startup of a small business - GST registration -
My question is in regards to income tax exemption for a newly self-employed individual.
I currently work as a contractor doing software developement which I just started about 4 months ago. To set myself up as a contrator,
david ingram replies
To give out income tax help, it always helps if I know what country you are in. Most of my questions come from the US but I think yours is from Canada.
There is no 'first few months' tax exemption for a new small business in either country.
Of course, the first $10,000 or so you earn from any business is tax free because of your personal exemption and a dedcution for 1/2 of the CPP you pay out as a self-employed person and all of the CPP and EI you pay as an employee.
CPP payments are essentlially 10% of everything over $4,000. (this is not an exact figure because I do not know the figures for 2007 yet.) - So, as a self employed person, if you had a profit of $10,000, there would not be any income tax, but you would owe $600 for CPP (Canada Pension plan).
You may be confusing the start up of a small business with GST rules. You do NOT have to charge GST if you are doing or expect to do less than $30,000 Gross. But 'IF' you know you are going to be doing over $30,000 gross business, you have to register and charge GST to Canadian Residents. You do NOT need to charge GST if you are developing software for US clientele but even though you do not need to charge it, you have to register. That is actually a benefit because when you file your GST 34 return, you will find that you get a refund of all the business GST you have paid in a year.
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I started a small business as a sole proprietor. I can't confirm this, but I had heard that the few first months of a small business,
the income earned is exempt. Is this true? When I do my taxes for 2007, is the income I earned during the first few months or up
to a certain amount exempt from income tax?
Having said that, in starting my small business, I used an older registered business along with it's business number and name. I
only needed to change the address and, since my first business venture was computer related, I only had to change the nature of the business slightly.
I made no income from the older business. It was a side business which I put to the side and didn't do much with it. If, from my new business, my initial earnings are exempt, does it still apply to me or since I used an older registered
business number and name? Is my 'new' small business not considered a 'new' business, but an old one?----------------------------------------------------
david ingram replies
To give out income tax help, it always helps if I know what country you are in. Most of my questions come from the US but I think yours is from Canada.
There is no 'first few months' tax exemption for a new small business in either country.
Of course, the first $10,000 or so you earn from any business is tax free because of your personal exemption and a dedcution for 1/2 of the CPP you pay out as a self-employed person and all of the CPP and EI you pay as an employee.
CPP payments are essentlially 10% of everything over $4,000. (this is not an exact figure because I do not know the figures for 2007 yet.) - So, as a self employed person, if you had a profit of $10,000, there would not be any income tax, but you would owe $600 for CPP (Canada Pension plan).
You may be confusing the start up of a small business with GST rules. You do NOT have to charge GST if you are doing or expect to do less than $30,000 Gross. But 'IF' you know you are going to be doing over $30,000 gross business, you have to register and charge GST to Canadian Residents. You do NOT need to charge GST if you are developing software for US clientele but even though you do not need to charge it, you have to register. That is actually a benefit because when you file your GST 34 return, you will find that you get a refund of all the business GST you have paid in a year.
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David Ingram wrote:
However, I regularly search for the words"PAYING CUSTOMER" and
always answer them first if they did not get spammed out. As an example, as I
write this on June 28th, since June 16th (12 days), my 'spammed out' box has
7,118 unread messages, my deleted box has 2630 I have actually looked at and
deleted and I have answerd 63 email questions I have answered for clients and
strangers. I have also put aside 446 messages that I am maybe going to try
and answer because they look interesting.
Calls welcomed from 10 AM to 9 PM 7 days a week Vancouver (LA) time - (please do not fax or phone outside of those hours as this is a home office)
$1,600 would be for two people with income from two countries
David Ingram expert income tax and immigration help and preparation of US Canada Mexico non-resident and cross border returns with rental dividend wages self-employed and royalty foreign tax credits family estate trust trusts income tax convention treaty
---------------------------------------------------------------------------------------------------------------
It is very unlikely that blind or unexpected email to me will
be answered. I receive anywhere from 100 to 700 unsolicited emails a
day and usually answer anywhere from 2 to 20 if they are not from existing
clients. Existing clients are advised to put their 'name and PAYING
CUSTOMER' in the subject and get answered first. I also refuse to be a
slave to email and do not look at it every day and have never ever looked at it
when i am out of town.
