Jo d
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Jo d asked in Business & FinanceTaxesCanada · 1 decade ago

Canadian tax question...This is a disaster?

K, heres what happened. My mom can sew. She stated advertising locally on some free buy/sell type sites last year for her sewing services and it took off! Good for her, really bad now that we have to start doing the taxes on this mess thats been created.

Now first off, no business registration, no license, no nothing..This was a home based thing that just turned out to really work!

Second, almost no reciepts. She never thought to keep reciepts for the thread and fabric that was being used, nor the new sewing machine she bought..($400, ouch! can we write this thing off?)

Third, records of exactly what was spent and what was made were kept, we know down to the cent how much was made (Just under 26K net profit, $33K before)

Basicly were really stuck here. We dont want to go to a professional just yet because everything is undocumented and she's afraid shes gonna owe big money. If anyone has any advice its appreciated!

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  • 1 decade ago
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    The moment things started taking off, your mom should've gotten herslef in order financial and legal-wise.

    At this point, she was 'working under the table'... illegally.

    So, no, she cannot write anything off.

    Her best bet is to consult a professional. That's a lot of money and the government is not going to be happy they didn't get their owed taxes. Better to come clean than be audited later and face fines and interest.

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  • She is self employed. As such, she can deduct, from her gross income, all the costs that went into earning that income. I'm a little confused how you arrived at the 26K when you state she never kept receipts? Are you saying she wrote down the amounts spent on thread and fabric, but didn't keep the receipts?

    She needs an accountant, both to work out this year's taxes and to set her up properly. For instance, she needs to apply for a GST registration, and perhaps PST as well. She MAY be allowed to claim her input costs against her income, it will depend on the records she has. Without the itemized receipts, she isn't assured of that.

    With an income of 26K, she could owe $1800 (Ontario). If she has to pay on $33,000, it jumps to $3200. Those are really rough, just dumping those incomes into Quicktax, with just standard single deductions.

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  • 4 years ago

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