I pay personal expenses in order to do my job. Can I claim?

Some employers require employees to go above and beyond with regard to incurring personal expenses in order to carry out their role. This sounds harsh, but is the reality for a lot of workers. There is however a silver lining for some, you may be entitled to claim some of the expenses on your tax return, and hopefully pump up your tax refund.

What expenses can be claimed

There is a vast amount of expenses which can be claimed, the most common ones being:

  • Motor vehicle expenses (Gas, insurance)
  • Cell phone expenses
  • Use of home expenses (rent, mortgage interest)
  • Meals and entertainment

How do I qualify to claim the expenses?

Depending on which type of expenses you are looking to claim, there are difference criteria that need to be met. The main criteria are that the employee was required to use their own funds in order to carry out their job, and that they were not reimbursed by their employer for those costs. For example, if you receive a large monthly car allowance from your employer, you are not able to claim vehicle expenses incurred on your tax return, as you have been reimbursed.

It can be quite confusing to understand what criteria need to be met to claim each of the expense types. If you have any questions, please feel free to contact the Jackstaxback team.

How do I claim the expenses?

If you qualify to claim the expenses, you can ask your employer to fill out a form ‘T2200 Declaration of conditions of employment’. It is a form that outlines the employer’s authorization for you to claim the expenses on your tax return. The T2200 allows CRA to understand why the individual was required to incur the expenses, and that they were incurred in order to do their role. The information will then be entered onto a form T777 on your tax return, in order to submit the expense claim to CRA when filing your taxes.

Please note, CRA can overturn your claim for the expenses, even if your employer has signed a T2200, if they deem the expenses were not allowable.

Do I need to keep receipts?

If audited by CRA, you may be required to provide them with receipts to prove that you had in fact incurred those expenses. In some case CRA will accept credit card or debit card statements as proof of purchase, however they usually require receipts. CRA may also request a copy of your T2200 which must have been signed by your employer. You should keep a copy of your T2200 in your records along with your receipts for the tax year.

What are the chances of being audited?

CRA carry out audits every year on a percentage of tax returns. The more items that are being claimed on a tax return, the more probable that it will be audited by CRA. There have been an increasing number of tax returns being audited with regard to T2200 expense claims. CRA are strict on the requirements to claim T2200 expenses, and as such they carry out a lot of audits, ultimately overturning a lot of the T2200 claims which have been filed.

Questions

If you have any further questions regarding any expense claims, and your potential eligibility to claim them, please send us an email. The experienced Jackstaxback team are more than happy to answer any questions you may have, after all, tax doesn’t have to be taxing.

Self-employed – Tips for tax return filing

There are many of us out there who are self-employed/contractors, but only a small percentage of us are fully prepared when it comes to the differing complexities of filing our tax return as self-employed/contractor come year end. There is a large group of workers who are forced to be contractors, as opposed to employees, which often leads to a lack of awareness when claiming all expenses for tax filing.

Declare all income

As someone who is self-employed/contractor, you are required to declare your income yourself, unlike someone who is an employee and receives a T4 stating their total employment income. It is your responsibility to declare ALL your self-employed income on your tax return. If CRA discover that there is missing income from your tax return, you will be hit with severe ‘failure to report’ penalties.

Claim all allowable expenses on your tax return

As a contractor your taxable income is reduced by the amount of your expenses. In short, the more expenses you claim, the lower your tax bill for the year. In order to reduce your taxable income as much as possible, you will want to claim every expense that applies to you. The types of expenses you can claim will vary depending on your type of work, however there are some common expenses which can be claimed by the majority of contractors on their tax return:

  • Office use of home
  • Vehicle expenses
  • Cell phone expenses
  • Meals & Entertainment
  • Professional fees

To maximize your expenses claimed on your tax return, you should research which expenses apply to you!

Be aware of GST and how it affects you

If you are going to earn over $30k in self-employed/contractor income within a 12-month period, it is very probable that you should be charging GST on the services that you are providing. If you believe you will earn more than $30k in a 12-month period you should research if charging GST on services applies to you, ensuring you are GST compliant.

