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jrnicholson91
New Member

I haven't filed taxes since turning legal age in Ontario, I am almost 24, self-employed freelance writer paid in USD via Upwork.com - what should I know?

I wanted to detail my situation and get your opinion on how to move forward.

Thank you in advance for your time.

I am turning 24 years old next month and plan to file taxes for the first time. The last time my taxes were filed was when I lived in Ontario, and it was either for the year I was 17 or 18 years of age. You become legal age a year earlier up there, so my mother stopped filing for me when I was an 'adult' as I ended up living on my own anyway; so, I have that year where I'm not sure how it's handled, I was a minor still I think as I moved to New Brunswick when I was 18, making me under the age of majority again? Weird circumstances I suppose.

Next, I only had t4 income one time and for about $450 for a call center job in 2011. This was not filed, I have never ever filed on my own.

I had small bits of income but financial support from my mother was repaid. This was a few hundred here and there, never in a year was it in excess of $3,000 until this year.

Now, I stand to make about $8,000 for the year, $11,000 max if I get a project done fast enough. Most likely the lower number for 2015 will be my stated income. 

I would have all my previous GSTs coming back to me.

I just purchased a new work computer under my mother's credit card -- is there a way that can be proven as a deductible for me?

I work purely from home. My pay is denominated in USD and I am a freelance writer. I work with the same clients some of the time, and other times I'll bounce between many. There's no business name behind it, I'm just representing myself as an individual freelancer, working through Upwork.com mainly -- which means my pays are pretty well documented overall. 

The site itself takes a 10% fee, PayPal takes a fee and also charges 2.5% on the conversion, I assume these are all deductibles in a way? I have some charitable contributions, I moved for family (required, custody related), from Ontario to New Brunswick in this year as well. I do not really have any other expenses...my home office space, I'm not sure if I should try and claim this year or be a minimalist to avoid the audit. 

This year I am living with my children's mother (we have a 2 year old, an almost 1 year old, and another on the way), and it's our first year living together enough to file together. She is on maternity leave until next month and was in the hospital at the start of this year so her earnings, besides EI ($1200/mth) from the year, would've been under $2,000, probably way less.

Next year I stand to make a lot more, so I need my taxes in order even if I don't owe any now. We could have a household income in the $40,000 - $60,000 range by then.

In previous years our child was claimed only by my partner, now we will be filing together with two children. Her being on EI as well, I am not sure how this impacts our tax finances as a whole, but any input on that?

Any questions you have? What should I know? Anything you suggest I do in particular?

Thank you very much!

Jason

1 Best answer

Accepted Solutions
Delphision
New Member

I haven't filed taxes since turning legal age in Ontario, I am almost 24, self-employed freelance writer paid in USD via Upwork.com - what should I know?

Jason:

You can get prior year TurboTax software here back to 2010.

http://turbotax.intuit.ca/tax-software/prior-year-taxes.jsp

You are not eligible for GST or other provincial credits until your nineteenth year, so I wouldn't worry about filing before that time.  If you make less than $11,138 give or take, your personal deduction, you do not have to file at all.

If you make between $8,000 and $11,000, you will get your GST refund, and the WITB, but you will not be able to take advantage of any of the home office expenses.  You are not allowed to use those expenses to create or increase a loss.

You would not be able to claim child care if one of the parents is at home.  You can only deduct child care if you are working or going to school. You do not have enough income to use a deduction and your partner would not be eligible.  For that reason, the subsidy for child care may well be in doubt, but she may be eligible for respite.

You can file "connected" returns, but each one of you must file a separate tax return.  There are no joint filing options in Canada.

You would report your sales, use the Paypal fees, and other fees as deductible expenses, and you would report the US exchange as income as well.

Your partner may be earning more income than you on mat leave, and it might be of more benefit for you as a couple, if she reports your earned income, and claims the spousal amount for you as well as the child credits.  From what you have said, I don't think it likely that either one of you will be paying any income tax, or should, at least, get any that was paid back.  If you are not paying or owing any tax, none of the tax deductions will benefit you.

