5 Things You Definitely Cannot Claim as Business Expenses

Sometimes, when my clients try to get super creative with their expenses, I look like this:


But, most times, I have a little giggle and send them a friendly reminder that they probably don’t want to go to tax jail, and so, should refrain from claiming expenses like these.

1) The birthday gift and card you bought for your wife.

Yep, who woulda thought. You see, as your accountant, I most likely prepare your taxes. Which means, I know your wife’s birthday. I have also likely met your lovely wife and am probably familiar with her taste in clothes, or may have seen her wearing that beautiful necklace you bought her. Also, did you know that most card stores actually print the type of card on your receipt? A good auditor looking at your Hallmark receipt which reads “BDAY WIFE LOVE $7.99” is going to see a red flag in you.

2) Expenses that you didn’t pay for.

As an accountant, I spend a lot of time looking at documentation. A LOT. You probably don’t, so I can forgive you for not knowing this. But, often times, the name of the credit card holder is printed on the merchant slip when a purchase is made using a credit card. When that name is not yours, and is not that of an immediate family member, there is a pretty good chance you did not incur the expense. It’s a pretty big no-no to “borrow” someone else’s receipts in order to reduce your income.

3) Your family vacation.

Remember last year when you took your family to Florida? Little Sally had such an amazing time at Disney, sweet, sweet Johnny giggled with joy as the ocean waves touched his toes for the first time. Lifelong memories were made. Yeah, you can’t claim that. Cherish the memories, feel free to send me a postcard, but, please don’t send me the travel receipts.

4) Botox, clothing, haircuts, manicures, or any other costs that you incur in order to look good.

Unless you are a model or actor, these are out. Outside of these specific industries, your maintenance of your looks has no bearing on your ability to earn income. A caveat here is clothing, which may be allowed in limited circumstances such as in trades where the clothing is ONLY worn for work (ex: a uniform, a painter’s coveralls, a carpenter’s steel-toed boots, etc.).

5) Golf green fees and equipment rentals. Weird, right? I mean, you probably meet clients on the golf course all the time. Unfortunately, this expense category was seriously abused over time, and now is specifically excluded in the Income Tax Act. The good news is that you can still claim 50% of business-related meals had at a golf course. Just remember to note the attendees, and the purpose of the meeting on the back of the receipt.

Always remember the basic rule: an expense must be incurred in order to earn business income in order for it to be a valid claim. If you are having to stretch the truth or application of this rule in an effort to claim it, you should probably think twice about claiming it at all. 


Clawbacks (sounds painful, but, it doesn’t have to be)

“the recovery of money already disbursed”


Ok. The recovery of money already disbursed. Got it.

But, how does this apply to tax?

In the tax world, clawbacks come into play when your income exceeds specified thresholds. Clawbacks apply in three main areas: Old Age Security (OAS), Employment Insurance (EI), and Personal Amounts (tax credits on your return).

If you are subject to a clawback in any of these areas, you will essentially be subject to a higher tax rate than others at the same income level.

For example, OAS is subject to a clawback once your income level exceeds $74,788 (2017). Once this happens, you will be required to repay a specific percentage of your net income over that level or your OAS benefits, effectively increasing your marginal tax rate.

What does this mean to you in 2017?

Old Age Security – if your net income exceeds $74,788, you be required to repay the lesser of:

  • 15% of your net income over $74,788, and,
  • 15% of your OAS

When net income reaches just over $121,000, all OAS received will have to be repaid.

Employment Insurance – if your net income exceeds $64,125 and you have received regular EI benefits for the 2nd time in 10 years, you will have to repay some of those benefits.  The repayment amount is the lesser of:

  • 30% of the benefits received, and,
  • 30% of your net income in excess of $64,125

Personal Tax Credits – both the Age Amount and the Canada Child Benefit are impacted.