If you charge GST you will need to file a GST return with CRA as well as an income tax return.

File your tax return on time to avoid penalties

As the vast majority of contractors will owe money to CRA at year end when filing their tax return, it is important that the returns are filed on time, and that the balance owing is settled before the deadline. Failure to file and pay on time will lead to penalties and interest charges being incurred from CRA. The date at which balances owing to CRA must be paid is April 30th. The deadline to file your tax return is June 15th.

If in doubt, seek help from a professional

If you are unsure about filing your self-employed tax return, or any other requirements or compliancy issues surrounding your tax return, it may be wise to contact a professional. Failure to be fully compliant with declaring income and GST charged can lead to an expensive fix with CRA, a professional will be able to help you navigate these hurdles. Claiming all possible expenses on your return will ensure you keep more of your hard-earned money.

If you have any questions surrounding your self-employed/contractor tax return, please get in contact with the jackstaxback team today. We will be more than happy to offer advice and help easy any reservations you may have. Tax doesn’t have to be taxing.

Summer/Short-term foreign workers – Tax return filing

Many university students, and individuals on gap years are starting to choose Canada as a destination to live and work for a short period, many of whom choose the summer break. As with most sought after destinations, high monthly rentals and living costs force tourists to take on employment to fund their stay. If you are living, and working in Canada, the chances are you are required to file a tax return at the end of the year, and a lot of workers will be entitled to receive a refund.

I was only in Canada for a month, do I still need to file a return?

Yes. If you have taken on employment in Canada and have income, you will need to file a tax return, no matter how short of a period you were here. Depending on how long you were in Canada will dictate whether you file as a tax resident, or non-resident.

Why should I file a tax return?

As well as being legally obliged to submit your return to CRA, there are also benefits to filing a tax return. If you are planning on residing in Canada for the next year or so, you may be entitled to receive a quarterly credit (free of charge!). You can only apply to receive the credit if you have filed a tax return. Non residents and tax residents are all entitled to receive a refund based upon their tax calculations.

Am I a tax resident or non-resident?

The most common way to determine your tax residency is the amount of time you have resided, or are planning on residing in Canada. Typically, if you reside in Canada for 6 months or longer, you will file your taxes as a tax resident. As with most things, there are exceptions to this rule of thumb. By speaking with a tax specialist or accountant, you will be able to confirm your tax residency. If you are unsure, please feel free to contact the Jackstaxback team.

I am a non-resident for tax purposes, how does this affect my refund?

As a non-resident, you are usually required to pay a flat tax rate of 25% on your income whilst in Canada. This is higher than usual, and quite unfair on short term foreign workers. Because of this, most non-residents actually owe money to CRA at year end when filing their taxes, as their employers usually fail to deduct enough tax from their income.

However, if 90% or more of your world income for the year is from Canada, you are awarded with a balance of Canadian tax credits, these will shelter you from paying tax on the first $11k (roughly) of your income. In most cases this results in individuals receiving a tax refund, rather than owing money to CRA.

We recommend that workers expecting to be considered as non-residents request their employers to tax their income at a higher rate, in anticipation of being required to pay 25% of tax o income.

Again, there are a lot of variables involved with calculating your refund eligibility, particularly when filing as a non-resident. If you have any questions, please get in touch.

Questions

If this information has left you with more questions than before, and you are unsure of your tax obligations, please send us an email. The experienced Jackstaxback team are more than happy to answer any questions you may have, after all, tax doesn’t have to be taxing.

Preparation tips for filing your 2019 Tax Return

Make sure you will receive your 2019 T4s from ALL employers

In order to file your 2019 tax return, you will need your T4 from all employers where you were employed during the tax year. It is important to make sure that your old and current employers have your current mailing address, as well as an email address so that you receive your T4 via email or mail. We have heard stories of small business employers (with an unorganized payroll) mailing T4s to old addresses, then refusing to reissue a replacement T4 due to ‘technical difficulties’.

