or Professional Activities, or consult your Tax Advisor.
[Business-use-of-home expenses
Business-use-of-home expenses are expenses paid for a portion of your home, if you use it as a
workspace. Some of those types of expenses – rent and property taxes, for example – seem to
have their own category on the first page of T2125 Statement of Business or Professional
Activities . However, those are reserved for workspaces outside the home.
Business-use-of-home expenses, just like motor vehicle expenses and capital expenses, are
handled on their own. This booklet doesn't explain these expenses, because the T2125
Statement of Business or Professional Activities and its guide are quite detailed and self-
explanatory.
1. Organize your receipts into your categories, separating out capital expenses
2. Add up each of your categories, making sure to include or exclude the GST as outlined in
the section The Gist of the GST
3. Take a deep breath
Most people use the 'accrual method' for calculating their income and expenses. That means that
for tax purposes you record income when you bill someone, and expenses when you are billed –
even if you weren't paid on time, or if you waited to pay the other person.
What can happen is that you bill someone, include the amount of that bill in your tax return and
pay taxes on it, but later realize that they're never going to pay you. Since you never got the
income, you really shouldn't have to pay the income tax.
Bad Debts is where you get that tax back. By including here the money you billed for but were
never paid, you subtract the income from this year's return, thereby getting the tax back.
Business tax, fees, licenses, dues, memberships and subscriptions ______ line 8760
Include fees for all your professional memberships, registration of business name, etc. If you are
an actor, your ACTRA fees go here.
[ Do not include payments to medical plans here, even if they're required for your membership
(e.g., ACTRA Fraternal medical benefits); they are a medical expense. Consult your Tax Advisor
to learn more about where those go.
[ This category is not for the usual postage or courier charges on letters or small packages you
sent out – those are Office Expenses (see below).
[ Do not include the gas you put in a vehicle in order to get yourself from place to place. That is
a Motor Vehicle Expense (line 9281, below).
[ This category is not for house, apartment or contents insurance, even if you work at home.
Such so-called business-use-of-home expenses go in the Business-Use-of-Home category,
which is calculated on page 2 of the government's form T2125 Statement of Business or
Professional Activities.
Remember, this category is only for meals and entertainment that were part of client or business
meetings. If you're a performer or a film or theatre critic and must therefore attend theatre or films
as part of your research, don't include those expenses here. Put them with your research
expenses under 'Other expenses' (line 9270, below) so that you write them off entirely.
Similarly, if you have some people working for you and you treat them to a meal as a thank you or
as a benefit of working for you, the cost of that meal doesn't go in this category. Put it in 'Salaries,
wages and benefits' (line 9060, below) instead so you can write the whole thing off.
[ This category does not include office supplies (see 'Office expenses', above), because they're
not physically incorporated into a product.
[ This category does not include taxes paid on your home, even if you work there. Such so-
called business-use-of-home expenses go in the Business-Use-of-Home category, which is
calculated on page 2 of the government's form T2125 Statement of Business or Professional
Activities.
[ This category does not include rent paid on your home, even if you work there. Such so-called
business-use-of-home expenses go in the Business-Use-of-Home category, which is calculated
on page 2 of the government's form T2125 Statement of Business or Professional Activities.
Salaries, wages and benefits (including employer's contributions) ________ line 9060
Use this category for amounts paid to someone else who helped you earn income, who isn't
covered under 'professional fees' above. Note that you can pay a spouse or a child if they do
necessary work for your business.
If you paid your employees or helpers with gifts and/or meals instead of (or in addition to) money,
include the cost of those here.
Remember, it's to your tax advantage to include meals here rather than in Meals and
Entertainment, because in this category you get to write them off in their entirety. If you ate the
meal yourself, it must go in Meals and Entertainment. If your employee ate it, it can go here.
[ This category does not include meals you eat while travelling, even if you're gone overnight.
Those expenses must go in Meals and Entertainment, above.
If your residential phone line is also your business line, include the business portion of the
expense, prorated by the amount of time you spend on business calls. For example, half the time
you spend on your residential phone line is for business purposes, you can deduct half the phone
bill.
Private Medical Insurance: This is also where you deduct the cost of private health services
plan (PHSP) premiums. If you pay into a health plan for yourself, your spouse or common-law
partner, or any member of your household, AND if you earn at least 50% of your income through
your freelance business, you can deduct those premiums here (within proscribed limits). While
these expenses can also qualify as medical expenses, which can be claimed on a separate form,
it is usually preferable to deduct them here. This is because PHSP premiums provide a greater
tax deduction as business expenses than as medical expenses.
Many expenses have one definite place on the form, while others can be interpreted various
ways. Some won't fit anywhere, and just have to go into Other expenses (line 9270).
A final note
When calculating and categorizing your expenses for your taxes, try to be as logical as you can.
But don't get tied up in knots if you're not sure exactly where a particular expense goes.
With the exception of Motor vehicle expenses, meals and entertainment, and Business-use-of-
Home expenses, the precise placement of an expense doesn’t make any difference to your
bottom line; so long as no one number is particularly irregular or high, it's unlikely to attract
negative attention from the Canada Revenue Agency.
If you do get audited, your task is to convince the auditor that your expenses are 'reasonable'. So
long as you've been honest and feel you can confidently argue the reasonableness of your
expenses, go ahead and file your return without fear.