The family tax credit compares the tax rate between higher wage earners and lower wage earners in order to decrease the tax payable by the higher wage earner.  In your case, it make not make any difference if you are both in the same tax bracket.

You would be wise to do some research at http://www.cra-arc.gc.ca/ndvdls-fmls/menu-eng.html

Also, a discussion with an accountant or other tax professional will help you going forward.


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4 Replies
Delphision
New Member

I haven't filed taxes since turning legal age in Ontario, I am almost 24, self-employed freelance writer paid in USD via Upwork.com - what should I know?

Jason:

You can get prior year TurboTax software here back to 2010.

http://turbotax.intuit.ca/tax-software/prior-year-taxes.jsp

You are not eligible for GST or other provincial credits until your nineteenth year, so I wouldn't worry about filing before that time.  If you make less than $11,138 give or take, your personal deduction, you do not have to file at all.

If you make between $8,000 and $11,000, you will get your GST refund, and the WITB, but you will not be able to take advantage of any of the home office expenses.  You are not allowed to use those expenses to create or increase a loss.

You would not be able to claim child care if one of the parents is at home.  You can only deduct child care if you are working or going to school. You do not have enough income to use a deduction and your partner would not be eligible.  For that reason, the subsidy for child care may well be in doubt, but she may be eligible for respite.

You can file "connected" returns, but each one of you must file a separate tax return.  There are no joint filing options in Canada.

You would report your sales, use the Paypal fees, and other fees as deductible expenses, and you would report the US exchange as income as well.

Your partner may be earning more income than you on mat leave, and it might be of more benefit for you as a couple, if she reports your earned income, and claims the spousal amount for you as well as the child credits.  From what you have said, I don't think it likely that either one of you will be paying any income tax, or should, at least, get any that was paid back.  If you are not paying or owing any tax, none of the tax deductions will benefit you.

The family tax credit compares the tax rate between higher wage earners and lower wage earners in order to decrease the tax payable by the higher wage earner.  In your case, it make not make any difference if you are both in the same tax bracket.

You would be wise to do some research at http://www.cra-arc.gc.ca/ndvdls-fmls/menu-eng.html

Also, a discussion with an accountant or other tax professional will help you going forward.


jrnicholson91
New Member

I haven't filed taxes since turning legal age in Ontario, I am almost 24, self-employed freelance writer paid in USD via Upwork.com - what should I know?

Thanks for the fast response Lee,

I can get a new copy of my t4 from 2011, for sure.

I do not have any bank statements or anything like that from back then, but also nothing else would be tied to my Social Insurance Number as any income was just spread out and over the Internet. At the end of the day, it was all very small amounts though and proving that probably just comes in if I get audited. 

The complex part is the income is paid online into my partner's name, it goes through her bank account on my behalf; although, since we are filing together for this year and I was paid to my bank for the 2011 income, I don't see this being an issue.

Should I avoid going for my deserved deductibles? ~$475 computer on my mother's credit card (to be repaid to her this month), I solely pay for rent which is $1,275 with Internet and utilities included, my office space this year is part of a master bedroom but will be it's own 24/7 room next year. I have a paper lease here as proof of cost, signed with my partner, but we only have it since we moved here in about May.

My 2014 income is all from self employment. It will be claimed most likely $8,000 to $10,000 we will say. I will be claiming as common-law with my partner, with two dependents (2 year old, 1 year old) as well. I understand the income splitting tax credit is getting taken away; will this affect my options? 

Do I qualify for the Working Income Tax Benefit? Are there any kickbacks or deduced costs because I have two children claimed under me? Does she claim the UCCB in her income since it goes to her bank account?

