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Tax Obligations for Canadians in the Platform Economy

Tax Obligations for Canadians in the Platform Economy (Twitch, Youtube, Instagram, and OnlyFans)

We live in an age of constant change, disruption, and innovation. When it comes to business, the internet has changed everything and regulations have amplified the move to new platforms beyond anything we’ve previously seen. This isn’t really news of course, but what does continue to surprise a lot of people is that just because you make money using new platforms and tools doesn’t mean that you are free from tax obligations. And perhaps more importantly, just because your revenue comes from new platforms it doesn’t mean that the Canada Revenue Agency (CRA) isn’t watching. 

In fact, there have been a number of recent moves that suggest the CRA is paying close attention and will no doubt continue to take these revenue sources seriously into the future. As of July 1, 2021, new GST/HST obligations apply to digital businesses and digital platform operators.  On December 17, 2021 the CRA released their Underground Economy Business Plan 2021-2022 which focuses heavily on digital models and platform economy transactions. And on February 1, of this year (2022), the CRA released a series of compliance guidelines aimed at helping sellers and service providers within the platform economy understand their obligations. All of this makes ensuring compliance important for anyone earning revenue from these sources who doesn’t want to face the risk of severe penalties. 

But we hear from clients all the time that figuring out exactly what their obligations are can be tricky. So, we’re putting together a series of blog posts designed to unpack taxpayer obligations in the age of the platform economy. Today’s post will take a closer look at the obligations for social media influencers and content creators on platforms such as Twitch, YouTube, OnlyFans, and Instagram. Stay tuned for future posts on the sharing economy, gig economy and peer to peer (P2P) market places.

What Social Media Influencers & Content Creators Need to Know

Whether you’re a gamer earning revenue through streaming on Twitch or YouTube; a performer receiving gifts and donations through OnlyFans; or an influencer earning commissions, sponsorship, and perks through Instagram or TikTok; the CRA expects you to report earnings and pay taxes. This includes both monetary and non-monetary earnings such as products, clothes, trips, or other gifts. 

It’s also possible that the CRA may go after you for unreported income that you’ve gained from these platforms in past years. Depending on the amount earned, this can result in significant penalties, interest and even jail time. The good news in such cases is that it may be possible to avoid or reduce penalties through the CRA’s Voluntary Disclosure Program. If you have questions about this or any other tax related issue, give us a call. We’re happy to help.

The bottom line is if the CRA believes you are carrying on a business through social media or other platforms you must report all income, including fair market value for non-monetary items. CRA’s definition of a business is pretty broad “The CRA will generally consider your social media activities to be business activities where there is an element of profit to your activities.”1  And remember, profit doesn’t just mean money. Continue reading to find out more about your obligations, how to get money back by tracking expenses, and possible GST/HST implications.

 What are my obligations?

If you receive earnings (both monetary and non-monetary) from your participation in the platform economy then you are required to pay taxes. Income made through such channels and platforms includes but is not limited to:

  • Subscriptions
  • Advertising
  • Sponsorships
  • Calls to action
  • Sales or commissions
  • Referral codes
  • Barter transactions
  • Perks or other gifts 
  • And tips

As an influencer or content creator you will most likely be considered self-employed (rather than an employee) which means that your tax obligations may be different than you are used if you’ve worked as an employee in the past. 

You are required to:

  • Report your earnings on either your personal income tax return or your corporation tax return. It is important to keep in mind that as a self-employed induvial, tax is not withheld from your earnings, so it is a good idea to hold a portion of your earnings back in order to pay taxes, CPP, and GST/HST (see below) come tax time. The amount to set aside will depend on your income level so it is important to contact your accountant to help you determine your total tax obligations.  It’s also important to note that (depending on your tax threshold) that you may be required to pay future income taxes by instalments at regular intervals, rather than as one lump sum during tax season. The typical threshold for this is more than $3,000 net tax owing for most of Canada and $1,800 for Quebec residents.  
  • Contribute to the Canada Pension Plan (CPP). Every person who works in Canada  who is over 18 and earns more than $3,500/year must contribute to CPP (with a few exceptions including Quebec residents). In addition, since you will be considered self-employed, you will be required to pay both the employer and employee portions, using the Schedule 8, CPP Contributions on Self-Employment form.
  • Keep records of all transactions, earnings, and expenses.  

Do I really need to keep records & track my expenses?

The simple answer is yes. You are required by law to keep business records to be able to support your income and expense claims regardless of the particular business or platform on which it is run. The good news is that by properly tracking your expenses, you may be able to claim a significant portion as deductible when you file your taxes. In order to do so, you must keep records of:

  • All earnings
  • Details about when and how you earned your income
  • Details of the expense incurred and how it relates to your business. For example, you may be able to claim a percentage of money spent on computer equipment, internet provider fees, platform fees and even rent.

While this may seem daunting there are several apps and services that exist to make this whole process as simple and painless as possible. We recommend Dext for all of our clients. It integrates easily with QuickBooks Online and streamlines all aspects of expense management while handling many backend accounting tasks automatically. If you’re looking for advice on what to choose or how to get setup, give us a call. We’re happy to chat about this or any other tax solution that can help you save time and money.

What about GST & HST?

You are required to register for General Sales Tax and Harmonized Sales Tax (GST/HST) if your taxable supplies exceed $30,000. Changes to Canadian law that took place on July 1, 2021 now include those who conduct business through platforms such as YouTube and OnlyFans under these requirements.4 Unfortunately, as a social media influencer or content creator, it can be complicated to figure out if you are required to register for, collect, or pay GST/HST on taxable supplies generated through social media channels.3 In many cases whether your platform earnings are subject to GST/HST, requires a ruling by the CRA done on a per taxpayer basis. If it is determined that you need to register, you will be given a GST/HST # after registration, and you will need to start charging taxes. But to further complicate matters, some sites (such as OnlyFans) do not (as of the time of writing) allow you to input your GST/HST #. Which means you may be required to remit (pay) GST/HST to the CRA after the fact. If you find all of this confusing, you are not alone. Hopefully, the CRA will work on simplifying these requirements in the future. In the meantime, an experienced tax professional can submit a ruling request on your behalf and help you understand your obligations.    

If you’re a social media influencer or content creator trying to figure out exactly what your tax obligations are, the tax experts at CPA Plus are here to help. Give us a call anytime. We’d be happy to chat with you about this and any other tax related decision you or your business is facing. Stay tuned for future posts on compliance in the platform economy including our take on the sharing economy, gig economy and peer to peer (P2P) market places.

Contact us and get started today!
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Employee Home Purchase Loan – What You Need To Know

What Business Owners Need to Know

Drawing and retaining quality talent is arguably more important to the success of your business than any other factor. This is especially true in today’s highly mobile and competitive labour market. The ability to work from anywhere coupled with widespread changes in employee expectations mean that many of the best employees know that they are in the driver’s seat. This leaves employers looking for unique ways to differentiate their offerings in order to attract and keep top talent. 

One (often overlooked) incentive that can set you apart is the option for corporations to offer employees low-interest-rate, home purchase loans as part of their incentive packages. Finding a home in today’s high-priced real estate market is increasingly difficult. This makes home purchase loans highly attractive to potential employees, especially if you’re courting talent from out of town or overseas. And helping employees and their families become established in the community is a great way to guard against turnover.

However, there are strict regulations and guidelines, established by the Canadian Revenue Agency (CRA) as part of the Income Tax Act . These regulations must be followed when setting up such arrangements in order to remain compliant and avoid trouble down the road for you and your employees. If you would like help setting up an arrangement such as this, please feel free to give us a call. We’d be happy to walk you through it.

Benefits and restrictions

  • Allows corporations to attract and retain top quality talent
  • Allows potential employees to obtain more favorable terms than are often available through traditional lending institutions
  • Must follow all rules and statutory regulations as they apply to both individuals and corporations under Subsection 15(2.4) of the Income Tax Act, including proper documentation.

Conditions and exemptions

It is possible for shareholder-employees to extract funds from their corporation, incentivizing shareholders for investing in the corporation. However, the standard regulations state that the loan or debt will be included in the income of that person or partnership for the taxation year in which the loan was made. In order for employee home purchase loans to be considered exempt from the above regulation it is important that the following conditions are met:

  1. The home purchase loan must be made as a result of the recipient’s employment.
  2. At the time the loan is made bona fide arrangements have to be established to allow for repayment of the loan within a reasonable time.

Trying to decide if Home Purchase Loans are the right fit for you?

The rules and regulations can be difficult to parse and making a mistake can be costly for you and your employees. That’s why the tax experts at CPA Plus are here to help. Give us a call anytime and we’d be happy to chat with you about this and any other options you are considering including in your incentive program.

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COVID-19 UPDATE: CERS & CEWS: What Business Owners Need to Know

CERS & CEWS: What Business Owners Need to Know

The COVID-19 pandemic has had a major impact on Canadian business owners. Most importantly, we hope that you and your loved ones are staying healthy and safe through this challenging time. We are here to help answer any difficult business or tax related questions that may come up. Provincial lockdowns, emergency orders, and numerous restrictions, have created many challenges for Canadian businesses and employers. The federal government has offered some relief, however filing and reporting can be difficult and onerous.

To help you make sense of it all, we have outlined two of the most important COVID-19 business relief programs below. We may also be able to help you with filing and reporting. If you have any questions, please feel free to give us a call.

Canada Emergency Rent Subsidy (CERS)

CERS is a federal program designed to help Canadian businesses, non-profit organizations, or charities who have seen a drop in revenue due to the COVID-19 pandemic. This subsidy may be able to help you cover part of your commercial rent or property expenses and covers both renters and property owners. The subsidy went into effect September 27, 2020 and will continue until at least June of 2021.

You may be eligible if your monthly revenue declined during this time period as compared to the previous year. There are several criteria that you must meet in order to be eligible for the program. The most important is:

  • That you had a CRA business number as of Sept. 27, 2020

You must also:

  • Qualify as an eligible business, charity, or non-profit
  • Have experienced a drop in revenue
  • Have eligible expenses

Note that there is no minimum revenue drop to apply for this program, however the amount of decline will be used to calculate the amount of subsidy you receive. If you have any questions about eligibility, you can visit the Canadian Revenue Agency’s (CRA) website.

CERS covers a portion of eligible expenses as calculated on a property-by-property basis. Qualifying properties include buildings or land in Canada that:

  • Your business owns or rents, and
  • That you use in the course of your ordinary business activities

Eligible expenses can be claimed up to a maximum of $75,000 per location and a total of $300,000 for all locations. Restrictions do apply in terms of residences, rental incomes, and non-arms length entities. For more information on eligible expenses, click here.

In order to apply for the CERS program you must:

  • Have a “My Business Account” with the CRA
  • Create a CERS (ZA) number
  • Set up direct deposit

For more information on how to complete the above requirements and apply for the CERS program or for help applying give us a call.

Canada Emergency Wage Subsidy (CEWS)

CEWS is designed to help Canadian employers who have seen a drop in revenue due to COVID-19. It aims to help employerscover a portion of employee wages, prevent job loss, and re-hire workers. The program can be applied forretroactively to March 15, 2020. However, there have been several changes to the CEWS program as of January 6, 2021. For detailed information on the changes and current subsidy rates visit the CRA website.

In order to be eligible for CEWS you must meet the following criteria:

  • You had a CRA payroll account on March 15, 2020
  • You qualify as one of the accepted types of employers
  • You have experienced a drop in revenue

For a full break down on eligibility criteria, including a list of eligible employer types, eligible revenue, and special revenue circumstances click here.

Please note that there are multiple claim periods. For additional information on current and upcoming claim periods click here. Each claim period has a specific deadline for applications and the subsidy does not renew automatically. You must confirm eligibility and reapply for each claim period, and you must apply separately for each (RP) payroll account that you have.

There are also restrictions and guidelines on which employees are eligible and how much of their remuneration can be covered, in some cases these regulations differ depending on the claim period that you are applying for, so be sure to review claim periods and regulations closely.

In order to apply for the CEWS program, you must:

  • Choose the correct claim period
  • Calculate the subsidy amount for your business
  • Set up direct deposit

Note that there is no minimum revenue drop to apply for this program, however the amount of decline will be used to calculate the amount of subsidy you receive. If you have any questions about eligibility, you can visit the Canadian Revenue Agency’s (CRA) website.

CERS covers a portion of eligible expenses as calculated on a property-by-property basis. Qualifying properties include buildings or land in Canada that:

  • Your business owns or rents, and
  • That you use in the course of your ordinary business activities

Eligible expenses can be claimed up to a maximum of $75,000 per location and a total of $300,000 for all locations. Restrictions do apply in terms of residences, rental incomes, and non-arms length entities. For more information on eligible expenses, click here.

In order to apply for the CERS program you must:

  • Have a “My Business Account” with the CRA
  • Create a CERS (ZA) number
  • Set up direct deposit

You can then apply by signing in to your My Business Account with the CRA or use the Web Forms application using your web access code (WAC). For a detailed application guide you can visit the CRA’s website or for help applying give us a call.

As always, the health and well being of our clients and their businesses is our number one priority. If you have any questions at all about the Government of Canada’s COVID-19 response or how it might affect your business, please don’t hesitate to reach out.

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CRA Temporary Flat Rate Method

Did You Work from Home in 2020?
The COVID-19 pandemic means that many more employees work from home (WFH) who did not do so before the pandemic. If you are one of them, you may be eligible for a new temporary flat rate deduction announced by the Canada Revenue Agency (CRA). As the name implies this deduction is temporary and currently only applicable to the 2020 tax season.

The new flat rate deduction allows eligible applicants to claim $2 for each day they worked from home due to COVID-19 up to a maximum of $400 per individual.

Eligibility Requirements
You are eligible to apply for the new flat rate deduction if you are an employee who meets ALL of the following criteria. If you are self-employed, you can click here to find out more about claiming “Business-use-of-home expenses”.

Eligibility criteria:

• You worked from home in 2020 due to the COVID-19 pandemic.
Note: This applies even if you were not required to work from home but chose to do so because of the COVID-19 pandemic.
• You worked from home for more than 50% of the time for a period of at least 4 consecutive weeks
• You are only claiming home office expenses and not any other employment expenses
• Your employer did not already reimburse you for ALL of your home office expenses. Note: If your employer reimbursed you for part, but not all of your home office expenses, you are still eligible to apply for the remainder.

You can claim days that you worked from home either full or part-time. However, you can not claim days off, vacation days, sick leave, or other leaves of absence.

Should I Use the New Flat Rate or the Existing Detailed Method?
The new flat rate method is designed to simplify the process for claiming home office expenses. However, the flat rate method may not be the best option for everyone. If you were already working from home prior to 2020, or have a larger claim, you can continue to use the existing method for claiming home office expenses. The following chart breaks down the key differences between the two methods:


Temporary Flat Rate Method Existing Detailed Method
• You can claim $2/day you worked from home due to COVID-19 up to a maximum of $400 • You can claim the actual (full) amounts you paid, regardless of COVID-19
• You do not need to keep documents to support your claim • All amounts claimed must be supported by documentation
• Your employer is not required to complete or sign any forms • You must have a completed and signed T2200S/ T2200 form from your employer

 

Have Questions?
The health and well being of you and your businesses is our number one priority. If you have any questions at all about the Government of Canada’s COVID-19 response or how it might affect your business, please don’t hesitate to reach out. Or click here to see the CRA’s list of frequently asked questions related to home office expenses for employees.

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COVID-19 Tax updates – What you need to know.

Our thoughts are with you and your families during the unprecedented situation surrounding COVID-19. We hope you and your loved ones are doing well and staying safe.

We would like to assure you that we are staying on top of changing circumstances and will do our best to keep the public apprised of any essential information as it applies to your tax filings. With that in mind, please be aware that the Canadian Government has announced today that it is extending the tax filing deadline for anyone who has yet to file. The new filing deadline is June 1, 2020. In addition, the deadline to pay off any outstanding balances interest-free will also be extended, this time to July 31, 2020. Furthermore, taxpayers will be allowed to defer tax payments until after Aug. 31, 2020 for any amounts that are due after today and before September.

As you are aware, the situation is rapidly evolving with new announcements and government responses being rolled out daily. Our team is monitoring the situation closely and will continue to keep you informed as more information becomes available.

In order to do our part and help avoid the spread of the COVID-19 virus, we are limiting in-person meetings. However, we are still available for video chat or phone calls. In fact, your personal taxes can be filed completely virtual by us. If you have any questions, please feel free to contact the CPA Plus team directly at (613) 413-8272. We are also taking advantage of the extended deadline to reduce office capacity until April 5th. Please be advised that email responses may be a bit delayed during this time, but we will do our best to get back to you promptly.

Stay safe.

Yours truly,

CPA Plus

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Corporate Year-End Checklist

Either your year-end is coming up in a few weeks or a few months from now, it is always a good idea to start early on preparing your accounting information. This will save you and your accountant a lot of headaches and will make filing to the Canada Revenue Agency (CRA) a lot easier. For most businesses, fiscal year-end typically falls at the end of the calendar year, making it already extremely busy for accountants in the New Year.

This is a checklist that will help you prepare and plan out the year-end tasks ahead of time. Avoid the last minute stress and prepare all your accounting documents early.

• A copy of your Quickbooks database. If you are using cloud accounting, please invite us to your account
• Last year’s trial balance to ensure that last year’s financial statement amounts have not been altered
• Bank statements (along with cancelled cheques), credit card statements, loans and line of credit statements
• All revenue source documents for the fiscal year. This would include all invoices issued to customers and cash register tapes
• All expense source documents for the year. This would include all invoices paid to vendors.
• Cash on hand amount at year-end
• Account receivable list (customers that you billed that you have not collected from yet) and accounts payable list (vendors that you still owe that already serviced your business), if applicable
• Cost of inventory with details of inventory items at year-end
• Capital assets purchases and disposals during the fiscal year
• The latest government correspondence (i.e. GST/HST, Payroll deductions, WSIB)
• Lease agreements, finance contracts and loan agreements
• Payments or withdrawals made by shareholder
• List of any employee benefit to report (i.e. company vehicle)
• List of insurance policy amounts and dates of expiry.
• A copy of last year’s financial statements
• A copy of last year’s corporate tax return, along with Notice of Assessment

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GST/HST Quick Method and How It Can Save You Money

The quick method is another accounting option available to help small businesses calculate their net tax for GST/HST purposes. This method reduces paperwork and makes it easier to calculate GST/HST remittances and file GST/HST returns because it eliminates the need to report the actual GST/HST paid or payable on most purchases.

That’s right. There is another option where you can file your GST/HST remittances that saves you a lot of time on paperwork. Also, if you are operating a business where you do not claim much input tax credits (ITC), you save on the overall GST/HST balance using the Quick Method.

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