File your tax return on time

It is important to file your tax return by the end of the April 30th deadline (June 15th if self-employed). By filing on time, it enables CRA to issue all available federal and provincial tax credits to you, filing late can result in missing out on certain provincial tax credits. If you are a newcomer to Canada, the sooner you file, the sooner CRA can calculate and issue any quarterly GST/HST credit cheques you may be entitled to receive.

Do not assume you are due a tax refund

In some cases, you may have a balance owing to CRA for a shortfall in tax deducted from your income during the year. This is particularly common when filing a tax return with multiple T4s for the tax year. If you have a balance owing, it is important to file your tax return on time to avoid any late filing fees. You will also be hit with interest penalties on the balance owing. Make sure you know whether you are due a tax refund or have a balance owing before the April 30th tax filing deadline, then you can plan accordingly.

Set up your online CRA account

Once you have filed a tax return with CRA, you become authorized to set up an online CRA account. It becomes a lot easier to track your tax return filings, correspondence and notices of assessment from CRA, as well as being able to manage your direct deposit details, and address information.

File a tax return even if you’re filing late

Even if you are filing your tax return late, you should try to file it as soon as possible. If you owe tax to CRA due to a shortfall in tax deducted from your pay cheques during the tax year, the quicker your return is filed the sooner you stop paying late filing fees on the balance owing. It is always beneficial to file your tax return as soon as you can. Procrastinating can lead to surprises when your tax return is finally filed, including late filing fees and interest penalties.

File your tax return with the correct address (This should be obvious)

If you are planning on moving address during the time that your tax return will be processed by CRA, you should enter your new address onto your tax return for filing with CRA. By entering the new address onto your tax return, it will automatically update your address with CRA, allowing all tax related correspondence to be sent there (rather than your old address).

If you’re stuck with your tax return, ask a professional for assistance

If you are feeling overwhelmed by your tax filing requirements, and keep pushing back filing your tax return, you can always turn to a professional for assistance. The jackstaxback team is always happy to take the weight off your shoulders and ensure that your return is filed correctly. If you are interested in a free consultation, please message us today. Tax doesn’t have to be taxing.

Self-employer Or Contractor? Don’t Be Misled By Dodgy Employers

When working for a new employer we can sometimes get caught up and forget to review the boring admin details with the employer. Especially if we are busy with the new found work and other activities associated with moving to a new city. This can leave us unaware of our employment status, which can have costly results.

Determining your employment status

If you are being paid through a payroll system, whereby you are receiving a paystub outlining your gross pay, tax, EI, CPP, and net income, you are an employee. This means your employer is correctly deducting tax from your income and paying it to CRA on your behalf. You will receive a T4 at the end of the year summarizing your pay and tax contributions, this will be used when filing your tax return.

However, if you are not receiving a pay stub, and are in fact being paid either cash or EFT into your bank account, you may not be having any tax deducted from your pay. This could mean that you are being treated as a contractor/self-employed by your employer. We would recommend that you speak with your employer to discuss your employee status, and to make sure you know where you stand.

What can go wrong?

Whether deliberately or accidentally, some employers have failed to inform workers that they are contractors rather than employees until year end, when the worker usually asks for their T4 to file their tax return. Why is this a bad thing? Well, as a contractor you do not have tax deducted from your pay cheques, meaning you are required to pay the tax to CRA at year end, upon filing a self-employed/contractor tax return. This can come as a complete surprise, and can be a very large, unexpected tax bill to the CRA.

Why would an employer do this?

When paying a worker on a contractor basis, it can benefit small businesses who do not wish to make the employer contributions of tax to CRA. Therefore, saving themselves money by recruiting contractors as opposed to employees, they do not always inform workers of their decision. This sort of behavior from employers is technically legal, and a complaint against them to CRA would not wipe of the outstanding tax balance because you ‘did not realize’. It is always best to ask your employer for a pay stub (if they do not automatically issue one to you) and make sure you are aware of your employment status.