Will my USD pay really mean anything, as in other types of forms or anything I have to do? It converts from USD to CAD from PayPal; if I am claiming the fees taken away by PayPal and Upwork, which is like 13% of my initial pay, it would help me ... so just claiming the CAD deposited to bank account doesn't make sense -- and is incorrect from an accounting standpoint, right? But if my pay is in USD and it sits in PayPal and the exchange rate makes it worth more in CAD by the time I withdraw it, do I pay even more because of that little gain?

Side question, in case you have insight: we are about to have our third child and working from home has proven to be challenging, I plan to upgrade to a larger rental soon; if we were to put our oldest in daycare, would we still get subsidy even though the child's mother would be at home watching the other two? Would we get the full amount like anyone else (unless I earn more of course) or do we get less as a result? Does my self-employment factor into what we get or mean we can't qualify?

I find my situation to be complex, or at least outside of the norm. There are many little parts that need broken down ... I'm probably missing a few important points, but would you be able to cover those?

Thank you once again for the help!

Jason

Leeanne-TurboTax
New Member

I haven't filed taxes since turning legal age in Ontario, I am almost 24, self-employed freelance writer paid in USD via Upwork.com - what should I know?

You are very welcome Jason

Lets start with the easy stuff. 🙂

Line 117 - Universal child care benefit (UCCB) If you had a spouse or common-law partner on December 31, 2014, the one of you with the lower net income must report the UCCB. Report on line 117 the amount shown in box 10 of the RC62 slip

Working income tax benefit (WITB)

The working income tax benefit (WITB) is a refundable tax credit intended to provide tax relief for eligible working low-income individuals and families who are already in the workforce and to encourage other Canadians to enter the workforce.

You can claim the WITB on line 453 of your 2014 income tax and benefit return. However, eligible individuals and families may be able to apply for the 2015 advance payments.

Most calculations are done automatically by TurboTax based on the information given from T4, spousal and dependant information.

Here is the hard part Jason,

Your income that is going into your spouse's bank , Since it is already converted to Canadian dollars there is nothing more you need to do when entering your revenu however if you do not get receipts to prove this money belongs to you, your spouse may have to claim under her income.

Rent portion for business

Line 9945 - Business-use-of-home expenses

You can deduct expenses for the business use of a work space in your home, as long as you meet one of the following conditions:

  • it is your principal place of business; or
  • you use the space only to earn your business income, and you use it on a regular and ongoing basis to meet your clients, customers, or patients.

You can deduct part of your maintenance costs such as heat, home insurance, electricity, and cleaning materials. You can also deduct part of your property taxes, mortgage interest, and CCA. To calculate the part you can deduct, use a reasonable basis such as the area of the work space divided by the total area of your home.

If you use part of your home for both your business and personal living, calculate how many hours in the day you use the rooms for your business, and then divide that amount by 24 hours. Multiply the result by the business part of your total home expenses. This will give you the household cost you can deduct. If you run the business for only part of the week or year, reduce your claim accordingly. For more information, see Interpretation Bulletin IT-514, Work Space in Home Expenses.

The capital gain and recapture rules will apply if you deduct capital cost allowance on the business use part of your home and you later sell your home. For more information about these rules, go to Line 9936 - Capital cost allowance (CCA).

I hope this helps

TurboTaxLee




Leeanne-TurboTax
New Member

I haven't filed taxes since turning legal age in Ontario, I am almost 24, self-employed freelance writer paid in USD via Upwork.com - what should I know?

Good morning Jason

 in order to get to this years taxes and past credits you will need to file for all the years you missed since turning the age of majority. 

you can obtain forms directly from the government's website http://www.cra-arc.gc.ca/ndvdls-fmls/menu-eng.html

seeing that you had very little revenu in previous years.  

For this year you can chose TurboTax Home and business for online or TurboTax Standard desktop (for windows only) The standard gives you all the forms you will need to file as an independant business ( T2125)

with the T2125 you will be able to claim your computer purchase (amongst other expenses)

I would suggest prior to starting your previous year returns to contact the Revenue Canada Agency if you are or think you may be missing T4's as they would have copies on file.  they are very helpful as well.

I hope this helps

TurboTaxLee


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