JAIKS BLOG

6 Deductible Expenses That Commission Employees Should Claim

Are you a commission employee? If so, you may be surprised with some of the expenses that you can claim when it comes time to file your taxes. Commission employees have more freedom to claim expenses than other employees, who may find their options rather limited when it comes to what they can claim as a business expense. If you intend to claim a business expense as a commission employee, you may want ensure you meet the CRA’s criteria to what constitutes a commission employee. Commission employees, as defined by the CRA will need to (as specified in their employment contract) pay for their own expenses, be required to work away from their employers place of business, and receive their pay in whole or in part by the commission earned by the business they conduct. If you feel that you meet the following criteria, you will want to consider having your employer prepare and provide you with a T2200 form, also known Declaration of Conditions of Employment form. Doing so will ensure that your employer recognises and vouches that any applicable business expenses you incur are legitimate and may be claimed. It is imperative that you retain a copy of this form, as well as other documentation recording expenses incurred while conducting business. Should CRA deem audit to be necessary, they will require your copy of the form, as well as proof of the expenses you claimed in order ensure that your claims are both legitimate and accurate.

With this being said, if you consider yourself a commission employee and meet the criteria set out by CRA, you should consider claiming the following expenses if you not already doing so.

6: Office Rent and Home Office Expenses

Expenses relating to either a rented office space or even home office are considered by CRA to be business expenses that you may claim. It is very important to understand that CRA treats these as two very different expenses, with two very separate rules on how they may be claimed. If you make use of a rented office space, make sure to consider a claim. If you pay for the rental fees yourself, you should have no problem in claiming them as an expense. However, if your employer pays for your expense, you will want check with your employer, and find out if they consider it a business expense on their part, or simply include it as part of your payment for the services you provide. If your employer includes these rental fees as part of your income, you should consider making a claim for a business expense.

If you have a home office, you should make yourself aware of the conditions that must be met before it can be claimed as a business expense. Firstly, any space in your home you wish to use as an office space should be designated for business purposes. Additionally, it is expected that you will spend a minimum of 50% of your business time within this space. If your home office meets this criteria, you will want to consider claiming a portion of your housing costs, such as heating, electricity, insurance, and even property taxes as a business expense. If you live in a rental property, a portion of any rental costs and maintenance fees may be considered a business expense. The recommended way to calculate the portion of costs you intend to claim is to divide the area you have designated to be your workspace by total area of finished rooms in your residence. Maintenance costs may also be claimed, but it would be best to limit any maintenance claims to work that is done within the work space.

When you are ready to file your taxes, it’s important to note that these expenses can only be used to deduct taxes that were contributed from business activities conducted within these workspaces. If you are finding that your claim exceeds the amount of taxes that you can deduct, don’t worry: you may be able to carry the expenses forward and use them next year.

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TAX BREAKS

There are some OLD tax saving ideas which are really great to use and should be taken advantage of to drop taxable income. Some of these ideas we are quite familiar with but do not always take full advantage of.

RRSP's can be purchased until March 2, 2015 and can save you quite a bit of money especially if you are in the higher tax brackets. Then when you retire and are in the lower tax bracket it is a good way to pay yourself with lower tax. IF you find yourself still in the higher tax bracket when you retire, come to talk to us as we offer great ideas of what to do with your RRSP contributions after age 65 but before 70 in order to withdraw RRSP income and not lose your old age pension due to clawback.

TSFA's are also great ideas of saving money, they do not reduce your taxable income the same way RRSP's do. But they are a good way to save and the interest from these are tax free. If you need more information on TSFA's come talk to us, we are here to help you.

A NEW great tax credit introduced for this year that you should look into is called FAMILY TAX CUT, The October 30, 2014 announcement included a proposal to introduce the Family Tax Cut, a new non-refundable tax credit of up to $2,000 for eligible couples with minor children. Basically you can now income split up to $50,000 with your spouse, provided you have minor children. This is very advantageous for the family where the income levels between spouses are great. This is definitely something to check out if you fall into this criteria.

We are here to help, just either give us a call and/or fill out our form online.

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DISABILITY TAX CREDITS - Do you qualify?

DISABILITY TAX CREDITS - Do you qualify?

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The Importance of reporting ALL income from information slips

This penalty consists of a 10% Federal, and 10% Provincial amounts. Whereas some penalties are applied against the uncalculated tax, this penalty is applied to the unreported income. If you voluntarily tell CRA about an amount you forgot to report, they may waive this penalty.

For Example, John filed his 2008 tax return early and hadn't received all of his T slips yet. After he filed, he received a T5 slip reporting $3.50 in interest income and didn't bother to request an adjustment because he thought the amount was trivial. The CRA then reassessed his return later to include the unreported income with no further issues. When John filed his tax return in 2010 however, he had forgotten about and then failed to report $2000 of RRSP monies he had withdrawn for his RRSP when he was tight for cash earlier in the year. When the CRA reassessed his 2010 return to include the unreported income, John was charged a $400.00 penalty, $200.00 Federal and $200.00 Provincial for repeated failure to report income plus interest.This effectively taxed his current income at over 60% due to his negligence in reporting $3.50 two years earlier! Another scarier way to look at it, is tax at over 10,000% on the original $3.50!

The moral of the story is that no matter how trivial, always report income included on income tax information slips.

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Foreign Asset Reporting and the Extreme Costs of Non-Compliance

Unfortunately the penalties for not completing this form are extreme as one large Canadian Corporation group found recently when a judge ruled against the Asper group of companies. Penalties for non filing were enforced even though the company reported all the income from these investments properly.

So what is this form and why is it required? As has been reported in the press both here in Canada and south of the border, governments are concerned with offshore money escaping taxes in the home country. As a resident of Canada and most other western countries, you are taxed on world wide income. This form is simply to track those assets offshore which have the potential to earn income and otherwise escape tax if not reported.

Canada Revenue Agency requires Canadian resident taxpayers to report specified foreign property with an aggregate cost in excess of $100,000 at any time during the year.

Specified properties include the following:

Foreign bank accountsInterest in foreign trusts (mutual funds)Foreign bonds, treasury bills and other debt instrumentsShares in foreign corporationsReal estateOther income earning property

Excluded properties include:

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