Random question if any of the tax experts want to chime in.
How is it determined if commission income is claimed as employment income or as self employed commissions?
If I made a base of $60k and got a T4 but made another $50k in commission, would the commission income generate a T4 or a T4A? How is it determined? Does my employer choose? If it’s T4A, then the employee would claim it a BFS commissions right? But then wouldn’t pay CPP premiums etc on it? And would be able to deduct BFS expenses?
I’m confused as to why some employers pay commissions as employment income and some pay it as self employed commissions. Especially for an employee who earns a base salary as an employee.
DoubleF did a pretty good job there.
The important distinction he makes is the 'exposure to risk.'
Canada is making full employment so expensive that employers have to leverage their risk. So the thing is...does the employee have a pension plan, retirement savings (through the company) and really...are they an employee or not?
If they serve multiple customers to sell goods then maybe they're contractors, but if they sell only one company's goods they might not be?
DoubleF is right on many fronts, but as with most things accounting, the Devil is in the details.
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I guess the confusion comes from a friend of mine is a salaried employee who also gets commission based on sales. She is a full time employee with benefits. Both her regular salary and commission show up on the same paystub.
But she gets a T4 for the salary and a T4A for the self employed commissions. When she files her taxes she claims the salary as line 101 and commission as line 139 (or whatever). She has to have a statement of bus activities. Except she writes off zero expenses. Her gross bfs income is identical to her net bfs income.
I can’t figure out why her employer pays her this way. It’s so bizarre. Everyone I know who is base plus commissions just claims it all as employment income. Why would her employer be slplitting off the commissions like this? She’s not a contractor. She’s a full time employee.
Is something shady going on? She’s doesn’t have much say. Just filed her taxes based on the slips they send her.
I guess the confusion comes from a friend of mine is a salaried employee who also gets commission based on sales. She is a full time employee with benefits. Both her regular salary and commission show up on the same paystub.
But she gets a T4 for the salary and a T4A for the self employed commissions. When she files her taxes she claims the salary as line 101 and commission as line 139 (or whatever). She has to have a statement of bus activities. Except she writes off zero expenses. Her gross bfs income is identical to her net bfs income.
I can’t figure out why her employer pays her this way. It’s so bizarre. Everyone I know who is base plus commissions just claims it all as employment income. Why would her employer be slplitting off the commissions like this? She’s not a contractor. She’s a full time employee.
Is something shady going on? She’s doesn’t have much say. Just filed her taxes based on the slips they send her.
Ooh. That depends.
The thing is, what is she selling? If she can only sell her primary employer's goods then she would be a commissioned employee. There's nothing wrong with that.
If she has a basket of goods from a variety of distributors that would be different, but then her 'employer' wouldn't be issuing a T4A with a Box 20 unless that 'employer' got a cut of her sales regardless of supplier.
I couldnt give you much more of a solid answer without some more details.
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She’s in hospitality. She gets her commission based on the number of bookings that their place gets.
Well if she's just collecting bookings for a single location it would be hard to classify that as 'Self-Employment' unless she has some sort of stake or interest in the location itself.
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there is also a difference on what employment expenses a salaried employee and a salary + commission employee can claim and then there is a complete other set of rules for self-employed as one would expect under our stupid tax code.
Is this actually for real? I’m not a landlord anymore and not a renter either but this seems asinine.
Well...I've been doing taxes all day so my brain is addled and I might not be thinking perfectly, but in my experience the only way this could stand is if the Tenant agreed to be the Non-Resident Landlord's designated Agent.
When someone moves out of the Country and designates themselves as a non-resident but still maintains property but wants to 'cut ties' with Canada they need to have a designated Agent who remits the required monthly taxes on a rented property.
That Agent is usually a Family member, friend or even a paid professional like a property manager and that Agent can be held accountable for Taxes not being paid.
Ergo, the normal procedure would be that the rent would be paid to said Agent, bills paid and taxes remitted and then the excess distributed accordingly and where the Agent would be responsible because the owner is Non-Resident.
If however, the case is that the homeowner duped the Tenant into acting as the Agent? Its possible?
I've never seen it personally.
What annoys me more is that a sitting Judge decided to screw someone else over because he couldnt get at the Property owner. As a Judge...maybe use some common-sense judgement?
Making the Tenant pay it? Who is this Judge? Thats a ridiculous judgement and I hope she gets tossed from the Bench.
And the Tenants aren't 'Expected to Manage it' if their Landlord is a Non-Resident. They have to be duly designated.
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What is the most near-offside activity someone tried to pay taxes for? Im thinking OnlyFans/bordello/etc.?
I didnt really respond to this so I wanted to circle back around to it.
