Thankyou for the awesome and quick response! I appreciate your help very much! Unfortunately, the assumption was incorrect so im not sure if it helped...
I do not collect GST because i do not bill for contracting fees. I work with a small company who xxxxxxxxxxxxxxx. I help them to XXXXXXXXXXXXXXXXX, and in turn, i receive a percentage of the profits made from the sales. The XXXXXX earn money in US dollars which is transferred to the company after the billing company takes their share. Then, bills are paid, and the profit is split between the 4 of us and the company.
Some write offs i give to the compnay to pay for, most things i keep for myself. I have write-offs for things like office supplies, gas, a car loan payment, and insurrance, travel expenses, costumes and props, business lunches, computer equipment and software (which i know has to be ammortized) etc, and i was wondering if when im adding up my write offs, if i include the gst and pst as part of the total? i have no gst or pst numbers at all, i think i am a sole propietorship.
If you have a chance to answer this question I would greatly appreciate it! Thank you so much, XXXX.
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david ingram replies:
Whether it is a commission or a share of the net profit, you are receiving more than $30,000 a year for your services and the law is clear. YOU HAVE TO CHARGE and Collect GST on everything you receive. Otherwise, you will be in the position of having them come back at you 10 years later and ask for $28,000 plus another $28,000 in penalties and interest.
The actual assessment I hae included a few paragraphs from now went back to 1991 and had $72,000 worth of tax and penalties and interest on the tax and penalties.
I see it at least once every couple of weeks.
The following was actually picked up by the National Post and run as a story in June 2003. It came from my newsletter.
You need help and I would be glad to straighten it out for you.
We can still have the company pay it to you and claim it as an Input tax credit on their returns. In other words, it will not cost them anything and get you out of the glue. the worst time is when the company you were dealing with goes broke and cannot help. "THEN" it is "YOUR" bill.
In other words, I answered the question correctly in the first place. "You" have to arrange your affairs to fit the answer. There is NO other answer!
This was originally published by me on June 3, 2003.
A lot of Canadians are self employed and not registered for GST.
Let me make it clear that if you are self employed as a hairdresser, mechanic, house painter, carpenter, electrician, dry-waller, psychologist, dentist, surveyro, clairvoyant, realtor, masseuse, call girl, call guy, radio host, actor, bad actor, stand in, accountant, lawyer, jockey, or any of another thousand self-employed occupations and expect to "gross" over $30,000, you MUST be registered for GST and you MUST collect GST.
I have never seen anyone have a problem or with a problem who grossed $32,000 one year but is usually around the $25,000 range but recently, the CCRA is coming along and issuing GST bills against people who have been grossing over $30,000 routinely and have not registerd and have not been collecting GST (Goods and Services Tax).
In these cases, the CCRA assumes that GST has been collected and issues an assessment for GST on the gross amount.
Therefore, if you have been grossing $60,000 a year or so, you will receive a bill for 7% of the $60,000 (The Gst which should have been collected). Grossing $40,000 means a GST bill for $2,800. Of course, there are also interest and penalty charges.
The following arbitrary assessment will give you an idea and we have three of them in the office at the moment. All were people who used accountants to do their returns and none of them were told ABSOLUTELY to register and charge GST. In fact, none of them remember being told to register at all.
If you are self employed and expect to gross over $30,000 get registered NOW and start collecting and start filing.
In this case, I expect that we will reduce the bill from $72,000 down to about $30,000 because there are large input tax credits available but would you like a $30,000 tax bill for the last ten years?
The following is a real bill for 1991 to 2001 and of course 2002 is also due now. As an example, in 1991 he grossed about $65,000 and netted $15,000. He will have input credits for most of the $40,000 of expenses. Interestingly, two of the three people are self-employed women.
Canada Customs and Revenue Agency
Agence des douanes et du revenu du Canada
NOTICE OF ASSESSMENT 000238
Goods and Services Tax I Harmonized Sales Tax
RC80 E (00/10)
Notice date Business Number
May 06, 2003 861xx 95xx RT1001
SURREY BC
V3T 5E1
Attention: Accounts Payable
XXXXXXX XXXXXXXXX
1111 Any Road
North Vancouver
V7K XXX
UNFILED GSTIHST RETURN(S)
You have not responded to our requests to file Goods and Services Tax/Harmonized Sales Tax return(s) as required under the "Excise Tax Act". As a result, under subsection 299(1), we have estimated the tax you owe.
