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Income is counted at the Canadian value of the USD as of the date of the invoice, as per the Bank of Canada Rate. So say, you invoice someone $100USD. That may be about $140 Canadian. So, A/R, or bank, is $100 USD, and income is $140 CDN. Because of this whatever software you are using needs to have the “Multi Currency” option turned on. More happens in the background, and I can go into further detail if you need, but the multi-currency function helps a lot.
Also, it doesn’t matter what currency you charge in regarding GST/HST, what matters is where the goods take ownership, aka “Where the supply is made”. Here’s a link from CRA to help answer your specific https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/gst-hst-businesses/charge-gst/charge-gst-hst.html But if you do need to collect GST/HST, again, the funds are valued as of the Cdn value the date of the invoice. If your business is based in the US, then you likely are not registered for GST/HST, and it’s customs that has to worry about it. (and any bills I have from US based services don’t have GST) But if you are in Canada, and your income is over $30k in four consecutive quarters, definitely check out that link to see if GST/HST is required. For example, if you are a vacation and accommodation service targeting American Tourists coming to Vacation in Canada, you can charge your American clients in American funds, but that income is still subject to GST HST. (and there’s a 50% tour package GST/HST rebate to encourage tourism!). If you have any specific questions about GST/HST, CRA can be super helpful: 1 (800) 959-5525. Just, make sure to ask “And what publication can I also see that you are referring to” as sometimes you get different answers.
And as to if a business is more susceptible to audits because of the GST not being exactly “x” percent of sales, I have not found that to be the case. Goods and supplies have different GST/HST ratings, as well as provincial rates differing depending on the “place of supply” rule. Some goods are zero rated, some goods are sold and shipped to various provinces, and so it is more typical that you think that the GST Collected is not exactly “x” percent of sales.
What IS on their radar is late filing, late paying, and also abnormal refunds. So, always file on time, and if there’s a big credit that causes a GST refund, make sure you have your data listed well (Vendor name, date of bill, GST/HST amount), and the highest 20 bills and invoices ready to be reviewed! And be sure to SEE the GST/HST on the bill when you enter it, never assume! Follow those tips, and you will be prepared for a review.
Hi Janice! Great Question!
Whether the income is considered business or rental, is not dependent on length of stay, rather it is dependant on services. If it is a basic renting with only heat, hydro, parking, etc, then it could be considered rental income. But if there are more services, such as meals, or cleaning visits, etc, then it would be considered business income. And with sales over $30k (in four consecutive quarters), if it is considered business, then your client is required to register for a GST/HST Account and begin collecting GST/HST.
I found this page on CRA’s website that has some guidelines and some links to bulletins to help decide if it is rental income or business income. https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/rental-income/you-have-rental-income-business-income.html If you review this, and you still are not quite sure, you can call CRA’s business inquiries line at 1 (800) 959-5525. Ask them to advise if the income would be considered residential or business, based on your Airbnb’s specific situation. And if you do this, don’t forget to ask them, “and can you please refer me to the bulletin or publication to support your statement?” (Because each call center person tends to have different levels of experience, and it helps if you can read it and refer to it yourself first hand if ever questioned. Sometimes you can call three times and get three different answers, but if you know what they’re basing their answer on, you can feel more confident in what you choose to do!)
So, if it is determined that the income is business income, you would use the T2125 to include the income on your tax return. If it is determined that the income is rental income, then you would use T776.
Hi Jamie! Great Question!
So, the TD1 Form (federal & provincial) is all about how much tax your employer takes off of your paycheque and passes on to CRA on your behalf. Everyone in Canada can make up to $11,635 without paying taxes on it! (That’s the basic personal amount for 2018). That is, if you were predicted to make less than $11,635, you wouldn’t owe any taxes on that!. Your employer needs to factor this non-taxed portion of your income in when calculating what taxes are to be deducted for you from your paycheque. The payroll software estimates, based on your pay amount and this TD1 form, what your taxes will be at the end of the year, and what to take off the paycheck to give to CRA for you so you don’t have a huge tax bill. (Paying ahead of the total you will likely owe).
People who have special circumstances can make a bit more before the taxes start. For example, people who have an infirm child, they can earn a little more before the taxes start, that is, $2,150 more. (#2 on this form) Etc Etc.
Now, when you’re married, and you are the sole income provider, (say your spouse is a stay at home parent), then that means you’re earning income for both your spouse and yourself! And so CRA says, “well, you can use their basic personal amount too! What they’re not using”. So that’s #8. And ALSO CRA says, “Well, if you don’t have a spouse you are supporting, but you do have a child you are supporting on your own, you can use their basic personal claim amount, as a special break because you are a single parent”. And that’s why you put in $11,635 in #8.
Why am I telling you all of this? Because if you put in $11,635 into #8, your employer will take less tax off of you. And if that was your only job, then your taxes at the end of the year will closely match what their system guessed based on this form, and you won’t owe too much more, and you won’t have given CRA too much throughout the year (an interest free loan to the government). BUT, if you love to get a refund at tax time (aka, a refund is your OWN money given back to you that was taken off your paycheque) and you don’t care that you just gave CRA an interest free loan… then leave #8 blank. It’s ok! In fact, if you are considering starting a business, and that business makes a profit this year, you will owe taxes on that ALSO, and no one is making tax installments on your behalf for that anywhere! (You can yourself though). So I would suggest leaving #8 blank!!! Less is more with these forms! The extra tax being taken off will just be applied to your 2018 business income, and reduce what you owe at the end of 2018.
That’s my personal approach to these forms. If you choose to put $11,635 in #8, then I would suggest to start a saving account that could be used in case you do owe taxes on 2018 business income, or any emergencies, whatever may come.
You would enter that deposit towards your Vehicle asset account. Did you collect GST/HST on that? (For a sale of a business asset you are required to collect the GST/HST if the business is registered for GST/HST). If you did, then you would separate that amount out. You can create an invoice or deposit, or do it with a journal entry. If your bookkeeping software allows you to create a deposit or invoice and instead of using a sales account or item, lets you select your Auto Asset account, that is what you need to put this sale towards. If not, you can use a journal entry; you would Debit the bank for $5,000, and you would Credit your Vehicle Asset account for $5,000. If there was GST/HST, for example, you would debit the bank for $5,000, you would credit GST/HST collected ledger account for $652, and you would credit your Vehicle Asset account for $4,348. I also put in the description or memo the Details of the entry about Asset sold. For a Vehicle I put the year, make, and model, plus the last four of the VIN. This way, when you look at the history of your asset ledger accounts, you can see all the comings and goings quickly and easily! (Fantastic for a company that’s been around for years, and a new account says, “so, where’s your asset list?”)
There is no need to create a new asset account for each asset purchased. Limit your asset accounts to the classes, or categories, of assets; Vehicle, Equipment, Buildings. (You can make a few more specific accounts for your needs if you choose, such as Farm Equipment, Construction Equipment. But do not create an asset account for *each* asset purchased. Just make sure to put in the detail of what asset was sold or purchased when you create an entry).
Also, take a photocopy of the bill of sale, and put it aside an a file for the accountant for Year End. Keep a file of a photocopy of all asset purchases and sales for the year ready to give the accountant. When the accountant collects the info for the Year End taxes, he will need to know what assets you purchased and sold, and he will update the tax file accordingly. Then any adjusting entries are sent to you with the Corporate Tax return to enter into the system.
Hope that helps!
Have a great day!