We see cases where people decide to leave Canada at the end of the financial year, rather than paying the unexpected bill to CRA. This is illegal and would be a red flag against any future work permit applications. Also, it can force people who wanted to stay in Canada and seek permanent residency to flee.

Benefits of being Self-employed / Contractor

If you are aware of your contractor status from the beginning of your work agreement, you can make the most of the benefits from being self-employed / contractor. You will be able to start keeping track of your allowable expenses, and making sure you have copies of receipts. Depending on your industry and role, you can often pay lass tax to CRA when being a contractor as opposed to being in the same position as an employee when paid the same hourly rate.

How does it affect your tax obligations?

It is typically more difficult to file a tax return when being self-employed / contractor. This is because there are a wide range of expenses which can be used to apply against your income. The aim being that the lower your taxable income, the less tax you pay. We advise that self-employed/contractors get in contact with our experienced team to ensure the lowest possible balance owing to CRA.

Questions

If you have any more questions about your tax return or all other tax related issues, please send us a message. We are more than happy to answer any questions you may have, after all, tax doesn’t have to be taxing.

Waiting For Your T4? You Should Have Received It By Now

For those of you that are still waiting on your T4 from your employer, you should have received it by now.

Your employer’s responsibility

It is your employers responsibility to file and provide your T4 from the previous year, by the last day in February of the current year.

The official wording from CRA specifically states that employers must:

Give employees their T4 slips on or before the last day of February following the calendar year to which the slips apply.


What to do if you still don’t have your T4

For those that have not received your T4 yet, the best method is to contact your employer directly and request them to send you a copy. Many will be able to provide this via email, which is particularly useful if you are no longer living in Canada and is the quickest method of obtaining it.

Accessing T4s through your myCRA account

Another option of accessing your T4, especially if it is from a previous tax year, is by logging into your myCRA account. This can give you access if your employer filed it in a previous year.

Still confused or have questions on your missing T4?

Get in contact and we’d be happy to answer any questions regarding getting your T4.

Contractors, Self-employed, Sole Proprietors in BC – Understanding Goods and Services Tax (GST)

If you are thinking of becoming a contractor, self-employed or a sole-proprietor one of the most important things you should be aware of is GST, and your GST obligations. Filing GST is as important as filing your tax return, and should be taken seriously. Failure to charge, file and remit GST can be very costly with penalties and fees from CRA.

What is GST?

Goods and services tax (GST) is a 5% tax that is charged on top of the cost of goods and services provided within BC. You will see GST being charged on receipts for GST qualifying items that have been purchased.

Who needs to charge GST?

If you are a contractor, self-employed, sole-proprietor, partnership or corporation selling goods or providing services within BC, and expect to record sales over $30k within a 12-month period, you are required to charge GST on those goods or services. There are some types of services and goods which are GST exempt, it would be wise to contact an accountant to see if your product or service is GST exempt.

What do you do with the GST received?

If you have identified that your service qualifies for GST, and have successfully applied for your GST number through CRA you can start charging GST to your clients. Unfortunately, the GST collected from your clients is not free money. You will be required to remit the GST to CRA, depending on your annual revenue you will be required to remit monthly, quarterly or annually.

Be organized, keep receipts

When you file your GST return, you will also be required to keep all supporting documentation for your claim that is filed. You should treat it the same as filing a tax return, as audits by CRA can happen. If CRA request evidence of your GST charged or ITCs (Input tax credits) claimed, you will be required to send information to CRA. Failure to produce the information requested from an audit may result in penalties being imposed by CRA, and future audits are more likely if you have been unable to provide them with evidence.

