How to report Freelance Income?

[SaraLee]

I made about $10,000 in my freelance job (graphic design) in 2006. I am not registered as a business for my freelance job and I don't charge GST/PST either because of the amount (under $30,000). However, I do issue invoices and keep record of the cheques that the clients pay me.

How should I report the income? Should that go under Self-employment income (line 135) or other income (line 130). If it goes under Self-employment income, can I write off my part of my cell phone bill as I got the phone specially for communicating with my clients.

Any advice? Thank you in advance.

[D-Sisive]

well if you didnt registered and you are scared some of your clients will write you off, this is what you can do

fill in a t2124 and enter your self business income

then expense the heck out of it

gas/insurance/cell phone/other expenses/office supplies

you can almost break even or make a loss so that it lowers your taxable income

this is not fraud since i dont know how much expenses you have but it is very legal

if you get an audit, just make sure you can show the invoices for your income and the receipts for your expenses (they dont care about gas, but like cell phone bills/insurance premium bill/some office supplies, etc receipts)

rarely will you get an audit if you break even or go into a small loss, its definately worth a shot to go this route

i do it for clients all the time

[2k4accord]

I wished I knew this when I was working part time contract.
It could of saved some money.
O well, I will have to wait next year.

[SaraLee]

well if you didnt registered and you are scared some of your clients will write you off, this is what you can do

fill in a t2124 and enter your self business income

then expense the heck out of it

gas/insurance/cell phone/other expenses/office supplies

you can almost break even or make a loss so that it lowers your taxable income

this is not fraud since i dont know how much expenses you have but it is very legal

if you get an audit, just make sure you can show the invoices for your income and the receipts for your expenses (they dont care about gas, but like cell phone bills/insurance premium bill/some office supplies, etc receipts)

rarely will you get an audit if you break even or go into a small loss, its definately worth a shot to go this route

i do it for clients all the time

I still live at home. I don't think I can claim electricity / insurance /rent. Right? The only expense is the cell phone but it comes off of my VISA automatically. How do I keep a record of it?

[D-Sisive]

sure u can, u claim a % of the expenses

say if you work out of your home (home office), you can claim 50/50 or 30/70 or 40/60

rarely will one get an audit, if you do, thats just bad luck

all you have to do it show a receipt/bill for your utilities and * 12 for a year

and other office supplies, claim something believeable

you can certainly claim gas/insurance/property tax etc

best you go to a tax preparer and see what they can do for u

[Drew_W]

I made about $10,000 in my freelance job (graphic design) in 2006. I am not registered as a business for my freelance job and I don't charge GST/PST either because of the amount (under $30,000). However, I do issue invoices and keep record of the cheques that the clients pay me.

How should I report the income? Should that go under Self-employment income (line 135) or other income (line 130). If it goes under Self-employment income, can I write off my part of my cell phone bill as I got the phone specially for communicating with my clients.

Any advice? Thank you in advance.

CAREFUL. It's GST under $30,000 sure, but PST starts from the FIRST penny you take in.

You may also find that registering for GST yields you more gains as you can claim the GST back on stuff you use in the course of your business. Believe me, this savings adds up FAST.

[SaraLee]

Can I also report the $10,000 on line 104 (other employment income). The $10,000 earning comes mainly from two galleries that I do work for and I am considered their employee. I charge per project basis if that helps anyone to determine my status.

The reason I would like to know is if I reported this portion of my income under self employment I have to also contribute to CPP which works to my disadvantage - I end up having to pay $600 rather than getting a $200 refund.

I am confused.

[integra_dc2]

Based on my experience, if you are doing freelancing work you only charge your client GST, and not PST.

Since you are only offering a service, therefore only GST is required. But lets say if you sell goods as well (graphic design tools or something) then you need to charge PST as well.

Hope it helps, but please consult with your accountant to get more details on what items you could expense to reduce your income figure, therefore paying lesser taxes.