I've been doing taxes for 20 years. This is actually 21 for me, so I've seen some things man ya know...I'm that guy with the 'Thousand Yard Stare' when it comes to taxes.
So the story I'll tell is, many, many years ago, when Mercury was in Retrograde and a much younger, much less cynical Locke was working for a Company, we had someone come in to get her taxes done.
She was a stripper.
Now. There is nothing inherently illegal or off-side about being a stripper. It is a perfectly cromulent profession, however, anyone who has ever worked for tips is hesitant to claim all of their tips.
Its simply an immutable law of nature.
Anyhoodles...this girl got a Boob-Job.
Now. Breast enhancements are largely not an eligible medical expense unless under very specific conditions as outlined by a physician who will expand upon that with a prescription and explanation, and in this young woman's case that was no different.
In the end however, we deducted said Boob-Job as a Business expense, as she...'Rented Pole' and no, I did not make that term up. It means that she was a 'contract' stripper who 'rented pole time' at various venues to make money.
Of course she got audited.
And I successfully argued to CRA that her mammary enhancements required a significant financial expenditure however they also aided in and increased her ability to generate Taxable revenue and as such they shouldnt be considered as an 'Elective Medical Expenditure' but rather as an 'Eligible Business Expense.'
And CRA agreed to that. The concurred.
And no, before anyone chimes in with the joke I've heard a million times, I did not require a 'Mandatory Inspection' of the expense in question.
I am a gentleman.
I did however generate considerable additional business after that based on referrals.
Still a Gentleman.
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What is the most near-offside activity someone tried to pay taxes for? Im thinking OnlyFans/bordello/etc.?
Oh. And about 15 years ago? Drug dealer.
They couldnt catch this guy dealing cocaine and decided to try the 'Capone' treatment.
One of only 2 times I've ever had the Police subpoena my records in 21 years. But the guy classified it as 'Sales of Medicinal Supplements' but as far as I know CRA were satisfied that he paid taxes on every goddamned dime and the Cops had nothing on him.
He's still my client. He runs a small Property Management business now. I actually got him involved in a community-based snow clearing initiative in Haysboro helping Seniors and the disabled shovel their sidewalks.
Really nice guy.
Taxes. What a ride man. What. A. Ride.
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Yeah, as was pointed out (I think by DoubleF) earlier in the thread, independent Accountants dont work for CRA, I work for my clients, come Hell or High Water.
I dont always win, but I always try.
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Is this actually for real? I’m not a landlord anymore and not a renter either but this seems asinine.
A few years ago I had a client receive an invoice from a vendor for about $50,000 + GST. They paid the invoice and I claimed the ITCs on the invoice on my client's GST return. During a normal GST audit the CRA asked for back up and I sent in the invoice. CRA came back to me saying that the vendor was not registered for GST, so I was unable to claim the ITCs. I asked why they didn't go back to the vendor, since the vendor collected the GST, and once you reach $30,000 in annual sales you must charge GST. CRA said the vendor wasn't selected for an audit, so there was nothing I could do. This eventually got resolved, but CRA is asinine at the best of times.
Another client had registered for GST before I started with them. They also had a GST audit. CRA stated the GST registration date was September 1, not January 1, so all GST from January 1-August 31 was denied. I asked why was September 1 the first day of GST and CRA said we requested that date when we called in to them in early January. They said we must have requested forward dating the GST period to September. The company was pre-revenue, so we didn't have any invoices we could back date the GST start date. The only reason they registered for GST was to claim the ITCs, so there was no way we wanted to forward date. My guess was it was called in on 1/9, and CRA took that to mean the 1st of September, rather than January 9th. After several appeals they simply said no. There was a creative way to get the ITCs, but it took way more time and effort than it should have.
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They couldnt catch this guy dealing cocaine and decided to try the 'Capone' treatment.
One of only 2 times I've ever had the Police subpoena my records in 21 years. But the guy classified it as 'Sales of Medicinal Supplements' but as far as I know CRA were satisfied that he paid taxes on every goddamned dime and the Cops had nothing on him.
He's still my client. He runs a small Property Management business now. I actually got him involved in a community-based snow clearing initiative in Haysboro helping Seniors and the disabled shovel their sidewalks.
Really nice guy.
Taxes. What a ride man. What. A. Ride.
Coke dealer turning his life around via snow clearing initiative? You do that on purpose?
Coke dealer turning his life around via snow clearing initiative? You do that on purpose?
First of all it should be noted that the initiative itself is not what caused him to turn his life of crime into being an altruistic member of the community, he did that on his own.
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Heh, "snow" clearing...
Goddammit. I know. I made that joke too. So. Fair enough.
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