Benefits of filing with a professional

When filing a GST return you need to be sure that the claim filed with CRA is correct. If CRA perform an audit and the information provided shows that there has been an error with the claim, there may be penalties. Having an accountant or tax return specialist file your GST return will ensure that an accurate GST return is filed. An accountant or tax return specialist will make sure that all available ITCs are claimed, which will result in the best possible financial outcome for the GST return being filed. Some accountants (ourselves included) will assist with CRA audits, and will assist with navigating audits by offering advice and preparing correspondence.

Questions

If you have any queries related to your GST responsibilities, or about filing/remitting your GST to CRA please get in contact. The team and Jacks Tax Back will be more than happy to answer any questions you may have, as well as providing a GST filing/remitting service for you. Tax doesn’t have to be taxing.

When can you file your Canadian tax return? Now!

Are you wondering when you are able to file your 2018 Canadian tax return? Wonder no further, as CRA have finally opened up EFILE!

Congratulations, you have made it to the EFILE opening date. Your tax refund is nigh

What is EFILE

Contrary to popular belief, EFILE is not a mythical portal invented by the tax god, although it is definitely as interesting…. Maybe not.

By opening EFILE, tax accountants around the country are now able to file tax returns online on behalf of their clients, with the click of a button. No magic involved, sorry HP fans.

To bE-FILE or not to bE-FILE? That is the question.

That really is the question. Almost everyone is able to EFILE. There are certain criteria which force some unlucky folk to print, sign and then mail their tax returns to CRA. This archaic form of communication is not only annoying for people who do not have access to a printer, it also means their refunds can take up to 10 times longer to be issued by CRA.

Some people out there (we don’t hold you personally responsible) are unfortunately spreading rumors about first time tax return filers. It is most certainly possible to file your tax return online if you are a first-time filer. There are some unlucky first-time filers who receive error messages about filing online, who ultimately believe it is the same for every other first time filer out there.

Make life easier, perks of EFILE

A few things to consider before filing your tax return. Probably the greatest thing about using a tax accountant to file your tax return with EFILE is that they can sign you up to receive your refund via direct deposit, yes you read that correctly. By letting your tax accountant know your direct deposit details you will receive your refund even quicker, and won’t have to make the long trek to the bank with your cheque.

If you have changed address since the last filing of your tax return (or have never filed a return), make sure your tax accountant updates your address with CRA when they EFILE your return, this option is not available to individuals using turbo tax or other free software to NETFILE their returns. This will make sure all CRA correspondence finds its way to you.

When using EFILE your tax accountant is required to answer to CRA. Every accountant with an EFILE number has their activity audited annually by CRA. EFILE accountants are required to abide by the rules, file tax returns accurately and serve their clients in an ethical manner.

Myths/Fake news/Terrible advice – The truth

  • You CAN file online as a first-time filer
  • Not everyone filing for the first time receives a full tax refund
  • EFILE is not NETFILE
  • You do need to declare your non-resident foreign income if you are a ‘newcomer’

If in doubt, get in contact us and we can answer any questions you may have and start preparing your free tax return quote for 2018, today.

Returning Home from Canada in 2018 – Filing a Tax Return

For those whose IEC time and working holiday visas have finished or coming to an end this year, we have a few tips from the Jackstaxback team to help make the transition as smooth as possible, when filing your 2018 tax return.

Pass on your new contact details to all 2018 employers

The most common issue we see from clients who are former IEC members is a missing T4. Unfortunately, not all employers are as organized as all IEC members, and will accidentally lose T4s by mailing them to an old Canadian address or incorrect email address.

When you hand in your notice to your employer, we recommend that you update them with your future mailing address, as well as ensuring they have your correct email address on file. You are required to submit a tax return with information from T4s from all 2018 employers, which should be issued to you in early 2019. As an IEC member, working holiday or other temporary foreign worker, it would be easiest to receive your T4 via email, that way you will always have access to an electronic copy, and avoid the T4 being lost in international mail.

