How to report this..

[PoopyP]

Hi
My question is as follows. Lets say you open a business, and you purchase 5000 worth of pencils @ 5 dollars each. So you are in your store and someone comes to you and pays by cash for 10 pencils = 50 dollars. Do you record this or not. Since I know 99% of people do not record cash transactions in small businesses. So my question is what happens later on since the gov will know you bought 1000 pencils.. wont they question what happened to those 10? Please explain

Michael

[BobW]

By law, you report the cash sale. Anything else is tax fraud.

If you are audited, the gov't can make a case based on unusually high inventory shrinkage.

[ptxpress]

You're not really soliciting advice on how to bypass taxes, are you?

Anyway, to answer your question real quick...you can write them off due to inventory shrinkage (i.e.theft) or pretend that they are still sitting in inventory for a year or 2 at which point you write them off as being old and unusable.

Both these methods are highly illegal.

[anony]

how frequently do you think these highly-illegal methods get used by small (or large) businesses?

[PoopyP]

I asked because I was told that whatever you sell on the internet doesn't have to be reported, or there are no tax laws for it yet. I can be wrong..

[anony]

Every business in the country should move all its sales online then. No more taxes. :razz:

[ptxpress]

I asked because I was told that whatever you sell on the internet doesn't have to be reported, or there are no tax laws for it yet. I can be wrong..


You really need to do a lot more homework before opening shop online then.


some taxes don't need to be charged when you're selling online to out of province/ out of state customers. That still doesn't mean you don't have to pay the income tax from the associated profit.

[PoopyP]

true I need to learn more about taxes. I was more specifically referring to reporting income not taxes. Like for example I sell a pencil for 10 dollars to a guy in China. I made a 5 dollar profit, but how will anybody know that unless i Truthfully write it in at 5 dollars. I mean I can write in 1 dollar and report that on my income tax. How does the gov track online sales revenue.

[kornstar369]

...this is a great topic..keep it up

[Sparhawk]

Income taxes for sales to out of country customers still need to be reported. How would the gov know? You'd be surprised what forensic accountants can dig up.

How are you gonna get paid from the guy in China? Check? Credit Card, or do you think he'll send you cash in the mail? Checks and credit cards are trackable.

If you make money, where are you going to keep it? In your bank account or in a shoe box?

And when you finally make money, how will you explain that you own a car, have a house, are able to eat and pay bills on you 1$ income / year?

I run a small business and pay every last cent of taxes. Don't get me wrong, I don't like to pay taxes any more than the next guy and sure, if there are legitimate ways to reduce the taxes I pay I'll do it (ie: RRSPs, dividends instead of salary or whatever). However, I don't want to get audited and end up paying the rediculously high penalties, have a record and be on the radar scope of the gov so they nit pick my tax returns every year.

I know someone who thought that the gov would never catch up to him because he's just small time business so he reported tiny amounts of income each year. After a few years of doing this he though he was safe and all. Now both federal and provincial gov are seriously on his case, he's had to sell everything he owns (including house and car), and pay rediculous high late charges and interests, and will probably have to declare bankrupcy.
Everthing he may have "saved" from avoiding taxes is going to be clawed back, and substantially more.

So in the end, his life is in shambles, he's closed his business and now had to take a crappy job to make ends meet.

Besides, I live in Canada and benefit from the things I get from this country which are paid for by taxes.

Getting a good deal on RFD: Great.
Trying to swindle the government out of taxes: Bad idea.

Bottom line, get an accountant to help you save taxes, but don't bother trying to cheat the system, its not worth it.

[poedua]

true I need to learn more about taxes. I was more specifically referring to reporting income not taxes. Like for example I sell a pencil for 10 dollars to a guy in China. I made a 5 dollar profit, but how will anybody know that unless i Truthfully write it in at 5 dollars. I mean I can write in 1 dollar and report that on my income tax. How does the gov track online sales revenue.

This inventory of pencils.

How did YOU pay for it ?

Cash ? Credit Card ? Cheque ? Do you have "terms "( i.e 30 days to pay ) with a supplier ?

Oh, in case you're wondering.......from Wiki.....

TAX EVASION:

By contrast tax evasion is the general term for efforts by individuals, firms, trusts and other entities to evade taxes by illegal means. Tax evasion usually entails taxpayers deliberately misrepresenting or concealing the true state of their affairs to the tax authorities to reduce their tax liability, and includes, in particular, dishonest tax reporting (such as declaring less income, profits or gains than actually earned; or overstating deductions).

Tax evasion is a crime in almost all countries and subjects the guilty party to fines or imprisonment.

[magicgsm]

Most of dealers will not charge you taxes if you pay cash, so if you paid cash and selling for cash, no one knows what you doing. Everything depends on how honest you are and if you really love to pay taxes.

[tlamm]

My wife is a tax auditor. They look at what you have purchased and what you have sold. If you purchased a 1000 pencils and sold 500 and have no inventory you get charged tax.

This shows up most in food businesses. They try to hide that the sold 1000 subs by saying they had 500 spoiled buns. But having 5 spoiled buns reported everyday for 100 days is a bad business move and sticks out.

If your business gets audited they will find most of your lies.

[excel]

how do they determine if they fine you or imprison you

[excitenews]

how do they determine if they fine you or imprison you

should be how much money you owe them, I think.

[poorwingman]

My wife is a tax auditor. They look at what you have purchased and what you have sold. If you purchased a 1000 pencils and sold 500 and have no inventory you get charged tax.

This shows up most in food businesses. They try to hide that the sold 1000 subs by saying they had 500 spoiled buns. But having 5 spoiled buns reported everyday for 100 days is a bad business move and sticks out.

If your business gets audited they will find most of your lies.

i see how this can apply to stores with regular/tangible inventory

but when food is involved.. isn't there always a good excuse? oh..the cheese went bad.. we had ordered too much b/c we were trying to get a discount.. oh we dropped a batch..etc

[Drew_W]

I quite like the OP's "99% of small businesses don't record cash sales" line... :)

[taichiubg]

no one will know if you do it in cash. yearly losses will raise flags.
It's the sucky truth that many don't pay their fair share of taxes.

Wouldn't this be a great advertisement?
For all of your tax free shopping needs...visit Pacific Mall in Markham Ontario!! The largest selection of restaurants and stores that don't accept any form of payment that leaves a paper trail! We protect the environment by not issuing receipts and avoiding deposit envelopes!

[Supershyguy]

no one will know if you do it in cash. yearly losses will raise flags.
It's the sucky truth that many don't pay their fair share of taxes.

Wouldn't this be a great advertisement?
For all of your tax free shopping needs...visit Pacific Mall in Markham Ontario!! The largest selection of restaurants and stores that don't accept any form of payment that leaves a paper trail! We protect the environment by not issuing receipts and avoiding deposit envelopes!

lol I am Chinese, and its sad but true.... worst part is, half the stuff is illegal anyways so what do you want them to do.

here is my share of tax this year, and we sell illegal DVD's or Fake Brand new stuff