Tax-saving tips from the taxman
Editor’s note: We originally prepared this tax-saving tips article to coincide with the April 30 tax filing deadline. As part of the federal government’s COVID-19 economic stimulus response, the filing date for 2019 returns has been pushed back to June 1, and outstanding payments will not be due until Aug. 31.
As a skilled tradesperson, you build the houses where families live, the skyscrapers in the concrete jungles where people work, and the roads and bridges that get everyone where they need to go. The work you do benefits all Canadians. When it comes to your taxes, the Canada Revenue Agency (CRA) wants you to benefit too.
Know the tools of the trade to maximize your refund
No matter your trade, you need to make sure you have the right tools for the job.
If you bought new tools for work this year, claim the tradesperson’s tools deduction, of up to $500. Your employer will need to certify that the tools being claimed were bought by you and are necessary for you to use directly in your work. You may also get a rebate on the goods and services tax/harmonized sales tax (GST/HST) you paid when you bought them. For information on tools expenses, go to canada.ca/taxes-trades.
Are you part of a trade union? If you pay membership dues, keep your receipt and deduct the amount paid on your return. This includes any GST/HST you paid as part of your dues. For information, go to canada.ca and search for “Line 21200 – Annual union, professional, or like dues.” When someone asks “Who’s the boss?” you take pride in responding, because, well…it’s you! If you’re self-employed, you may be able to deduct reasonable expenses you paid to earn income, such as vehicle expenses, supplies needed to complete a job, and office space expenses.
Did you convert part of your garage into a workspace for your business? When you use part of your home for business, you may be able deduct part of your maintenance costs such as heat, home insurance, electricity, and property taxes. To find out more, go to canada.ca/taxes-self-employed and select “Report business income and expenses.”
If you’re self-employed you can also get up to speed on your tax obligations through the CRA’s Liaison Officer Service. Book a free in-person visit or group seminar online at canada.ca/cra-liaison-officer. Liaison officers will answer your tax-related questions, discuss self-employed tax deductions, explain common tax errors, provide an overview of digital services to help with your taxes, and offer advice and help with setting up an effective bookkeeping system.
You learned from the best in your trade. Now, you want to pass that knowledge to the next generation of tradespersons. If you hire an eligible apprentice working in an approved Red Seal trade, you may be able to claim the apprenticeship job creation tax credit. For each eligible apprentice, claim $2,000 or 10% of the eligible salary and wages payable in the year, whichever is less. Don’t need to use the whole credit amount this year? Carry the unused amount back three years or forward up to 20 years! For information on the apprenticeship job creation tax credit and other investment tax credits, go to canada.ca/taxes-self-employed and select “Line 41200 – Investment tax credit.”
Registering for a GST/HST account
You know first-hand that the demand for skilled tradespersons never seems to slow down. As your project schedule starts filling up, it might be time to consider registering for a goods and services tax/harmonized sales tax (GST/HST) account.
You must register for the GST/HST if your business income was more than $30,000 in the previous four consecutive calendar quarters. If this is the case, you have one month from the end of the calendar quarter to register. However, if your revenue exceeds $30,000 in a single calendar quarter, you must register immediately. Even if you don’t have to, registering could let you claim input tax credits on the GST/HST you paid on your business purchases and expenses. This is an important benefit of owning a business and could put more money in your pocket to re-invest for the future. For information, go to canada.ca/gst-hst. If your business is located in Quebec, go to revenuquebec.ca.
All projects have important deadlines
Income tax and benefit returns for most Canadians are due on April 30th. Self-employed individuals and their spouses or common-law partners have until June 15th, to file their returns. However, if there is a balance owing, the amount is still due no later than April 30th.
Last year, nearly 90% of individuals filed their returns online, because it’s convenient, easy, and secure. If you file online and use direct deposit, you get your refund in as little as eight business days. There are a variety of tax software options to meet your needs, some of which are free. For a complete list, go to canada.ca/netfile-software.
Unfortunately, not every year can be a winner. If your business is facing cash flow problems and you can’t pay off your tax debt in full, contact the CRA. You can set up a payment arrangement by making a pre-authorized debit agreement through the CRA’s online portals or by calling 888- 863-8657. To learn more about your payment options, go to canada.ca/guide-taxes-payments.
Bring down the hammer
Even with all of your training and credentials, it’s important to stay vigilant and not get swayed into participating in the underground economy. If your clients suggest you do a job “for cash,” know that by avoiding taxes, you’re putting yourself at risk. A few dollars of unreported income here and there may not seem like a big deal, but together they amount to billions of dollars lost that are needed to fund public services in your community.
As the boss, if you pay your employees under the table, they aren’t able to access the benefits they are eligible for, like employment insurance, Canada Pension Plan payments, and workers’ compensation coverage. If you’re caught evading taxes, you could face penalties and jail time, or even lose your business. It’s not worth the risk. For more about the underground economy, go to canada.ca/ taxes-underground-economy.
If you have made a mistake or an omission and want to correct your tax affairs, consider looking into the CRA’s Voluntary Disclosures Program. To learn more, go to canada.ca/taxes-voluntary-disclosures.
Stay on top of the latest CRA news and tax tips. Follow the CRA on Twitter @CanRevAgency.