For our meeting on February 15, 2022, we were joined by two liaison officers from the Canada Revenue Agency (CRA), who discussed preparing and filing business taxes. Shelley Pederson gave a PowerPoint presentation, while Karen Westbrook answered questions in the Chat.
The presentation covered the following topics, among others: determining deductions; when business taxes are due; when we need a GST/HST number, its benefits, provincial rates, and remittance options; the pros and cons of sole proprietorship versus incorporating; whether we need a company name; whether we need a business bank account; charging a service fee to cover transaction fees; and accepting credit cards and foreign wire transfers.
Most attendees were small suppliers (earning less than $30,000 per year in business income) and sole proprietorships (earning more than $30,000 per year in business income); one was incorporated.
The presentation was thorough and offered a lot of information. Shelley followed it up with two information kits (in PDF format) – one for small businesses and self-employed individuals and the other for incorporated businesses. These kits are available by emailing Editors Kingston at firstname.lastname@example.org.
Liaison Officer Service
This is a valuable and free service. It offers confidential, one-on-one sessions between a taxpayer and a liaison officer; if you’re interested, see the next section for the link. In addition, the CRA website offers a wealth of information on taxes, GST/HST, etc. – chunked into easily digestible topics and including videos – so it’s worthwhile having a look.
Questions and Answers from the Chat
All the information provided in this presentation is available through the Government of Canada website: www.Canada.ca
Link to the Liaison Officer Service web page, which includes a link to the form to request the service: https://www.canada.ca/en/revenue-agency/programs/about-canada-revenue-agency-cra/compliance/liaison-officer-initiative-loi.html
Filing deadlines for T1 and self-employed: https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/important-dates-individuals/filing-dates-tax-return.html
Place of supply rules and GST/HST: https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/gst-hst-businesses/charge-collect-place-supply.html
Q: I’m wondering specifically about how to charge GST/HST, or if I even need to. Do I understand correctly that you do not owe GST on the sales you made before hitting $30,000?
A: Filing GST/HST returns is only required where you are a registrant. Further information on GST/HST will be provided in the presentation. But yes, you are not required to register until you earn $30,000 or more in four consecutive calendar quarters.
Q: My understanding is that if you charge GST/HST, you charge it based on the person’s province of residence. I currently do not need to register, but I have one client in the US and one in Nigeria. Once I need to register, I’m wondering what rates I should be charging them.
A: Within Canada, if you are a registrant, you will collect the tax based on the province the client is in. Any services provided outside Canada are considered an export and thus a zero-rated supply; therefore, you will not be collecting GST/HST . Shelly will be discussing this further in a few minutes.
Also, remember that if you are offering services outside Canada and are paid in a currency such as US dollars, these monies will have to be converted to Canadian dollars for reporting purposes for both income tax and GST/HST.
Q: Do “supplies” include “services”? Such as what editors do.
A: Yes, “supplies” are both goods and services.
Q: A question about international money payments. Can bank fees for receiving money transfers be treated as a business expense?
A: Yes, any bank charges or fees that are related to your business activities can be claimed 100% as an expense against your business income.
Q: The majority of my work is international, with a small minority from domestic sources. So I assume that even though my total income is above $30,000, because only, say, $5,000 of that is from domestic sources, I wouldn’t have to register for GST/HST as below that threshold, regardless of total income?
A: Your sales determining whether you meet the $30,000 threshold are your worldwide sales, both your taxable and zero-rated sales. Thus, in the example you provided, you would be required to register for GST/HST purposes.
Also, if you are an annual filer, but owe $30,000 or more over a year, in the following year you will be required to remit quarterly – making payments quarterly but filing annually. This is a time someone might choose to elect to file quarterly.
Q: I don’t include payment method on my invoices (as advised in the presentation). What is the purpose of including the method?
A: If you are accepting payments in different ways – e.g., credit card, cash, e-transfer – including the payment method will help you track the payment to the invoice. It is not a requirement. However, if you provide terms or charge interest if not paid within a specific amount of time, those details should be included on your invoice.
Q: I’m semi-retired now so don’t expect to earn over $30,000, even though I’m still a GST/HST registrant. Do I have to cancel my GST number, and how? Is there information on the CRA website that discusses this process?
A: If you are consistently under the $30,000 threshold, you may de-register for GST/HST. The following link will provide information on de-registering: https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/gst-hst-businesses/account-close.html
Also, depending on what your filing periods are, there may be a requirement to file until the end of the year. If, for example, you’re a quarterly filer and ask to close your account in September, you will likely be asked to file up until December 31st. If you request to de-register in February and you haven’t had any sales to date in the current year, you may be allowed to back-date the de-registration to the prior December 31st.
Q: I assume paid parking at a place of business is not an allowable expense?
A: If it is parking at your place of business, that would be considered personal. If you have to pay for parking while visiting a client or providing your services, this expense would be allowable.
Q: If I provide a service in December 2021, invoice in December 2021, but get paid in January 2022, is that income in 2021 or 2022?
A: That is income in 2021. You are required to use the accrual basis for accounting purposes; thus, you include the sales within the period that the service is rendered and invoiced and not when it is paid.
Q: And if the service is rendered in December but invoiced in January?
A: Then you would report the income in 2022, but equally, you would claim any related expenses in 2022.
Q: Are professional development (training) costs and publications subscriptions deductible?
A: Professional development – definitely. Subscriptions could depend on the reason for them. If you have a reasonable explanation for the subscriptions, they could be considered allowable.
Link to the Benchmarking tool, aka Financial Performance Data: https://www.ic.gc.ca/eic/site/pp-pp.nsf/eng/Home
Link to Business Benefits Finder: https://innovation.ised-isde.canada.ca/s/?language=en_CA&adv=2122-201900&id_campaign=396599076&id_source=1249045792341926&id_content=78065507324889&gclid=081e38d10f5c1036b1115add59f6277b&gclsrc=3p.ds&utm_source=bing&utm_medium=cpc&utm_campaign=7031-SE-0006%7CBBF%7CUT849-221893-001-CZ%7C2122-201900%7CGC%7CISED%7Cdirect%7CQ4%7C2021%7CEN%7CSEM%7C&utm_term=business%20benefits%20finder&utm_content=SMEs%2FEntrepreneurs%7CDEMO%7C%7CNAT%7CSEM%7CBIN%7CTRA%7CBBF%7CSEM%7C%7CNAT%7CTXT%7C%7CdCPC%7CEN%7CBusiness%20Benefits%20Finder
These links will be included in the PDF files we provide to you.
The industry code for editing is 561410 (Document Preparation Services).
Please complete our anonymous survey at: https://www.canada.ca/en/revenue-agency/programs/about-canada-revenue-agency-cra/compliance/liaison-officer-initiative-loi/liaison-officer-service-survey.html
Thanks for answering my questions in the chat!
Thanks to the organizers and Shelly and Karen – much appreciated.
We hope you’ll join us for these next meetings:
Tuesday, March 15, 7:00–8:30 p.m. – This will be another in our “Authors Talk Editing” series, this time with fantasy writer Nicholas Eames. Nicholas recently relocated from Kingston to Victoria, BC. Some of his titles are available through the Kingston Frontenac Public Library system, either in print form or by download. Check out a copy!
Tuesday, April 19, 7:00–8:30 p.m. – TBD.
Tuesday, May 17, 7:00–8:30 p.m. – Clarke Mackey is back, by popular demand! We enjoyed his presentation on film editing in October 2020 and are delighted that he’ll join us again to present on editing film and television scripts.