Taxes For Ontarians...

[kinitex]

I know a lot of members here live in Ontario, so I would like to discuss our tax situation. Has anyone done it before? This will be my first year im not in school, and making over $50,000 for the year if not more.

Should I just assume that whatever my total net profit is, that 20 - 30% of it is going to the government? Is there a calculator or something out there I can use?

Also, what about off-shore bank accounts. Is this something to look into to help reduce taxes?

[Ganceann]

I am in the UK, but the tax may operate on a similar basis (possibly).

For the UK every individual person has a tax-free allowance (basically if they earn very little income they wouldn't have to pay taxes). The personal allowance in the UK is:

2008/2009 tax year = £6035

(There are other things that can increase the tax allowance, but keeping it simple).

So, if someone in the UK earned £10,000 profit throughout the 2008/2009 tax year they would be required to pay tax on the profit - personal allowance.

In this case, £10,000 - £6035 = £3965

For simplicity, assume 20% tax and the tax owed for the year would work out at:
£3965*20%= £793
==============

Also... I just found this site that may be useful for you Kinitex:
taxtips.ca - Federal Tax Rates

[Emon878]

I'm not completely sure but Norb would be the perfect person to answer this question
becuase he lives in Scarborough? Right?

From what I understand this business tax is much less than the working tax. And you
pay it of at the end of the year. When you do this you can claim a lot of things as
expenses when you claim thing the you do not pay tax for the value of what ever you
claim. So if you made $100,000 and you show $25,000 expenses you only pay tax for
the $75,000.

And you can claim many things if you are working from your house you can claim
part of the mortgage. Also computers ect. Norb what do you claim?

As for offshore bank accounts illegal I think. Tax evasion not worth the risk.

These is the knowledge I posses I could be wrong.

[kinitex]

So what if you don't have a registered business yet? And what if I go register one this week, does that mean all my income prior to that doesn't count towards my business?

[Ganceann]

So what if you don't have a registered business yet? And what if I go register one this week, does that mean all my income prior to that doesn't count towards my business?

If you haven't registered as self-employed or a business yet you really MUST contact your local tax office to figure out where you stand... you could already be operating illegally.

In the UK you can operate self-employed/business for up to 3 months before you have to register it... (thats from memory). However, as far as business expenses are concerned you will only be able to claim business expenses for the duration you are recognised as either self-employed or a business.

Simply put, if you registered today as a business and your start date officially showed as today... you would NOT be able to claim business expenses for anything before todays date (that means you wouldn't be able to claim adwords expenditure as a business expense because you were not officially a business or registered as self-employed)... this would mean you would be taxed on your INCOME and not just your profit.

- The longer you leave the situation the more liable you become and the more tax you will end up paying. You may be able to backdate things for up to 3 months or however long you can operate without registering as a business, but why have you not already registered or looked into this before now? (If I recall, you asked before about this on DP a few months ago... maybe it was someone else and you replied in the thread... but you can't just leave it without making sure you are operating legally within your country).

Best advice = speak to a local tax representative ASAP before you end up being taxed on your turnover rather than only your profit.


PS. It may operate differently in Canada, but in the UK I can only claim business expenses from the date I was officially registered as self-employed... so webhosting costs prior to that date are counted as personal expenditure and are not able to be deducted as an expense.

[NCMedia]

To be honest it's a very complex game, this tax stuff.

I have a sole-proprietership (Kinitex you should get one - it's $60 or so and I believe you can do it all online now). Then get a business bank account and open both canadian and US accounts.

You'll change all your payee names to your new business name which will accept checks/wires at your bank. Start to collect your wires/checks in US in your US account and don't convert it until you must or until the exchange is in your favor.

Yes you are correct to assume that your 50K is going to be taxed accordingly. From what I understand (I haven't done CB taxes yet either), our Canadian Gov't makes an average conversion % for the exchange rate for the year, so your 50KUSD would be around 60KCAD, and you would be taxed on 60, and pay out 20 or so to the taxman. It doesn't really matter if you're a business or not, you'll have to pay this. However yes, you'll also be able to write off a LOT in your business name once you do, that you 'may' not otherwise.

You can then buy cars in your business name (expense), assign a portion of your mortgage/toys/office etc. as expense, business dinners (anytime you go out save the receipts), vacations (if you can prove you were there on business), etc.

I have two accountants, if you want their names/numbers please let me know, one is in Scarborough, the other in Richmond Hill. The one in Richmond Hill is well versed with bigger business and online income, feel free to reach out and I'll forward her info, or if you're close enough to me to drive, perhaps we can go together.

Cheers,
N.

[kinitex]

What if a big chunk of your money is in paypal, couldn't you send that to an offshore bank account and pay the taxes of that region?

[NCMedia]

For offshore stuff you have to do quite a bit.

1. Have a business address in that region. Let's say you want a swiss bank account, you must open a Swiss business, and have a Swiss address, and then can get a Swiss account.

2. If you have already accepted the money through paypal, and the paypal account is in your name, you may be able to 'buy' the money from your Swiss account. i.e. your Swiss business invoices YOU for all the money for consulting or so, not sure about this one but it's highly unlikely that you can wash the paypal money to be tax free.

3. I've been looking into the offshore stuff more and more, and though it seems like a bitch to setup, and is risky if you play with the wrong people, it's worth exploring more.

4. You can also get an INC. I had a site (websocials.com) that was INC'ed, then the max you pay if you take advantage of tax shelters is 23% I believe, where otherwise if you reach 100K+ you pay close to 35-40 if you have no creative accounting. My experience with the INC didn't pan out because the site never made that kind of money so I don't have data, but it is said that an INC is also a lot harder to maintain from minute books, to articling, to payroll etc. I wouldn't bother with those anymore.

N.

[antantnz]

re the UK thing ...

if you are an employee of a company and taxed through PAYE, then my take on the way the rules read is that you can earn up to an additional £2,500 of income before you are required to fill in a self-assessment ... up until that point it's just you "may" need to fill in a self assessment, however the heck they define "may"

[Ganceann]

re the UK thing ...

if you are an employee of a company and taxed through PAYE, then my take on the way the rules read is that you can earn up to an additional £2,500 of income before you are required to fill in a self-assessment ... up until that point it's just you "may" need to fill in a self assessment, however the heck they define "may"

Antantnz, in general if you are already being taxed at source by your company you will already hit the personal tax allowance limit during the year. From what I read it looks like any additional earnings over £300 would be taxable... but as always, tax is levied per person and you'll only ever find a general rule-of-thumb guide on the internet... to get the correct and applicable tax situation for your circumstances you would need to speak with a local tax representative.

It goes without saying that anyone who is doing affiliate marketing may need to check with their local tax office and find out what is applicable to them.