This assessment is not a substitute for the unfiled return(s). You still have to file the return(s) and pay all amounts
Reporting period Net Tax Interest Penalty Total
From. To (YYYY/MMIDD)
1991/01/01-1991/12/31
4,209.10
4,284.29
5,601.74
14,095.13
1992/01/01-1992/12/31
4,543.00
3,795.34
5,074.21
13,412.55
1993/01/01-1993/12/31
3,836.70
2,664.68
3,605.71
10,107.09
1994/01/01-1994/12/31
3,141.60
1,800.91
2,464.12
7,406.63
1995/01/01-1995/12/31
3,235.40
1,406.03
2,039.92
6,681.35
1996/01/01-1996/12/31
2,206.40
761.19
1,123.72
4,091.31
1997/01/01-1997/12/31
2,383.50
674.05
969.75
4,027.30
1998/01/01-1998/12/31
2,680.65
567.86
829.49
4,078.00
1999/01/01-1999/12/31
2,264.99
327.52
499.85
3,092.36
2000/01/01-2000/12/31
2,656.71
197.55
370.20
3,224.46
2001/01/01-2001/12/31
6,300.63
173.15
432.76
6,906.54
Total all periods
37,458.68
16,652.57
23,011.47
77,122.72
Total amount assessed
77,122.72
Please note that interest and penalties accrue daily on the total balance owing. This assessment is not a substitute for the unfiled return(s) and does not relieve you of your obligation to file the return(s) and pay all amounts owing. Please file the overdue return(s) and pay any taxes owing immediately. Failure to do so may result in legal action being taken without further notice.
For more information, contact your local tax services office or call:
Local (604) 669-7994 Toll Free 1-800-663-0474
.
Commissioner of Customs and Revenue
----- Original Message -----
From: David Ingram at home - bus at taxman at centa.com
To:
Sent: Monday, July 26, 2004 10:29 PM
Subject: GST and PSTin my Expenses in Canada - ask an International real estate immigation and income tax experts expert - David Ingram 's CENTA Services Group in North Vancouver BC Canada
From: XXXXXX
Reply_To:
My_question_is: Canadian-specific
Subject: gst and pst in my taxes
Expert: taxman at centa.com
Date: Monday July 26, 2004
Time: 04:47 PM -0700
QUESTION:
i am self employed as a contractor for a company.. they pay me cash for helping them work and no tax is taken off. i make like 40g a year b4 tax. i do not sell anything to collect gst on! i DO have write off's for my business. i was wondering if when i am adding up my writeoffs for supplies etc, do i write of the total receipt including the tax? or do i not include the tax?
++++++++++++++++++++++++++++++++++++++++++++
david ingram replies:
I am assuming that you are collecting 7% GST with your contract fees. Therefore if you bill $10,000, they pay you $10,700.
I am also assuming that you do not have a PST number and are not collecting PST. PST is an unusual tax because it is applied unevenly. For instance a car repair shop or an upholsterer and a lawyer have to charge PST on their service or labour charges. I do not have to charge as an accountant.
Your expenses are $1,070 for accounting fees. ($1,000 plus $70.00 GST, NO PST)
$2,290 for gas expenses ($2,000 plus $140 GST and $150 PST (BC rate)
$3,425 for car lease. ($3,000 plus $210.00 GST and $225.00 PST)
Your GST return would show $700 collected and you would then subtract $420.00 GST input and you would owe anther $280.00 ($700-$420).
For your tax return, you would use form T2124 and show $10,000 as income and deduct the $6,450 ($6,000 plus $450 PST) of expenses in the proper place and pay tax on $3,550. You do NOT deduct the GST.
For your information, the last six returns brought to my office by other people were done incorrectly. However, I had to amend one of the returns I prepared last year and discovered that "I" had included the GST in half of the figures. It was really obvious when one of the figures was $321.00 for accounting and I should have spotted it.
===============================================
Answers to this and other similar questions can be obtained free on Air every Sunday morning.
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Those outside of the Lower Mainland will be able to listen on the internet at
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Local phone calls to (604) 280-0600 - Long distance calls to 1-866-778-0600.
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