Small business tax accountant / writeoff advice?

[Mitsu3000gt]

Does anyone have a reasonably priced small business tax accountant they can recommend? Or perhaps a Beyond member?

Basically I have a small side business in addition to my main career. It doesn't make a ton of money and I don't want to put much more time into it than I already am, but it's nice for a little bit of extra cash.

I want to take advantage of as many write-offs as possible, assuming I qualify.

What I am looking for is someone who can answer questions like:

- What I can write off, and how often
- Are there are limits to what I can write off based on my small business income?
- If I write off more than I make in a year from the business, is that a problem?
etc.

Anyone have a good contact? TIA

[msommers]

Is it for your photography stuff?

Mine handles my rental and photography stuff, plus did my geology consulting before going back to school.

MNP in Airdrie. PM for specifics if you wish...

[ExtraSlow]

Having more expenses than income isn't an issue, I did that my first fiscal year for my business. You can carry forward expenses to future years to pay yourself back, and paying for your own expenses doesn't count as income.

Here's my legit guide for what you can actually write off as a business expense, and my accountant confirmed it was a good starting place.
1) are you trying to write it off because you just want to find more write offs and pay less tax?
2) is it something you legitimately need to run your business?

If the answers are No and Yes respectively, then you are good to go. If you answers are "I'm not a scammer" and "who's to say what's legitimate", then you are on your own, you scammer.

:devil:

[Mitsu3000gt]

Originally posted by msommers
Is it for your photography stuff?

Mine handles my rental and photography stuff, plus did my geology consulting before going back to school.

MNP in Airdrie. PM for specifics if you wish...

It is yes - I just want someone to tell me how much camera gear, computer gear, car mileage, home office expenses, etc. I can write off before raising any eyebrows basically, given that this isn't my primary income source.



Originally posted by ExtraSlow
Having more expenses than income isn't an issue, I did that my first fiscal year for my business. You can carry forward expenses to future years to pay yourself back, and paying for your own expenses doesn't count as income.

Here's my legit guide for what you can actually write off as a business expense, and my accountant confirmed it was a good starting place.
1) are you trying to write it off because you just want to find more write offs and pay less tax?
2) is it something you legitimately need to run your business?

If the answers are No and Yes respectively, then you are good to go. If you answers are "I'm not a scammer" and "who's to say what's legitimate", then you are on your own, you scammer.

:devil:

It's for my photography business, so the one-time costs of certain things are very high (i.e. the camera gear I already own, computer, etc.) They are absolutely required to conduct the business properly at my standards of quality, and I would like to write them off if possible. The reason I need to talk to someone is that the cost of that stuff will likely exceed my yearly income from the business, at least for the first little while - so if that's going to be an issue then I need to find out. I'm not trying to pull a fast one on anyone, but if I am entitled to certain write-offs I would love to take advantage of them.

[benyl]

You can't write off capital costs directly. It is amortized over a number of years.

For instance, the CCA for a laptop is 55%.
http://www.cra-arc.gc.ca/tx/bsnss/tpcs/slprtnr/rprtng/cptl/dprcbl-eng.html#class50

That means you can only write off 55% of the value every year until it reaches zero. You can't write off the whole value the first year because the laptop doesn't become worthless after 1 year.

[Mitsu3000gt]

Originally posted by benyl
You can't write off capital costs directly. It is amortized over a number of years.

For instance, the CCA for a laptop is 55%.
http://www.cra-arc.gc.ca/tx/bsnss/tpcs/slprtnr/rprtng/cptl/dprcbl-eng.html#class50

That means you can only write off 55% of the value every year until it reaches zero. You can't write off the whole value the first year because the laptop doesn't become worthless after 1 year.

Good info, thanks.

Can that apply to things I already own that are now used for my business but weren't previously, or only on brand new items I buy specifically for my business?

[msommers]

Pretty sure it's purchases made during that tax year.

From what I understand, CRA is slighly lenient with write-offs and low income for the first couple years as you're not expected as a small business to instantly be making it rain. However, you need to justify your writes offs that this is actually a business and not a hobby. Photography being consistently 1% of your yearly income year after year will definitely be viewed poorly.