  • Net Income less than $36,430? Seniors can claim the Age Amount.
  • Net income between $36,430 and $84,597? Seniors can claim the Age Amount, reduced by 15% of their net income over $36,430.
  • Net Income greater than $84,597? The Age Amount is reduced to zero.

The Canada Child Benefit begins to be reduced when the family net income is greater than $30,000, and is further reduced with it is greater than $65,000. The number of children in the family also impacts the reduction.

How can you manage these clawbacks?

There are strategies you can implement in order to minimize the impact that clawbacks have on your tax situation. These include reducing net income, and making RRSP contributions. We can assist you in pro-actively deciding on the best approach to take, as a part of your year end planning.

Continue reading


Students & Taxes

Something I hear all the time from students…”Oh, told me I don’t have to file a tax return”.
And, you know what? In many situations, that advisor is correct, you probably don’t HAVE TO file a tax return.
But, here’s the catch! If you don’t file a tax return, you miss out on all kinds of great opportunities, such as:
  • Receiving a refund of taxes paid – if you are a low-income earner, or have many tax credits, in many cases you will receive a refund of part or all of the income tax your employer withheld from your pay cheques during the year
  • Transferring tuition credits to your parents or grandparents (is there really any better way to show Mom you care?)
  • Creating tuition credit carryforwards, which can result in significant income tax refunds when you start working full-time
  • Applying for the GST/HST credit – when you file a tax return, you are automatically applying for this quarterly payment (to check your eligibility, go here: http://www.cra-arc.gc.ca/bnfts/gsthst/fq_qlfyng-eng.html)
  • Applying for the Ontario Trillium Benefit – when you file a tax return, you can apply for this monthly payment (to check your eligibility, go here: http://www.fin.gov.on.ca/en/taxcredits/CalculatorQuestions.asp)
  • Building RRSP contribution room – this may not seem like a big deal at your current stage in life, but, it is HUGE down the road when you want to start saving for retirement. If you are working student, the income you earn from employment (and some other sources) helps build contribution room in your RRSPs, which means that you will have the opportunity to start saving more, faster.
Most tax preparers, our firm included, offer significantly discounted rates to prepare student tax returns. Often the refunds/tax credits you are entitled to far outweigh the fee you will pay for having your return professionally prepared.
Not much to lose, and a whole lot to gain!

Why Your 2015 Tax Refund Might Not Be As Big As You Hoped

So, remember last year when the Federal government introduced the Enhanced Universal Child Care Benefit? And, we were all like “Yay..free money!”.

And remember when the Federal government also reminded us that the UCCB is taxable and announced that they would be eliminating the Child Amount from our tax returns?

And, remember when I recommended that you put a portion of the UCCB into savings ’cause you were gonna need it at tax time?

No? Of course you don’t, you were distracted by free money! Totally understandable. Who doesn’t love free money?

Here’s the thing though….depending on your tax situation, you might be about to feel the hit. Here’s why:

That Child Amount that you used to be able to claim, reduced your tax bill by $338 per child. For 2015, you no longer have that credit available to you on your tax return. Add to that the fact that the Enhanced UCCB is fully taxable at your marginal tax rate, and you’ve got a double whammy.

Unfortunately, there is not much you can do about it at this point. However, if these tax changes do result in you having a balance owing, be sure to file your return on time and pay the balance by the due date to avoid interest and penalties.

And, remember, you will keep receiving the Enhanced UCCB until June 2016, which will again impact your 2016 income tax return. So, plan ahead by savings some of these funds. 20-25% is a good range for middle income earners.


To TFSA or Not TFSA, That Is The Question


Maybe you’ve got some extra cash lying around and you aren’t really sure what to do with it. You’ve heard about these Tax Free Savings Account (TFSA) things and don’t know what they’re all about. Here’s the scoop:

The Basics

A TFSA is essentially an investment account held at a financial institution, and the amounts contributed as well as the income earned (interest, dividends, etc.) are tax free, even when they are withdrawn. Anyone who is 18 years of age or older and has a valid Social Insurance Number can open one. Each year you can contribute a maximum of $10,000 to your TFSA, and this contribution room accumulates every year. Any withdrawls you make are added back to increase your contribution room for the following year, and contributions are deducted.