Know your tax residency status

This can be the most confusing part of filing a tax return. If you filed last year or a previous year as a newcomer tax resident, and have a permanent leaving date from Canada (for work purposes) in 2018 you will most likely be filing your return as a tax emigrant. However as with all things ‘tax’, it is beneficial to consult a tax professional regarding your tax residency, in order to make sure you are 100% tax compliant when filing your tax return, and also to ensure you receive the largest tax refund possible.

Making mistakes with your tax residency can lead to incorrect, potentially smaller refunds and extremely long delays with receiving your deserved tax return.

Update your details with CRA

There is not many more annoying things on earth than having your hard-earned tax refund cheque mailed to an old address in Canada. Especially when it should have already been deposited into either a Canadian account you have left open, or mailed to your correct foreign address. So, how do you update your contact details with CRA? When leaving Canada for good you should contact CRA and update them with either your foreign address, or your Canadian bank account details in order to receive your tax refund via direct deposit (if you plan on keeping an account open).

More information on doing this can be found on the official CRA website.

File a tax return!

After the effort of ensuring you receive all the required documents to file a tax return, and inform CRA of your new personal details, do not forget to file a tax return! You are legally obliged to file a tax return in Canada if you have worked at some point in Canada within the previous calendar year. There is also a high possibility that you will be due a tax refund. With a quick and free tax return quote provided by Jackstaxback, you will be able to see how much of a tax refund you are entitled to.

Further questions

If you have any further questions regarding your 2018 tax return or all other tax matters, why not send us a message. Our experienced team are more than happy to answer any questions you may have, after all, tax doesn’t have to be taxing.

Self-employed contractor? Don’t lose money

Thousands of self-employed workers, contractors and sole-proprietors lose out on some of their hard-earned dollars by failing to file their Canadian tax returns correctly. We have provided several simple tips you can follow to ensure that you don’t over pay the tax man.

Tips

Understand your expenses

The easiest way to reduce your taxable earnings is by applying as many allowable expenses as possible against your self-employed / contractor / sole-proprietor income. It sounds simple, the lower your taxable income, the lower your tax balance to CRA

Lesser known expenses

Make sure you are well aware of the long list of expenses which can be entered onto your Canadian tax return. Please note that the list of allowable expenses varies from other countries in which you may have previously files a tax return. A couple of the most commonly missed expenses, or incorrectly claimed expenses are the office use of your home and vehicle use expenses.

Be organized

It is important to make sure that you have receipts for all of the expenses claimed on your Canadian tax return. By filing or organizing your receipts throughout the year you will be in a great position to have your tax return correctly filed at year end. Many expenses can be missed if receipts are misplaced or lost. Each receipt lost for an allowable expense is going to result in a higher tax balance owing to CRA.

Prepare for an audit

There is always the possibility that CRA will audit your Canadian tax return. The most common type of audit will be a request to produce receipts for an expense type. Ie – Gas (for vehicle use). In which case you will be required to send copies of your gas receipts which were used to make your ‘Gas’ claim on your tax return. Failure to produce these receipts will result in your tax return being re-assessed, and the ‘gas’ claims being removed from the return.

Understand GST

The majority of contractors, self-employed and sole-proprietors will be providing goods and/or services through their work. If you earn over $30k in a 12-month period providing a service or goods, you will be required to charge GST on your services/goods and remit the GST collected to CRA. Failing to be GST compliant can result in hefty fines and penalties. If you will earn under $30k in a 12-month period you will not need to worry about GST.

Benefits of using a tax return specialist

When using a tax return specialist to prepare and file your tax return you will be in safe hands. They will ensure that as many allowable expenses as possible are applied against your income, and provide you with the best tax return result possible. Some tax return specialists, ourselves included, will also assist their clients if they are presented with a CRA audit. If you wish to enquire about our services at Jackstaxback we offer a free consultation for self-employed, contractors and sole-proprietors looking to file their Canadian tax return.

Questions

If you have any questions or queries about your contractor/self-employed tax return, please do not hesitate to shoot us a message. Our experienced team will be more than happy to answer your questions. Tax returns don’t have to be taxing