Simon Zhong

How to report your commission income and claim your expenses on your tax return

As a salesperson, you can either be classified as an employee earning commission income or as a self-employed commission salesperson. How to report your commission income and claim your expenses on your tax return depends on which category you are in.

Employees earning commission income

If you are an employee earning commission income, you will receive a T4 slip from your employer. The commission income is show in box 42 (the amount in box 42 is included in box 14). It has to be reported on line 102. This amount is already included in your income on line 101, so do not add it again when you calculate your total income on line 150.

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Taxes on rental income received by non-residents

if you are a non-resident and receive rental income from real property in Canada, a non-resident tax at rate of 25% on the gross rental income has to be withheld and remitted to the Canada Revenue Agency (CRA).

Non-resident tax has to be withheld

The tax has to be sent to the CRA on or before 15th day of the month following the month the rental income is paid to you. Normally, you can ask your tenant or property manager to remit the tax on your behalf. At the end of year, an NR4 return, Non-Resident Tax Withholding, Remitting, and Reporting, has to be sent to the CRA. The NR4 return shows the total income and the amount of non-resident tax withheld.

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Canada Pension Plan (CPP) for the self-employed

If you are self-employed, you have to pay Canada Pension Plan (CPP) contribution based on your net profit (after expenses). 

How is the contribution calculated?

The first $3,500 of earnings is exempt. The contribution is calculated by multiplying the remainder (up to maximum) by the contribution rate.

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Residency for tax purpose

Canadian taxation is based on the concept of residence. A person who is a resident in Canada will be taxed on his or her worldwide income from all sources. However, a non-resident person only pays Canadian income tax on income from sources inside Canada.

To become a non-resident for tax purposes, your must demonstrate that you have sever most of the ties.

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What is working income tax benefit (WITB)?

Working income tax benefit (WITB) is a refundable tax credit available to lower-income individuals and families who have earned income through employment or business.

To claim the working income tax benefit (WITB), you need to meet certain conditions.

The WITB consists of a basic amount and a disability supplement. Disability supplement is additional benefit available to those who are entitled to a disability tax credit for the year.

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Marketing is not just the job of marketing and sales department

In his book The Practice of Management, management guru Peter Drucker argues “any business enterprise has two - and only these two - basic functions: marketing and innovation.” He further points out that “concern and responsibility for marketing must therefore permeate all areas of the enterprise.” Here is a true story illustrating Peter Drucker’s point that marketing is not just the job of marketing and sales department.

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Are legal fees tax deductible?

There are a lot of confusions regarding the tax deductibility of legal fee expenses. The general rule is simple: they are deductible only to the extent that they are incurred to gain or produce income from a business or property. 

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What is child care expense deduction?

Child care expenses are generally considered personal or living expenses. However, some expenses may be tax deductible if they were incurred to allow you or your spouse to earn income from employment or self-employment, to go to school, or to conduct research.

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The difference between TFSA and RRSP

Since the introduction of Tax-Free Savings Plan (TFSA) in 2009, many Canadians have been struggling with the question: to TFSA or to RRSP?  Although both plans shelter your income tax-free, they work in different ways. Here is a comparison between TFSA and RRSP.

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Cost analysis help client increase profit - a Proccounting successful story

Cost management is crucial to your business profit. Effective cost control starts from your understanding of cost behavior - how a specific cost behaves in response to the change in the level of your business activities. Does it rise, fall, or remain constant as sales rise or fall? If a particular cost is expected to change, by how much will it change?  To answer these questions, you must understand the difference between fixed costs and variable costs, the two main categories of costs based on cost behavior. A fixed cost is a cost that does not change in total despite changes in sales or productions. A variable cost is a cost that changes in total in proportion to changes in sales or productions.

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Should I file a tax return?

You should file a tax return in the following three situations:

  1. You have to pay tax
  2. The CRA sent you a request to file a return
  3. You want to claim a refund, credit, or benefit.

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Price it right, knowing the costs is the key

Setting the right price is not only critical for profits but also fundamental for a company to thrive and grow. However, when it comes to setting the price of their products, many small business owners are often inaccurate.

How much should you charge your customers? At least, you must know how much the product costs you. Here are some cost factors you should know before making pricing decisions:

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An example about how to calculate capital cost allowance (CCA)

The money you spend on purchasing capital assets for your business is capital expenditure. Unlike the day-to-day expenditures such as telephone bills, office stationery,  rent, or car lease, a capital expenditure cannot be fully deducted immediately as a business expense. It can only be deducted over time in a form of depreciation. In stead of using the term “depreciation”, the tax department calls it Capital Cost Allowance or CCA. Capital cost allowance was calculated by depreciating the cost of the assets at certain rate. To prevent anyone from taking advantage by depreciating assets too quickly to defer taxes, there are strict rules regarding the depreciation rate and how an asset should be depreciated. Here is an example showing you how to calculate CCA.

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Federal incorporation vs. Ontario incorporation

A business in Ontario can choose to incorporate federally or provincially. This article compares the difference between federal incorporation and Ontario incorporation.

Before we go into our subject, one very important thing you should know is you may sell your products and services to individuals and businesses located in any province of Canada or overseas, no matter you incorporate federally or provincially.

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