*Note: for 2009-2012, the annual limit was $5,000, for 2013 and 2014, the annual limit was $5,500 and for 2015 the annual limit is $10,000. The annual limit will return to $5,500 in 2016.

The Pros

  • You can withdraw money from the TFSA at any time, for any reason, with no tax consequences, and without affecting your eligibility for federal tax benefits and credits.
  • Your Old Age Security (OAS) benefits, Guaranteed Income Supplement (GIS) or Employment Insurance (EI) benefits will not be reduced as a result of the income earned in, or the amounts withdrawn from, your TFSA. Meaning you won’t be slapped with a social benefits repayment if you make use of your TFSA funds and are receiving any of these benefits.
  • The income earned in the account or amounts withdrawn from a TFSA will also not affect your eligibility for federal credits, such as the Canada Child Tax Benefit (CCTB), the working income tax benefit (WITB), the goods and services tax/harmonized sales tax credit, or the age amount. Very, very good things as this allows you to maximize your tax return.
  • For estate planning purposes, the designated beneficiary rules apply to TFSA’s. Meaning that if you have a designated beneficiary assigned to your TFSA, the individual who receives the funds from your TFSA will not have to pay tax on that amount (as long as the payments don’t exceed the fund’s fair market value at the time of the holder’s death). In addition, if the individual receiving these funds wishes to invest them into their own TFSA, that individual can apply for an exempt contribution, which will not impact their TFSA contribution room.
  • If there is a marriage or common-law partnership breakdown, amounts can be transferred from one partner’s TFSA to the other’s, without any impact to either individual’s contribution room.

The Cons

  • The TFSA is not truly “tax-free”, its more “tax-free under most circumstances”. But, they probably didn’t call it that because it would make for a really messy acronym (TFUMCSA – meh, I’ve seen worse). Anyhow, there are certain situations under which the amounts earned in respect of investments in a TFSA are subject to tax. Briefly, these include, contributions made while you were a non-resident of Canada, and taxes on overcontributions, non-qualified investments, prohibited investments, and “advantages”. I won’t go into detail here as there are lengthy regulations around each. If you have a TFSA, or are considering opening one, give me a call and we can chat more about these. In addition, if these situations apply to you, you will also be required to complete and submit a TFSA Return to the Canada Revenue Agency.
  • The contribution room can be fairly low when compared with your RRSP contribution room.
  • The rate of return on the majority of TFSAs is relatively low (around 2% interest if you shop around). Deduct from that the trading fees that are charged if you want to use it to invest in equities for a higher rate of return (in theory…..we all know what the markets are like in reality right now) and you may not be walking away with much, if any, return.


Sounds like a TFSA is a perfect savings vehicle for all, doesn’t it? I should stop contributing to my RRSP and use a TFSA right? Well, not necessarily. There are a few other factors to consider in the TSFA vs RRSP debate.

Unlike RRSP contributions, TFSA contributions do not reduce your net income. As a result, in the tax year in which you make the contributions, you will not have a reduced tax base (you’ll most likely pay more taxes than if you had’ve made RRSP contributions). This is a very important consideration for tax planning purposes, especially if you have a higher marginal tax rate.

But remember, any tax savings you realize today from an RRSP contribution, will have to be paid back down the road when you withdraw the funds. Of course, it can be argued that you would be paying that back at a reduced rate because your retirement income will be much lower than your income today. However, RRSP income can trigger clawbacks of your social retirement benefits, such as Old Age Security payments, if the income is high enough. If the withdrawals from your RRSP begin to reduce your social retirement benefits, not only are you paying tax on the RRSP income, you are also feeling the impact of reduced cash flow in your household. As you will recall (because I know you’ve diligently read through this entire post), TFSA withdrawals do not have any impact on social retirement benefits.

