# Question on tax report for a side, small Solo business



## behrooz66 (Feb 2, 2016)

I just have a very basic question.
I have opened a small, solo business for creating websites and I may just have a couple customers a year, making a couple grand off of it at most (I am a full time employee, that's why).
I am just wondering if I can get some basic clarification on reporting my taxes and expenses now that I have this small side business next to my job.

I know I pay the PST I collect from my clients to the provincial government, and I have a business CRA account through which I believe I pay the GST I collect as well. Now:

1. The rest of the money that I collect from my customers will simply be added to my personal income? Or do I have to create pay stubs and pay myself, deducing EI, CPP etc.? If not, should I pay stuff like EI, CPP, etc. in any other way or does the government just collect them off of my "tax" return? 

2. How do I "claim" the costs that I have for my business? What is the exact procedure for that? Is it simply deducted off of my "personal income" again or what?

3. What is the maximum I can claim as business costs, and given that it is a home based business, is there a way to associate some of the home costs (mortgage, utilities, ...) etc as business cost and claim them? How?


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## Nerd Investor (Nov 3, 2015)

I would recommend going through this guide, it will help answer a lot of your questions: http://www.cra-arc.gc.ca/E/pub/tg/t4002/t4002-15e.pdf

1) You don't need to remit payroll taxes and actually pay yourself a salary, you can simply recognize the income net of expenses as business income on your tax return. There is form as part of your tax return to fill out to calculate your "net business income" (it's included in the guide I linked). So no payroll taxes, CPP on self-employment income gets calculated on your tax return, but if you've already paid into fully through your regular job this won't apply (ie: if you make over $55K at work). 

2) you claim your expenses on the same form I mentioned (it's a T2125). 

3) The most common way to claim some of your household expenses is if you have a home office of some kind, you would take the square footage of that office and divide it by the square footage of your home and use that to pro-rate the business portion of the home costs that you can claim. (utilities, mortgage interest, insurance etc). There's a specific section for this on the T2125. 

You don't have to register for and remit GST unless your business revenue is over $30,000 is 4 consecutive quarters. You _can_ register if you want but you wound't have to in your case.


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## Market Lost (Jul 27, 2016)

I'd follow Nerd's advice, but from your questions, you need to get a book on what to do, as your not even aware of the difference between being employed and carrying on a business. You may also want to have a professional do your books for the first year, and take good note of what they do. Also, make sure you keep all receipts, and keep them in some type of file system - the accordion file folders at Staples with the pre-written tabs are fine. Also document anything that isn't obvious from the receipts.


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## Joe Black (Aug 3, 2015)

Nerd Investor gives a good overview. A very scaled-down answer is that you just fill in the tax forms, they have places to fill in your income and your expenses, etc. Basically, you just have an extra set of forms for business activities, you enter the total you made in sales, deduct your expenses, and the difference is your business income. Then that just gets added to a line on you personal income tax. There's not that much more to it, and if you use tax software it should be pretty simple.


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## Market Lost (Jul 27, 2016)

Joe Black said:


> Nerd Investor gives a good overview. A very scaled-down answer is that you just fill in the tax forms, they have places to fill in your income and your expenses, etc. Basically, you just have an extra set of forms for business activities, you enter the total you made in sales, deduct your expenses, and the difference is your business income. Then that just gets added to a line on you personal income tax. There's not that much more to it, and if you use tax software it should be pretty simple.


That's the 10K foot view of things, but it gets a lot more complicated than that. Do you have assets? I'm guessing you have at least a computer, and some software, and some furniture, do you know what to do with those? Do you use this equipment 100% business or a mix of business and personal? Do you use your car? Do you know what and how to expense it? Do you even know what minimum records are?

Just because you can fill out the T2125 with some numbers doesn't mean your return is simple. It isn't difficult for a tax professional, but you need to do a lot more work.


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## behrooz66 (Feb 2, 2016)

Market Lost said:


> That's the 10K foot view of things, but it gets a lot more complicated than that. Do you have assets? I'm guessing you have at least a computer, and some software, and some furniture, do you know what to do with those? Do you use this equipment 100% business or a mix of business and personal? Do you use your car? Do you know what and how to expense it? Do you even know what minimum records are?
> 
> Just because you can fill out the T2125 with some numbers doesn't mean your return is simple. It isn't difficult for a tax professional, but you need to do a lot more work.


Well that's exactly why I posted here, because there are a lot of things I need to know. 
Why are you so angry? Just curious, I feel kind of an aggressive temper in your comments.


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## Market Lost (Jul 27, 2016)

behrooz66 said:


> Well that's exactly why I posted here, because there are a lot of things I need to know.
> Why are you so angry? Just curious, I feel kind of an aggressive temper in your comments.


Angry. I'm not sure how you get that from my replies.

I'm trying to point out that you don't have even a basic knowledge of business taxes and that you just can't start throwing numbers into a tax program because that won't work. This forum isn't here to teach someone the basics of business accounting. If you have a specific question, then I, or several other members here are more than happy to help, but you can't expect us to bring you from neophyte to expert. I'm not sure what you're hopping to accomplish if you start accusing me of being angry at you. I was an accountant for a number of years, and I've seen people at your stage, so what I'm telling you is from professional experience. What Joe Black has stated isn't helpful for someone who is in your situation because it assumes you have at least a basic idea of how to setup a set of books. 

Seriously, I wish you well, but I will not reply to any further posts.


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## Joe Black (Aug 3, 2015)

Market Lost said:


> That's the 10K foot view of things, but it gets a lot more complicated than that. Do you have assets? I'm guessing you have at least a computer, and some software, and some furniture, do you know what to do with those? Do you use this equipment 100% business or a mix of business and personal? Do you use your car? Do you know what and how to expense it? Do you even know what minimum records are?
> 
> Just because you can fill out the T2125 with some numbers doesn't mean your return is simple. It isn't difficult for a tax professional, but you need to do a lot more work.


It's really not all that complicated for his tiny business - a few hours reading his tax guides, maybe attend a seminar for small business starters. He just needs the basic concept for shared use of assets, which will really just comes down to roughly dividing it by % home vs. business use. Furniture? Why even bother?


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