I don't know the "cut-off" for this.

[Mitsu3000gt]

Originally posted by msommers
Pretty sure it's purchases made during that tax year.

From what I understand, CRA is slighly lenient with write-offs and low income for the first couple years as you're not expected as a small business to instantly be making it rain. However, you need to justify your writes offs that this is actually a business and not a hobby. Photography being consistently 1% of your yearly income year after year will definitely be viewed poorly.

I don't know the "cut-off" for this.

Thanks. Yeah as best I can tell, the problem seems to be two-fold, and I don't want to get in any trouble which is why I am seeking the proper advice.

1) A business like this requires significant one-time investment necessary to do a proper job (computer, camera gear, car to get around, etc.) Obviously you aren't buying those new every year, but maybe every 5 years.

2) You can't run the business without the above mentioned things, but you also have no idea how successful the business will be. Maybe it becomes really profitable, maybe it fizzles out after a few years.

So how do you approach that and still stay above-bar? If I buy things necessary for the business, obviously I want to write them off or depreciate them or whatever, but if the business doesn't do as well as planned after several years, of course I will still own all those items at the end of the day, so how does the CRA deal with that? The items would eventually be paid off with business proceeds, but as to how long that will take there would be no way for anyone to ever know that up front.

[chkolny541]

lol this is sounding less and less like a legitimate business and more and more like a casual photographer who wants to try and expense his hobby off. If you really are trying to seek the proper advice as you mention you should be asking more questions to a legitimate accountant and less to a public car forum. If you want the CORRECT advice you gotta pay to play.

[Mitsu3000gt]

Originally posted by chkolny541
lol this is sounding less and less like a legitimate business and more and more like a casual photographer who wants to try and expense his hobby off. If you really are trying to seek the proper advice as you mention you should be asking more questions to a legitimate accountant and less to a public car forum. If you want the CORRECT advice you gotta pay to play.

Not at all like that (hence why I am putting in any effort necessary to do things properly and legally), and yes I have already initiated contact with an actual accountant. The intention of the thread was just to ask for contacts, but obviously was bound to stir up some discussion. Thanks.

[ExtraSlow]

Paul Hoglin at CHH has been really helpful for me.

[Mitsu3000gt]

Thanks guys, I think I've got a good start with some contacts :thumbsup:

[yipb]

Originally posted by Mitsu3000gt


Good info, thanks.

Can that apply to things I already own that are now used for my business but weren't previously, or only on brand new items I buy specifically for my business?

Maybe you could "sell" the items to your business and use that as the cost base?

[Twin_Cam_Turbo]

I have a question, as a Sole Proprietor do I get taxed on everything I make in a year or just whatever I withdraw from my business account? I assume it's everything I earn in a year? I've basically just been withdrawing a set amount minus XX% which I leave in my business account and plan to use for taxes.

I have no experience with this and haven't found much help on google.

[msommers]

TCT, are you a SP with a business account or Incorporated?

[HiTempguy1]

Originally posted by Twin_Cam_Turbo
I have a question, as a Sole Proprietor do I get taxed on everything I make in a year or just whatever I withdraw from my business account?

If you are a sole prop, you pay your personal tax rate on your profits (ie income earned).

http://canadabusiness.ca/starting/before-starting-your-business/corporation-partnership-or-sole-proprietorship/

I don't know what MS means by "with a business account or incorporated". Sole props aren't incorporated, hence unlimited liability. What account you have with the bank means nothing. It matters how much money you have earned (net profit) at the end of the year.

Maybe I am misunderstanding MS? But regardless, if you are sole prop, you pay tax on whatever net income you earned (net income, the way I am using it, meaning after writeoffs and expenses).

[ExtraSlow]

Yeah, when you are an SP, you as a person "earn" every dollar in revenue at the exact moment that your company receives it. You can't shelter it or delay it within the company bank account. Basically, the company isn't a separate entity.

That's one big advantage of an incorporated business, you can choose to defer money inside the business and only pay yourself when you choose. I have a buddy who used to pay himself $40k/yr for several years, and then basically didn't work for two years in a row, but he could continue to pay himself. Doesn't work for everyone, but it's nice flexibility.