RRSPs offer the added benefits of being able to borrow your own money through the Homebuyer’s Plan and the Lifelong Learning Plan without tax consequences (just make sure you pay it back during the allotted timeframe!). Given the higher contribution room available with RRSPs, this is a great benefit.

Another point in the RRSP column, is that it they are in essence forced savings…who wants to take money out of their RRSP when they’ll be taxed on it? This can be very important for those of us who have difficulty saving.

An additional consideration is the wide use of employer-matched pension programs. If are one of the lucky Canadians out there who’s employer matches contributions to a company pension plan, contributing to that plan is definitely the better way to go. Who wants to turn down free money right?

You’re probably still wondering what the best option is for you…and the answer is – it depends. I definitely prefer the TFSA as a short term savings vehicle. But, the RRSP still has a lot of merit.

In general, for a very young, low income earner (less than $40K annually) with a low marginal tax rate, the TFSA can be the better way to go. The tax reduction provided by RRSP contributions really won’t benefit you all that much, and the TFSA will provide you with greater access to your funds for short term savings (vacation funds, etc.). However, for a middle to high income earner, the tax reduction benefit from RRSP contributions will be a huge benefit, making it more appealing.

A nice middle of the road option is to contribute to your RRSP, and then invest your tax refund in a TFSA. Using this option, the rate of return on your investment will be increased over straight TFSA contributions, you will be making use of the tax benefits that come into play with RRSP contributions, yet, you will still have funds available for use tax-free.

If you have any comments on this topic, or would like us to assess your situation, please e-mail us at inquiries@asffinancialconsulting.com.


The Household Budget

imageI have had several of my clients and Facebook followers ask me for tips on household budgeting lately. So, without further ado…

It’s a Process

Managing your personal finances is not a one time affair. Don’t get me wrong, creating a budget is a great starting point. But unless you continually track your actual spending against that budget you will never know:

A) Whether or not your budget is realistic for your circumstances

B) If you are sticking to the goals you established for yourself

C) The true depth of your debt problems

D) Where you are overspending

Enlist Help!

Personal financial management is not a venture to undertake with pen and paper alone. Find yourself good software and make use of it. My personal preference is http://www.mint.com. It is a free online tool offered by Intuit, which allows you to link your bank and credit card accounts, automatically loading your detailed transaction data on a near real-time basis, and categorizing it for you.  You can view reports and charts to monitor your spending, and load in your assets and liabilities to watch your net worth grow.

Once you finalize your initial budget and embark on your financial management journey, make sure that all members of your household are on board. If Mom is being diligent with her spending, but, Dad is out golfing every Sunday, you will be spinning your wheels.

Budgeting 101

When developing your household budget, use your last 6 month’s worth of financial information and be sure to factor in any upcoming changes to your financial picture. If you are a big cash spender, track it down to see where you have been spending it.

  1. First, determine how much income is coming into your household each month. If your income is variable, calculate a realistic average based on your last 6 months and your current earning situation.
  2. Next, identify your fixed expenses. These include your mortgage, loans, car payments, etc.
  3. Then, review your variable spending. Items such as gas, groceries, etc. Calculate a reasonable average of these as well. Be very detailed here and make sure that you budget for all of your costs.
  4. Review all of the costs above and analyze the areas in which you can cut back. Tackle the easy changes first, items such as cutting back on cable or shopping at discount grocery stores. Then look at your bigger ticket items. Does it make sense for you to re-finance your mortgage to obtain a better rate? Should you lower your car payment by trading in for a different vehicle? Spend a fair amount of time here, there is always fat to trim.
  5. If applicable, create a debt reduction plan. Here, you want to focus on paying off your highest interest rate debt first and ensure that you are making at least the minimum payments on your other debts while paying off the high interest cards so that your credit rating is protected.
  6. Create a line item for emergency savings. I don’t care if you have thousands of dollars in debt, you still need a line item in your budget for savings. Look at it this way, if you don’t have a rainy day fund and your car breaks down, you are just going to go further into debt to fix it. So, save. It doesn’t have to be a huge amount….even $20 a month is a start.
  7. Ensure you are thinking about retirement savings, and saving for your future. We will have a future blog post on this topic….so check back soon. The key thing to remember is that the earlier you start, the more opportunity for it to grow.
  8. Revisit! As you cut spending, pay down debt and monitor your finances, you should find that you have a greater amount of disposable income available to you. Make sure reevaluate your budget frequently.

