# late cheque!



## dubmac (Jan 9, 2011)

I earned some "other income" from a publisher in the Fall of 2011 and made arrangements with my employer to increase the amount of tax that I pay so that I wouldn't be hit with a big tax bill when I file in March of 2012. Problem is that the cheque for the work performed in 2011 has not yet arrived -but I have paid the taxes in anticipation of having been paid!

Doe the CRA make a provision for a late cheque (ie one arriving in 2012 for work done in 2011)?


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## MoneyGal (Apr 24, 2009)

Most people (and probably you) are required to use the accrual basis for recording income earned in Canada, which simply means that the income is recorded in the year in which it is earned, with no regard to when it is actually paid. 

So even though you have not actually received the cheque, you are almost certainly required to report the income in 2011. 

(The only exceptions are farmers, fishers, and self-employed commission sales agents, who are all allowed to use the cash basis [in which income and expenses are recorded when paid/received] and professional businesses [i.e., dentists] who are allowed to make an election to report work in progress in the next accounting period. This second provision would not apply to you in any case, as 1. you aren't a professional business and 2. the work you described is not in process.)


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## dubmac (Jan 9, 2011)

thanks MG.


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## humble_pie (Jun 7, 2009)

what puzzles me is why black mac doesn't set up the extra payment from the publisher as income from his small home-based business. One can carry on business in one's own name, plain & simple. One does not need to be incorporated.

if the payment were to be business income, black mac could claim all the usual home office deductions, could he not. Ideally he would end up with little net income out of that freelance income to report as business income.


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## bbsj (Aug 26, 2010)

Does that mean that if one starts work around Chrismas day and receives the first pay cheque in January has to include the pay up to December 31 for income tax filing for that year?


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## MoneyGal (Apr 24, 2009)

Humble: Depends on what the income is. In my own case, I get a T5 issued for royalties - which are not self-employment income (but you can take deductions against them). 

bbsj: yes. But the tax isn't actually due until April, by which time you should have received payment.


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## dubmac (Jan 9, 2011)

hmmmm....
HP..you have me thinkin'
I get contracts from time to time from a publisher on work that I do from home - on top of my regular job as a teacher. I only use my laptop, and the internet and email! So, what you are suggesting is that I can claim deductions (as the cost of doing business), things like - well - a printer, my telephone bill? Not sure what I could write off as I write curruculum, create test questions, write methods to solve problems, a few other things...that I bascially package and sell (as a service) to the publisher.


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## oedema (Jan 1, 2012)

dubmac said:


> I earned some "other income" from a publisher in the Fall of 2011 and made arrangements with my employer to increase the amount of tax that I pay so that I wouldn't be hit with a big tax bill when I file in March of 2012. Problem is that the cheque for the work performed in 2011 has not yet arrived -but I have paid the taxes in anticipation of having been paid!
> 
> Doe the CRA make a provision for a late cheque (ie one arriving in 2012 for work done in 2011)?


How nice of you to pay CRA in advance, in effect giving the gov't an interest free loan...


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## humble_pie (Jun 7, 2009)

dubmac it sounds like a lovely home business. But an internet stranger shouldn't be the one to advise you in the final instance.

surely you have or know a good general accountant who can help you set up bookkeeping for your home business. Basically what you want to do is cluster as many business expenses as possible so these can be deducted from the business income.

a simple approach would be to estimate the portion of your house that you utilize strictly as your home office - say 10-15% of the square foot area - & then add up 10-15% of all the house-related bills. Heating, light, cooling, phone, internet, property taxes, i'm not sure about mortgage because i've never had a mortgage. I'd include 100% of all office supplies like paper, etc. 

a complication for you might be that you use your home office also to carry out some of your teaching duties at school, for example marking papers, etc. So it's not strictly a home office for the publishing business. This is where the accountant can particularly advise you. You won't be the first teacher to claim some home office expenses, i'm sure, nor will you be the first teacher who has other business interests run out of the same home office.

btw computers, printers, etc get depreciated each year. Other smaller equipment items get expensed.

there's driving, too, if you drive to meet your client; and entertainment, if you entertain him or her. There are fairly complicated rules & schedules for reporting these expenses.


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## dubmac (Jan 9, 2011)

thanks HP...I'll look into it.


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## praire_guy (Sep 8, 2011)

MoneyGal said:


> Most people (and probably you) are required to use the accrual basis for recording income earned in Canada, which simply means that the income is recorded in the year in which it is earned, with no regard to when it is actually paid.
> 
> So even though you have not actually received the cheque, you are almost certainly required to report the income in 2011.
> 
> (The only exceptions are farmers, fishers, and self-employed commission sales agents, who are all allowed to use the cash basis [in which income and expenses are recorded when paid/received] and professional businesses [i.e., dentists] who are allowed to make an election to report work in progress in the next accounting period. This second provision would not apply to you in any case, as 1. you aren't a professional business and 2. the work you described is not in process.)


I don't understand. Don't you earn income when you cash the cheque?


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