[msommers]

^Yep exactly.

TCT, what you were describing is what you'd do if you were incorporated. The business account has no bearing on being tax sheltered or not - this is where I was seeking clarification.

As an SP, regardless of where the money is held/deposited, it gets taxed completely as personal income (just like your regular job).

Being incorporated, you can pay yourself personal income of your choosing, to a reasonable degree, which gets included in your overall personal income for the year. However, if there is money left in the account, this gets taxed at the business rate (14% IIRC). This is why people prefer to leave money in there over time, provided them give themselves enough money to live off of for the year!

[Twin_Cam_Turbo]

Originally posted by HiTempguy1


If you are a sole prop, you pay your personal tax rate on your profits (ie income earned).

http://canadabusiness.ca/starting/before-starting-your-business/corporation-partnership-or-sole-proprietorship/

I don't know what MS means by "with a business account or incorporated". Sole props aren't incorporated, hence unlimited liability. What account you have with the bank means nothing. It matters how much money you have earned (net profit) at the end of the year.

Maybe I am misunderstanding MS? But regardless, if you are sole prop, you pay tax on whatever net income you earned (net income, the way I am using it, meaning after writeoffs and expenses).

That's what I thought made sense, thanks!

I don't have a lot of expenses, less than $2k I'd say to write off.

[TimG]

I was just about to post a similar question in another thread - good thing i searched first ;)

i'm also thinking of taking my hobby business from hobby to legit as it's starting to pick up more than i expected.

My main questions for you guys who might have gone thru this are:

1) my hobby would be considered "light manufacturing." the lightest of the light. personally i don't even think it should be considered this, but that's the closest option on the city web site. What is it like to get your residential property rezoned for something like this? should this be step 1 before anything else happens?

2) i use part of my basement and garage for this. How does it work for claiming a portion of the house/mortgage for the business?

3) is it better to be in a SP or incorporate? i think liability is very small. if you incorporate do you need to set up independent bank accounts, etc?

4) if you're only making around 10k or less per year, is it worth all the headaches?

[sabad66]

Originally posted by msommers

Being incorporated, you can pay yourself personal income of your choosing, to a reasonable degree, which gets included in your overall personal income for the year. However, if there is money left in the account, this gets taxed at the business rate (14% IIRC). This is why people prefer to leave money in there over time, provided them give themselves enough money to live off of for the year!
If the "leftover" profit is being taxed at 14%, wouldn't it be better to pay yourself as much as you can so that there isn't much left to tax?

[Mitsu3000gt]

After some research it seems it can cost up to $1000+ for simple small business taxes, you might be better off doing it yourself or not at all depending on your profits. Unless you are getting enormous benefits from the write-offs, paying 20% of your income or whatever it is for someone to do taxes just didn't seem worth it to me. If you can claim a few "safe" things without paying anyone, that is probably the best compromise.

[carson blocks]

Originally posted by TimG
I was just about to post a similar question in another thread - good thing i searched first ;)

i'm also thinking of taking my hobby business from hobby to legit as it's starting to pick up more than i expected.

My main questions for you guys who might have gone thru this are:



I'm an incorporated contractor, I'll tell you what I'd do below, but my answers are in no way what CRA or the city might say if asked the same questions.


Originally posted by TimG

1) my hobby would be considered "light manufacturing." the lightest of the light. personally i don't even think it should be considered this, but that's the closest option on the city web site. What is it like to get your residential property rezoned for something like this? should this be step 1 before anything else happens?


If it's a hobby business and you won't be renovating to accomodate it or having traffic to your house, why complicate life by involving the city?


Originally posted by TimG

2) i use part of my basement and garage for this. How does it work for claiming a portion of the house/mortgage for the business?


Keep life simple, set a fair rent amount that's low enough to fly under the radar with CRA and charge yourself rent on the space. Don't try to screw the CRA, be able to defend your numbers.
I have a fully equipped room set aside for solely my office space and percentage wise it's actually a big chunk of my tiny 800sqft house and I think I charge $300/mo rent to my corp. My corps income more than justifies this minor expense. If you're making 10k a year on your hobby though you might want to think carefully about how much rent you can justify before the percentage will raise red flags with an auditor.