Establish Reasonable Goals

There is nothing harder than trying to stick to a budget that is unrealistic. When establishing your goals, you definitely want to aim for the guidelines below from DebtSteps.com, however, you also need to make sure they are reasonable for your current circumstances. If you can’t meet these today, don’t stress about it, the last thing you want is to get overwhelmed and give up.

  • Housing 35% – This includes mortgage, rent, taxes, repairs, improvements or renovations, insurance, utilities, and any other expenses pertaining to the maintenance and upkeep of the home.;
  • Transportation 20% – This category includes monthly car payments, gas, oil, repairs, insurance, parking, and public transportation fees.
  • Debt 15% – Basically any debt except your mortgage and car payment should be placed into this category including credit cards, personal loans, or student loans.
  • Personal Expenses 20% – Here you have all additional “cost of living” expenses such as food, insurance, prescriptions, clothing, entertainment, dental, medical, prescriptions, or any other miscellaneous expenditures.
  • Investments & Savings 10% – This category includes stocks, bonds, savings, retirement plans, rental properties, or artwork.

Even if you can’t reach these at first, aim for them. It is great to have stretch goals, but, make sure you put together a separate plan for achieving those. For example, if you want to pay off your debt in 18 months so that you can place 10% into savings, but, your current situation will only allow you to do so in 24 months, figure out how much additional income you need to earn to get you there and how you are going to earn it.

It Is A Lot of Work

Yep, I said it. Personal financial management is a lot of work. Trust me, I track every penny that enters and leaves our household. But, it is incredibly worthwhile. Anything that you want to be successful at is going to take work, and knowing your true financial situation helps you sleep better at night. Who couldn’t use a better night’s sleep?




Tax Planning For Teens


I know what you’re thinking. “Did she just use the words planning and teens in the same sentence?” Yeah, I know. But, it really can happen, I swear!

We have a super awesome teen (not going to mention any names…you know who you are) working for us. We were working on T4 preparation the other day, when she brought up some great questions about planning for her financial future. Our chat sparked this post.

Here is a snapshot of our Q & A:

Super Awesome Teen: Do I have to have income tax deducted from my pay?

You may not, but, your employer(s) have to deduct it unless you tell them otherwise. If you are certain that your total earnings will fall below the personal income tax exemption for the year ($11,138 federally, and $9,670 provincially for 2014), check the box that exempts you from having income tax deducted on your TD-1 Form

Even if your income will fall above these exemption amounts, review the other credits listed on the form against your situation, because they can bring you back down under the threshold.

These tips will leave more money in your pocket each pay, which you can use to save for your future. Remember, the earlier you invest, the greater the earning potential!

Super Awesome Teen: Why wasn’t CPP deducted from my pay?

CPP is only applicable to the earnings of individuals between 18 to 70 years of age. Make sure your employer is calculating this correctly by double checking your pay stubs regularly and making sure that CPP isn’t being deducted if you are under 18.

Super Awesome Teen: Do I have to file a tax return?

Nope. Unless the CRA has sent you a request you most likely don’t HAVE TO file one. But, you’ll want to. Properly filing a tax return ensures that you receive all of the credits to which you are entitled, and builds your RRSP contribution room.