Therefore, if an email is not answered in 24 to 36 hours, it
is lost in space. You can try and resend it but if important, you will
have to phone to make an appointment. Gillian Bryan generally accepts
appointment requests for me between 10:30 AM and 4:00 PM Monday to Friday
VANCOUVER (Seattle, Portland, Los Angeles) time at (604) 980-0321
David Ingram's US / Canada Services
US / Canada / Mexico tax, Immigration and working Visa Specialists
US / Canada Real Estate Specialists
My Home office is at:
David Ingram's US / Canada Services
US / Canada / Mexico tax, Immigration and working Visa Specialists
US / Canada Real Estate Specialists
My Home office is at:
4466 Prospect Road
North Vancouver, BC, CANADA, V7N 3L7
Cell (604) 657-8451 -
(604) 980-0321 Fax (604) 980-0325
North Vancouver, BC, CANADA, V7N 3L7
Cell (604) 657-8451 -
(604) 980-0321 Fax (604) 980-0325
Calls welcomed from 10 AM to 9 PM 7 days a week Vancouver (LA) time - (please do not fax or phone outside of those hours as this is a home office)
Disclaimer: This question has been answered without detailed
information or consultation and is to be regarded only as general
comment. Nothing in this message is or should be construed as advice
in any particular circumstances. No contract exists between the reader and the
author and any and all non-contractual duties are expressly denied. All
readers should obtain formal advice from a competent and
appropriately qualified legal practitioner or tax specialist
for expert help, assistance, preparation,
or consultation in connection with personal or
business affairs such as at www.centa.com. If you forward this message, this disclaimer must be
included."
David Ingram gives expert income
tax & immigration help to non-resident Americans & Canadians from
New York to California to Mexico family,
estate, income trust trusts Cross border, dual citizen - out of
country investments are all handled with competence &
authority.
Phone consultations are $400 for 15
minutes to 50 minutes (professional hour). Please note that GST is added if
product remains in Canada or is to be returned to Canada or a phone consultation
is in Canada.
This is not intended to be definitive but in
general I am quoting $800 to $2,800 for a dual country tax return.
$800 would be one T4 slip one W2 slip one or two
interest slips and you lived in one country only - no self employment or rentals
or capital gains - you did not move into or out of the country in this
year.
$1,000 would be the same with one rental
$1,200 would be the same with one business no
rental
$1,200 would be the minimum with a move in or out
of the country. These are complicated because of the back and forth foreign tax
credits. - The IRS says a foreign tax credit takes 1 hour and 53
minutes.
$1,500 would be the minimum with a rental or two in
the country you do not live in or a rental and a business and foreign tax
credits no move in or out
$1,600 would be for two people with income from two countries
$2,800 would be all of the above and you moved in
and out of the country.
This is just a guideline for US / Canadian
returns
We will still prepare Canadian only (lives in
Canada, no US connection period) with two or three slips and no capital
gains, etc. for $150.00 up.
With a Rental for $350
A Business for $350 - Rental and business likely
$450
And an American only (lives in the US with no
Canadian income or filing period) with about the same things in the same range
with a little bit more if there is a state return.
Moving in or out of the country or part year
earnings in the US will ALWAYS be $800 and up.
TDF 90-22.1 forms are $50 for the first and $25.00
each after that when part of a tax return.
8891 forms are generally $50.00 to $100.00
each.
18 RRSPs would be $900.00 - (maybe amalgamate a
couple)
Capital gains *sales) are likely $50.00 for
the first and $20.00 each after that.
Just a guideline not etched in
stone.
This from "ask an income trusts tax and immigration expert"
from www.centa.com or www.jurock.com or www.featureweb.com. David Ingram deals on a daily
basis with expatriate tax returns with multi jurisdictional cross and
trans border expatriate problems for the United States, Canada, Mexico,
Great Britain, United Kingdom, Kuwait, Dubai, Saudi Arabia, Thailand,
Indonesia, Japan, China, New Zealand, France, Germany, Spain, Italy, Russia,
Georgia, Brazil, Peru, Ecuador, Bolivia, Scotland, Ireland, Hawaii, Florida,
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Grenada,, Virgin Islands, US, UK, GB, and any of the 43 states with state tax
returns, etc. Rockwall, Dallas, San Antonio Houston, Denmark, Finland,
Sweden Norway Bulgaria Croatia Income Tax and Immigration Tips, Income Tax
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preparer expatriate anti money laundering money seasoning
FINTRAC E677 E667 105 106 TDF-90 Reporting $10,000 cross border
transactions Grand Cayman Aruba Zimbabwe South Africa Namibia help USA US Income
Tax Convention
David Ingram expert income tax and immigration help and preparation of US Canada Mexico non-resident and cross border returns with rental dividend wages self-employed and royalty foreign tax credits family estate trust trusts income tax convention treaty
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Niagara Falls, income trust, Income Tax Treaty Convention
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