I'm assuming you have a full-time job, or else if you just make $10,000 a year on freelancing work, i'm pretty sure you get almost 100% of your taxes back. You only have to pay tax ontop of the 8000ish tax bracket. So MAX a % of $2000 of your income.

[D-Sisive]

Can I also report the $10,000 on line 104 (other employment income). The $10,000 earning comes mainly from two galleries that I do work for and I am considered their employee. I charge per project basis if that helps anyone to determine my status.

The reason I would like to know is if I reported this portion of my income under self employment I have to also contribute to CPP which works to my disadvantage - I end up having to pay $600 rather than getting a $200 refund.

I am confused.

it does not matter if you report on 104 or 130, bother are other income

why you would report 10,000 straight on the 104/130 is beyond me

how you get a $200 refund if you do that is interesting cause you werent taxed on 10,000 so obviously u have to pay taxes on it unless u have enough non-refundable credits as in childexpense, rrsp, etc

i suggest going hte route of t2124 and expensing some stuff to lower that 10,000 freelance income to pratically zero or as a lost

its a loophole in the system as long as you can provide the receipts if auditted (and you have a good chance of NOT being auditted)

if you are scared, just expense it down to a few thousand as income so you dont pay as much taxes on it

these are not fraud advices im giving but something to think about if you are in that situation and if the solution is a viable one

ps contributing to CPP is better than paying taxes

[Bullseye]

Some truly terrible advice on this thread. I have a baby in my arms, so I won't type a full response, but the OP would be wise to ignore most of the advice given here, especially from the guy giving tips on audits but who can't even spell 'audited'! Maybe I'll reply later with some more accurate info...

[SaraLee]

Some truly terrible advice on this thread. I have a baby in my arms, so I won't type a full response, but the OP would be wise to ignore most of the advice given here, especially from the guy giving tips on audits but who can't even spell 'audited'! Maybe I'll reply later with some more accurate info...

Please do!!! Bullseye.

One thing I have to point out. Even though I work from home. All the bills of the house (electricity, property tax, gas, etc) are all billed under my parents names. I am certain that will prevent me from writing off any portion of it, right? I think the only things I can claim is the depreciation of my equipments, such as computer and printer, and my cell phone bill. I've been reading up on the T2124 and the business guide so please give me some advice.

[ipxxx]

SOME information is covered here already:
http://www.redflagdeals.com/forums/showthread.php?t=412085

[D-Sisive]

Some truly terrible advice on this thread. I have a baby in my arms, so I won't type a full response, but the OP would be wise to ignore most of the advice given here, especially from the guy giving tips on audits but who can't even spell 'audited'! Maybe I'll reply later with some more accurate info...

hey what do i know, i just help people save money when it comes to tax season

what i talked about was a general idea of what the OP should consider

im pretty sure the people who had their returns done by my family business for 20+ years are happy with the outcome of how we help them out

t4a>t2124=loophole=happy customers=no trouble so far

there are enough loopholes (legal and non) if you know how to make use of it without getting caught...trick is not to be greedy

and commenting on my spelling on the internet....:)

you know how the internet is, everyone is a know it all (including yours truly)

:D

[Bullseye]

You can only claim legitimate business expenses, so the advice to just 'expense the heck out of everything' to get your income to zero, just for the sake of getting it to zero, is definitely against the rules. Anyone peddling such advice I would be very leary of. In the business, and I'm an accountant so I know it well, we call such people 'rock and rollers', they like to play fast and loose with the rules. This is no 'help' to their clients when the CRA comes knocking, and regardless of what this person says, they DO audit regularly, especially with areas known to abused, like home office expenses.

You are correct that if you live with your parents, you can not claim for any house expenses like utilities, mortgage interest, etc. If you pay them rent, and you use a portion of your rented area as a home office, then you could pro-rate that portion of your rent and deduct it. Otherwise, you could expense the things you mentioned, like cell bills, and depreciation (CCA) on assets you have bought.

The advice about GST only, not PST, is wrong, you charge PST whenever it applies, regardless of your business status.