Your RRSP contribution room is cumulative over your lifetime, so the earlier you start filing your returns, the more you will be able to contribute when you are ready to start.

If you aren’t financially inclined, most tax preparers offer discounted rates for students.

Super Awesome Teen: You mentioned RRSP contribution room. Should I be contributing to an RRSP already?

In most situations, no. Because the average teen’s income is so low, the tax benefit that comes from an RRSP contribution will not be of any benefit for a fair number of years. In addition, a teen has some fairly significant expenditures coming up in the very near future (i.e.; post-secondary education), which they may need to borrow for.

A better alternative to an RRSP contribution at this age is a contribution to an RESP or a TFSA (if you are over 18). Doing so will earn you a relatively decent return in the short term, and save you the cost of borrowing in the long term. A win-win.


Should I Borrow For Tomorrow?


A client came to me the other day looking to chat about the idea of borrowing to contribute to an RRSP.

Sound counterintuitive? Well, not always.

If you have no other debt and have unused contribution room in your RRSP, borrowing funds to contribute to your RRSP might be the thing for you, especially if you plan on using your boosted tax refund to pay down the loan.

Here are some things to consider:

  • Will the rate of return on your RRSP exceed the interest you will be paying on the borrowed funds? Interest you pay on the loan is NOT tax deductible, so you have some risk of loss here.
  • Will the cash flow you will need in order to make the payments on the borrowed amount prohibit you from making future RRSP contributions? If so, think twice because this will most likely result in a lower overall investment long term.
  • If you have an unexpected life event (i.e.; lose your job), will you be able to continue to make the loan payments?
  • Will the loan stretch you too thin or put you in a position that prevents you from being able to access borrowings you may need for other reasons?
  • If you plan to access funds in a home equity line of credit, remember that your home is securing that borrowing. If you can’t pay it back, you could lose your house.



Year End


Year End

Year. End. Two words that can make the most consummate professional cringe. A time when the workload seems to increase infinitely, every detail gets placed under the microscope, final results are tabulated and *sigh* the tax bill comes in. Your stomach turned just reading that didn’t it?

It does not have to be this way! Trust me. Implement these changes into your business procedures and you will reap the rewards:

Get a Handle on Your Data

Review, review, review! Look at your financial results, not just at year end, but on a monthly basis. Stay on top of things to minimize surprises at year end. Ask your bookkeeper or accountant run all of the reports that are important for your business and make sure you understand what those numbers mean to you. Planning and re-evaluating throughout the year will place you miles ahead of the game.

Defer Income

Earn less income? Why would I want to do that? Well, the key here is tax savings….but, be careful. Deferring income into the next tax year will reduce your tax bill, but, can come back to bite you in the behind. This is especially true if you are looking to obtain financing in the new year, as lenders will want to see growth in your financials.

Go Shopping!

Who doesn’t love to shop? Am I right? Year end is a great time to incur additional expenses to minimize tax payable. Now, I’m not saying to go out and make frivolous purchases your business does not need. But, review your inventory or supply levels and check your equipment . If you’re running low or your assets need to be refreshed, buy now instead of the first week of January. Just remember to consider the cash flow implications your shopping spree will have on your annual financial statements.

Make a Charitable Donation

Contributing to charity is such a great social responsibility activity for your business to undertake. Providing you obtain the proper documentation for your records, you will also receive a tax deduction for it.

Start or Contribute to a Retirement Savings Plan

Not only will this provide you with tax relief in the current year, it is the gift that keeps on giving, providing an excellent vehicle for long term savings.

Prepare for Next Year

You’ve got a handle on this year and things are looking great. Or maybe you don’t and you are looking for ways to improve. Either way, reviewing historical performance, keeping up to date on the state of your industry and assessing future financial impacts are excellent financial management practices. Better yet, take those tasks one step further and build a budget for your business. This can seem daunting, but, with today’s electronic bookkeeping systems, most of the data you will need for this exercise is right at your fingertips. Still unsure where to get started? Call your bookkeeper or accountant and enlist their help to build you a budget template.

