About
Sole Proprietorships
Sole proprietorships refer to unincorporated businesses owned by an individual. It is the responsibility of owners to make decisions, receive all profits and losses. Since owners do not have a separate legal status from the business, they assume all the risks.
You are required to pay personal income tax on the income generated by your sole proprietorship every year. To pay taxes, you should report your net income or loss on a T1 income tax and benefit return.
When you receive a demand from the Canada Tax Authority to file a return.
If you want to access the employment insurance special benefits.
When you have disposed of capital property.
If you are claiming a tax refund.
Partnerships
Partnerships are formed when individuals, trusts, corporations, or partnerships come together to trade. Partners bring money, labour, skills or property to the business in exchange for profits or losses. Profits and losses are divided according to the partnership agreement.
Since it is easy to form a partnership, some have been formed through a verbal agreement. However, it is best to have a partnership agreement that governs how the partnership works.
The CRA does not require partnerships to pay annual income tax return or tax on operations. However, the partners should include part of the income tax when paying a personal, corporate, or trust income return. Partners should file the required statements according to their situation.
All partnerships should file form T5013, for each fiscal period of the partnership due to the following:
If the partnership has an absolute value of revenues and absolute value of expenses exceeding $2 million. The partnership should also file form T5013 if it has more than $5 million in assets.
If one of the partners is a trust or corporation.
When the Minister of National Revenue asks for a completed form T5013.
If the partnership is tiered.
When a principal-business corporation that incurred Canadian resource expenses renounces the expense of the invested shares back to the partnership.
Employees
The Canada Revenue Agency requires every employer to pay employees properly and remit the correct payroll deductions. Employers should follow these steps to do payroll properly:
Open and operate a payroll account with the Canada Revenue Agency.
Make the required payroll deductions for each pay period.
Report employee income and deductions on the T4 form or T4A before the last day of February each year.
Ask the employees to provide the required information, including their social insurance number and a completed TD1 form.
After accounting for the taxable wages and benefits, employees should make the required deductions. The following are the three deductions you should make from employees’ pay:
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Income Tax
Employers should use the territorial tables for the territory the employees work. You can use CRA’s online calculator to determine all the deductions you need to make. Visit CRA’s payroll page to find the payroll deductions table you need.
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Canada Pension Plan Contributions
You are required to deduct CPP contributions for employees within the ages of 18 to 69 years who are able bodied, not receiving treatment, and who are in pensionable employment.
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Employment Insurance (EI) Premiums
According to tax laws and regulations, employers should deduct employment insurance premiums on each dollar of insurable earnings every pay period.
Investments
50% of the venue of all capital gains are taxable in Canada. Capital gains are reported on T3 slips, T5013, T4PS, or T5008 slip. You also have to report the gross amount if you receive dividends. You can claim federal tax dividends credits when you report it.
While you will not be taxed for making your RRSP contributions, CRA will start taxing you when you begin to make withdrawals. Interest from a bank account, guaranteed investment certificate, tax refund from CRA, and term deposit is taxable.
Interest earned on a tax-free saving account is not taxable. However, the CRA is observing investors making six figures or more. According to the CRA, the income should be considered employment income if the holders spend too much time making trades and boosting their earnings.
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Rental Income Canada
The Canada Revenue Agency requires you to report your rental income. Examples of rental income include:
Income earned when you rent out a bedroom in your house.
Income earned when you rent out your basement.
Income is earned when you rent out your condo or house.
Non-Resident Tax Returns
According to the CRA, the following elements make you a non-resident:
If you do not have residential ties in Canada.
If you have a rental property in Canada, S.216 is required
You are required to report the income tax you receive from Canadian sources. The type of tax you should pay depends on the type of income you receive. Non-resident tax returns as classifies as Part XIII tax or Part I tax.
Part XIII tax
The following types of Canadian income are subject to Part XIII tax:
Dividends.
Rental and royalty payments.
Pension.
Old age security pension.
CPP and QPP benefits.
Annuity payments.
Management fees.
Worldwide/Foreign Income Reporting
World income refers to income your earn from all sources both inside and outside the country. You are required to report your worldwide income by CRA. It is advisable to maintain all records of your payment documents and income and tax returns to report properly.
HST and GST Filing
This online filing service allows users to file their goods and services tax (GST) and harmonized sales tax (HST) returns online. It is easy to use and secure. HST and GST filing is also quick and readily available. You will also get faster refunds.
Should You Incorporate?
Incorporating can lower taxes depending on your province and situation. Learn about the benefits of incorporation below: