Maybe you do a little woodwork in your spare time or a little baking in your retirement. Maybe you mow the neighbor’s yard, plow their driveway, or lend your DVDs or tools. While the amounts may be trivial, all are considered being self-employed. What if no money changes hand but instead a dinner in return or use of their boat (known as bartering)?
Canada Revenue Agency (CRA) has a broad scope of what is self-employment. Barter is included, and if the business has a reasonable expectation of making a profit in the future – well, you are your own boss!
Do you think being self-employed is complicated? My answer, do not overthink it! Being self-Employed only adds one schedule to your personal tax return! Keep your receipts (paper or even photos of them). Buy a $5 two-part invoice book. For barter, record the details of what, when and who the barter was with.
Benefits of being self-employed? Writing off expenses that you purchase or use by the business. Examples: Cell phone, home internet, Car expenses. You can also write off part of your home expenses (without any tax on house sale).
Let’s do some quick math. Say about $80 per month for cell phone. Internet about the same. Let’s say your business use is 50%. Your automobile, you spend about $180 a month on gas, the same for car insurance and about $1,400 a year for repairs and $1,000 for snow tires. You figure 15% usage for your business.
With the above expenses, you have over $1,950 in business expenses. Let’s say your first year; you only make $250 in revenue or barter. That leaves you with a loss of $1,718. If you make $50,000 a year from either work or retirement, you will either save or see a tax refund of around $600.
For using a percentage of your home as a write-off. If you rent, a percentage of the rent, home insurance, house maintenance and the utilities, and if you own, replace the rent with a percentage of the mortgage interest and property tax. CRA does require you either making enough profit to claim the use of home expense or if not, you can carry it over (for use in future year) against future profit.
Now, what about GST? Register voluntarily as you offset the amount of the GST collected in your business with all the GST you pay of business expenses, including equipment bought or used within the business. This can mean a refund on the GST if you spent more than collected.
At the end of the day, you are not only your own boss but can see tax benefits. And you never know, Bill Gates, Steve Jobs and Michael Dell all started their businesses (Microsoft, Apple and Dell Computers) right from home!
Questions, suggestions or comments? Go to PennyDimeDollar.com for extra content. Next week, what is this thing called Bitcoin.
Andre Choquette is an accountant in public practice and an author of over 30 books through Pentice-Hall and other publishers. He is also a software developer of software apps and websites. Andre resides with his wife Wanda at Christina Lake. While finance, tech and computers are Andre’s life – Wanda yanks him away from the keyboard so that they can enjoy travelling, as well as being with close friends.