Originally posted by TimG

3) is it better to be in a SP or incorporate? i think liability is very small. if you incorporate do you need to set up independent bank accounts, etc?

If you're at all serious about it or will have any number of transactions, a separate bank account will keep your bookkeeper from strangling you. To me, the big benefits of incorporating are being able to keep money in the business, and more insulation from lawsuits as the corp is a separate legal entity.


Originally posted by TimG
4) if you're only making around 10k or less per year, is it worth all the headaches?

Probably not worth it to incorporate unless you're building and selling something that someone will sue you over. I'm incorporated and have pretty simple books. My bookkeeping is around $400/yr and my accountant around $1200.

[TimG]

If it's a hobby business and you won't be renovating to accomodate it or having traffic to your house, why complicate life by involving the city?


because to get a business license you need to disclose the type of business to the city...


thanks for the answers.

who do i need to talk do about all of the details? an accountant? city? province? registry?

[msommers]

Originally posted by sabad66

If the "leftover" profit is being taxed at 14%, wouldn't it be better to pay yourself as much as you can so that there isn't much left to tax?

No and here's why: you're trying to minimize you're overall tax paid to the government in the long term. So when you're retired/not paying yourself as much, you can slowly "pay" yourself more later in life with a fairly even tax rate. Otherwise, you're getting dinged at the max tax rate every year (assuming of course you're making that much).

There is stuff with dividends too but I can't speak to the specifics as I honestly don't know. Also setting up trust funds...

[carson blocks]

Originally posted by TimG


because to get a business license you need to disclose the type of business to the city...


I'm not advocating it, but you'd be surprised how many home businesses skip the city business license and the associated BS.


Originally posted by TimG

who do i need to talk do about all of the details? an accountant? city? province? registry?

I got my incorporation done by lawdepot.ca. It was easy and I needed it RFN for a juicy contract. You can do it yourself at a registry though to save money. I have a good bookkeeper who takes my shoebox of mess and makes a quickbooks file out of it, and a good accountant who keeps me out of trouble with the CRA. For me anyways, both the bookkeeper and accountant are mandatory. If you need one-stop advice, a good accountant will know all the ins and outs, and many of them offer help with getting your business set up.

[Xtrema]

Originally posted by Mitsu3000gt
After some research it seems it can cost up to $1000+ for simple small business taxes, you might be better off doing it yourself or not at all depending on your profits. Unless you are getting enormous benefits from the write-offs, paying 20% of your income or whatever it is for someone to do taxes just didn't seem worth it to me. If you can claim a few "safe" things without paying anyone, that is probably the best compromise.

Safe/Easy stuff:

- Mileage (log it, especially you only have 1 car)
- % of internet/utilities/property tax/insurance (200/1000 sq ft home in as your home office, 1/5 can be write off a expenses)
- Any professional fees
- Training

You can't:
- Mortgage interest when you work from home
- Lease of vehicle if it's your only car

Write off is basically giving you ability to acquire stuff with pre-tax dollars. So it's just a discount, it's not government paying for your stuff.

[ExtraSlow]

Originally posted by Xtrema


Safe/Easy stuff:

- Mileage (log it, especially you only have 1 car)
- % of internet/utilities/property tax/insurance (200/1000 sq ft home in as your home office, 1/5 can be write off a expenses)
- Any professional fees
- Training

You can't:
- Mortgage interest when you work from home
- Lease of vehicle if it's your only car

Write off is basically giving you ability to acquire stuff with pre-tax dollars. So it's just a discount, it's not government paying for your stuff.

My accountant gave me a rule of thumb that's easy to remember and easy to apply. If you are incurring the expense to assist you gaining revenue, then it's a legit expense.

As for home office expenses, I am pretty sure a percentage of your mortgage interest can be claimed, just like a percentage of your home internet/phone etc. I claim mine, although it doesn't add up to much.

[v2kai]

http://www.dorward.ca/home/

cant speak highly enough about these guys, and affordable too