Now, once the budget is prepared, don’t just store it in a drawer somewhere. Make sure that you implement regular reviews of budget vs. actual results for the new year to make the most of your new management tools.

Clean House

You know that feeling you get when you do a little spring cleaning around your home? Well, the same can be done at the office. Consider hiring a student to review and clean up your files. Always retain financial supporting documentation for at least six years from the end of the last tax year to which they relate (there are some exceptions here). We recommend that older documentation be shredded for security reasons.

Once complete, reap the rewards of increased efficiencies in a well organized office environment!

Happy Year End Folks!


So, You Want To Be Your Own Boss…

imageApproximately 15% of the Canadian workforce describes themselves as self-employed. Want to become one of them? Here are a few tips to help you get started.

Your Books

I hear it all the time. “Oh, my business is so small, I don’t need to keep a full set of books.” Well, I couldn’t disagree more. If you don’t track your revenues and expenses, how on earth do you know if, when and where you’re profitable? How do you create budgets and track your progress? How do you know if it is the right time to grow? How do you know what trends exist in your industry and how they are impacting you?

You might argue “I know all of that stuff anyway”. You would be amazed at how off those educated guesses can be. When you keep a proper set of books, you have a wealth of information at your fingertips and are better armed to make the financial decisions that matter and can help you achieve your dreams.


For your own sanity, and that of the poor soul who handles your books, establish a separate bank account and credit card for your business activities. If you don’t want to pay the higher business banking fees, you don’t have to. Set up new low-fee personal accounts and use them for your business transactions. Having separate business bank and credit card accounts acts as a control point (you have a single source to reconcile your expenses and receipts against), makes determining business finance charges and bank fees a breeze at tax time, and most importantly, gets you in the habit of separating these two facets of your life.

Stay on Top Of Your Paperwork

I tell my clients all the time….if you don’t have paper behind it, don’t claim it. As a financial professional, I have seen my fair share of CRA audits. The burden of proof rests solely on you in these cases. Remember, we’re just coming out of a recession…the government is going to try to hold on to every penny they can. Why help them by trashing your receipts?

If you receive the dreaded “review” notification and are able to quickly go to your files and provide supporting documentation for each item being reviewed (actual receipts here people, credit card and bank statements won’t cut it), you’re golden. Everyone is happy, the auditor issues a lovely letter affirming that no issues were found, and you take your refund check to the bank.

Be that guy…trust me, you want to be that guy.

Personal Expenses

But, I would never have gotten the $180 bird poop facial (I am not making this stuff up folks), if I wasn’t running my business! Oh, really? Look, you might be great at sales, but, you are never gonna be able to sell that one to the CRA.

Just remember the golden rule, if the expense was incurred in order to earn business income, claim away. Otherwise, eat the cost personally. Some might say “Oh, I’ll only have to pay back the difference plus interest. That’s so small.” But, you have to remember, the CRA looks at patterns and penalizes repeat offenders excessively. If you get caught once….you’re a red flag for a very long time.

Do NOT Spend The CRA’s Money

What is it they say? There are two things in life that are guaranteed – death and taxes. Well, when the tax man comes a knockin’, you’ll want to make sure you the have the funds you’ll need to pay him. Not only will you need to remit income taxes on your net self-employment income, you’ll have to remit CPP (did you know that when you are self-employed that this is calculated on your tax return?) and HST, net of applicable input tax credits.

For many, that tax bill can be enough to make you want to lose your lunch. So, why not prepare in advance? We recommend that self-employed individuals put an average of 20-25% of their sales into a savings vehicle (hey…why not earn some tax-free interest by throwing it in a TFSA?). Look at it this way, it’s better to be safe than sorry. If you don’t end up needing it all, go on a much needed vacation with the excess!

You’ve worked really hard to get to this point, so start your business smart!