# Contract Income



## Clacker (Mar 18, 2012)

Hi all, I have a quick question which I hope somebody has some insight into. 

I'm doing some contract work from home for a publisher and expect to get paid for it some time in the new year (< $5000). From my reading of the CRA website it would seem that I am supposed to claim the income in the year when the work was performed and not when I actually get paid. I've been working on it for a few months this year and will probably also do so into 2013. It doesn't seem fair to me that I may have to pay taxes on money that I might not receive until February or March of next year. Is it possible to report the income and expenses in 2013 instead of for 2012?

I do plan on phoning CRA to get an opinion but thought I'd see if anybody here could also point me in the right direction.

Thanks in advance.


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## kcowan (Jul 1, 2010)

The offiicial response is that you claim the income when the work is done and billed and you carry an unpaid receivable over year end. GST must be remitted when billed as well.

OTOH if you are a sole proprieter, claim the income when the cash is received.


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## omegacanuck (Jun 16, 2011)

Actually, even sole proprietors are supposed to report the income (or expense) when earned, not when received. The only businesses that are on a cash basis are farmers and fishermen.


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## domelight (Oct 12, 2012)

Clacker said:


> Hi all, I have a quick question which I hope somebody has some insight into.
> 
> I'm doing some contract work from home for a publisher and expect to get paid for it some time in the new year (< $5000). From my reading of the CRA website it would seem that I am supposed to claim the income in the year when the work was performed and not when I actually get paid. I've been working on it for a few months this year and will probably also do so into 2013. It doesn't seem fair to me that I may have to pay taxes on money that I might not receive until February or March of next year. Is it possible to report the income and expenses in 2013 instead of for 2012?
> 
> ...



CRA's view is that this is "work in progress", which is taxable in the year incurred. (When you get paid is irrelevant) The simple way to get to the correct answer is pretend that the client fired you on december 31st (before you have completed all the work) How much would you bill the client for the partial work completed ? This is the amount you would report on this years tax return. All other income earned in 2013 (for example) would be reportable in that taxation year. 
HST is not applicable unless you are registered for HST. You are not required to register for HST until you gross business revenues exceeds $ 30,000 in one taxation year.


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## Clacker (Mar 18, 2012)

Thanks for the replies, you're basically confirming what I had suspected. I had read on the CRA website that commissioned people (ie real estate broker) are also able to report on a cash basis (when the money is received). I was thinking of trying the angle that this is a commissioned work and so I should be allowed to treat the income the same. I'll have to see what the CRA says about that


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## domelight (Oct 12, 2012)

Clacker said:


> Thanks for the replies, you're basically confirming what I had suspected. I had read on the CRA website that commissioned people (ie real estate broker) are also able to report on a cash basis (when the money is received). I was thinking of trying the angle that this is a commissioned work and so I should be allowed to treat the income the same. I'll have to see what the CRA says about that


 Good try but nope. I assume you are a proprietorship. You can't give yourself a commission. Whatever your business income is. It is what it is. You can think this one out 16 ways to Sunday but if you want to be compliant. My previous comments stand. 
You said you worked from home. you should be looking at some office in residence expenses.


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## Clacker (Mar 18, 2012)

domelight said:


> Good try but nope. I assume you are a proprietorship. You can't give yourself a commission. Whatever your business income is. It is what it is. You can think this one out 16 ways to Sunday but if you want to be compliant. My previous comments stand.
> You said you worked from home. you should be looking at some office in residence expenses.


I'm not giving myself a commission, but in my contract is states that they are commissioning me to perform the work. Maybe it's just because of the similarity in the words that got me hopeful, but if real estate agents can do it, then why can't I (is what I'll ask CRA).


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