Independent contractor/expense deductions

[instantneedles]

Hi everyone,

I'm currently working as an independent contractor/sole proprietor and am on the road a lot as well.

Therefore, I have several expenses such as car, phone, equipment, etc that I am hoping to get deducted.

I am wondering if it is cheaper to just get turbo tax and try to figure it out on my own, or if it is wiser to get a tax accountant to help me out.

I am just not sure if the cost of getting an accountant to do my work for me would be worth it.

[BIC_BAWS]

I am a bookkeeper and I have a number of clients who are self-employed and own their own business.

Anyone can do the work, just know that, it is a lot of work. When you pay someone to do it, you pay them to make sure that you are within legal guidelines and to make sure that you have all the documents that you need come income tax time.

For example, anyone who wants to write off car expenses, MUST have a mileage log. This mileage log should outline each personal and business trip. Start to finish point. Km driven. Etc

Driving from home to work or work to home does not count as business mileage.

Feel free to PM if you've got more questions

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[sexyaccord]

tiger_handheld will be here soon

[tiger_handheld]

Originally Posted by sexyaccord

tiger_handheld will be here soon

i smiled when i saw this, not sure if good or bad



OP: the most important thing you can do is staying organized. There are a number of apps that tie into your calander for mileage calc. Remember - home to first appointment and last appointment back home are not eligible. Also, while other say it's must for a log, you just need to have a solid base to prove consistency and can get by without a log.

Like BAWS said, difference between paying someone $20/hr vs $200/hr is same as the man with the hammer - anyone can bang a hammer and get it right eventually, but the one guy knows exactly where to bang and get it right the first time.

feel free to pm or post if any questions.

[instantneedles]

Originally Posted by BIC_BAWS

I am a bookkeeper and I have a number of clients who are self-employed and own their own business.

Anyone can do the work, just know that, it is a lot of work. When you pay someone to do it, you pay them to make sure that you are within legal guidelines and to make sure that you have all the documents that you need come income tax time.

For example, anyone who wants to write off car expenses, MUST have a mileage log. This mileage log should outline each personal and business trip. Start to finish point. Km driven. Etc

Driving from home to work or work to home does not count as business mileage.

Feel free to PM if you've got more questions

Sent from my Pixel XL using Tapatalk

Originally Posted by tiger_handheld

i smiled when i saw this, not sure if good or bad



OP: the most important thing you can do is staying organized. There are a number of apps that tie into your calander for mileage calc. Remember - home to first appointment and last appointment back home are not eligible. Also, while other say it's must for a log, you just need to have a solid base to prove consistency and can get by without a log.

Like BAWS said, difference between paying someone $20/hr vs $200/hr is same as the man with the hammer - anyone can bang a hammer and get it right eventually, but the one guy knows exactly where to bang and get it right the first time.

feel free to pm or post if any questions.

Thanks for the solid advice guys.

I'm seriously considering hiring a tax accountant for that reason. Why do it myself when I can outsource someone who does this stuff professionally.

Approximately when do you guys recommend that I start reaching out to someone?

[BIC_BAWS]

Originally Posted by tiger_handheld

Also, while other say it's must for a log, you just need to have a solid base to prove consistency and can get by without a log.

To add on to this, typically the following years has allowance for a certain percentage of variance. Simply speaking, most clients only hear the second part and elect not to even do the base. Which for their first year, will cause issues if CRA asks you to provide one.

Originally Posted by instantneedles

Thanks for the solid advice guys.

I'm seriously considering hiring a tax accountant for that reason. Why do it myself when I can outsource someone who does this stuff professionally.

Approximately when do you guys recommend that I start reaching out to someone?

As soon as possible. Just know that it'll make it a lot cheaper or easier to deal with if you have all your own documentation and expenses sorted. And regardless of who you go with, regardless of price, please don't just expect to be able to dump all your receipts on them and expect a cheap price.



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[instantneedles]

Originally Posted by BIC_BAWS

Driving from home to work or work to home does not count as business mileage.


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I don’t actually have an office and do all my paperwork out of home.

All of my travelling is to client’s houses which I was hoping to be able to get deductions for.

[BIC_BAWS]

Originally Posted by instantneedles

I don’t actually have an office and do all my paperwork out of home.

All of my travelling is to client’s houses which I was hoping to be able to get deductions for.

It depends on where is your regular place of work. If every Monday, you are expected to go to Client A's house, it can be considered as regular place of work.

Take a look at this: https://www.canada.ca/en/revenue-age...sonal-use.html

[bobbinka]

Originally Posted by BIC_BAWS

It depends on where is your regular place of work. If every Monday, you are expected to go to Client A's house, it can be considered as regular place of work.

Take a look at this: https://www.canada.ca/en/revenue-age...sonal-use.html

You referenced employee benefits when the OP is not an employee. It talks about "regular place of employment" in the context of an employee. The title at the top of the page says "When does a benefit arise" (as in, taxable benefit for an employee).

Originally Posted by instantneedles

I don’t actually have an office and do all my paperwork out of home.

All of my travelling is to client’s houses which I was hoping to be able to get deductions for.

https://www.canada.ca/en/revenue-age...ses.html#p2_11

2.4 Specifically, paragraph 18(12)(a) provides that in order to deduct expenses related to a work space, the work space must be:

the principal place of business of the individual (subparagraph 18(12)(a)(i)); or
used exclusively to earn business income and used on a regular and continuous basis for meeting clients, customers or patients of the individual in respect of the business (subparagraph 18(12)(a)(ii)).

Principal place of business
2.11 Where an individual has two or more places of business in respect of the same business, the work space must be the principal place of business in order to meet the requirement described in ¶2.4(a). The word principal is not defined in the Act but in this context is generally understood to refer to the individual’s chief or main place of business .

Example 1
Mr. A is a building contractor who uses a work space in his home to perform various administrative activities that are required in his business operations. These activities include receiving work orders, bookkeeping, ordering supplies and preparing payrolls. The remaining activities of the business, the performance of contracts, are carried out at various customer locations. The work space in Mr. A’s home therefore represents his main place of business. Mr. A’s children often use the work space in the evening to do their homework.

A work space need not be used exclusively for the business in order to meet the principal place of business requirement outlined in ¶2.4(a). This means that the room used by Mr. A in his home to perform the administrative functions of his business will be considered Mr. A’s principal place of business.

In light of the personal use of the space, Mr. A will, however, have to apportion his expenses as discussed beginning in ¶2.18.

Therefore, if it is your principal place of business, you may be entitled to business use of home deductions.

As for motor vehicle expenses, if you are a sole proprietor...

https://www.canada.ca/en/revenue-age...-5.html#tocch3

Line 9281 – Motor vehicle expenses (not including CCA)
You can deduct expenses you incur to run a motor vehicle you use to earn business or fishing income. Fill in "Chart A – Motor vehicle expenses" on your form. The chart will help you calculate the amount of motor vehicle expenses you can deduct. If you are a partner in a partnership and you incur motor vehicle expenses for the business through the use of your personal vehicle, you can claim those expenses related to the business on line 9943 in Part 5.

If you use your vehicle occasionally for business purposes, you can claim motor vehicle expenses on a per-trip basis. For example, taking the children to a park or on an excursion may involve paying for fuel and parking.

If you regularly use your vehicle for business and personal trips, you can claim part of the total operating expenses for your vehicle as a business expense. You must keep accurate records that show the part of the total kilometres that you drove for your business.

At the end of the day, there are many factors to consider in whether it is worth it to get an accountant. For example, what is the business? do you make 10k or 200k a year? How much expenses are there and what's the amount of work required to deal with it? What is your knowledge of tax matters and ability to understand it? Can you take the risk that you're doing it incorrectly and not knowing so? Or are you confident enough to accept a small margin of error? Only you can figure out where you're comfortable with.

My recommendation is to speak with people in your industry first. See how others do it and hear their experiences.

While having an accountant can be reassuring, you have to figure out if it's justified. Sometimes it is, sometimes it's not.

[instantneedles]

Yo thanks for the help guys.

I found out I don’t actually get to deduct my gas because I actually get reimbursed by my company.

Another question:

How do I find out the total amount of money I can deduct for my expenses? I’m assuming higher income = higher amount of tax I can deduct?

Reason being is I am planning on taking a pricy seminar and potentially buying a new cellphone - but only if I can deduct all or most of these expenses.

[fliptuner]

Why doesn't the company own the car and phone?

[tiger_handheld]

Originally Posted by instantneedles

Yo thanks for the help guys.

I found out I don’t actually get to deduct my gas because I actually get reimbursed by my company.

Another question:

How do I find out the total amount of money I can deduct for my expenses? I’m assuming higher income = higher amount of tax I can deduct?

Reason being is I am planning on taking a pricy seminar and potentially buying a new cellphone - but only if I can deduct all or most of these expenses.

So when do we all get a 6pk each?

[instantneedles]

Originally Posted by fliptuner

Why doesn't the company own the car and phone?

Cellphones yes, but I decided to just use my own..

Originally Posted by tiger_handheld

So when do we all get a 6pk each?

When I can figure out how to deduct that as well

[BIC_BAWS]

Originally Posted by instantneedles

When I can figure out how to deduct that as well

Meals and Entertainment account "client appreciation" "revscene.net."



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