Help...too many taxes to pay....Any tax deductions ideas? (Quebec/Canada)
Thread poster: Annie Estéphan

Annie Estéphan  Identity Verified
Canada
Local time: 04:15
Member (2010)
English to French
+ ...
Jan 19

Hi,

Like most of you who are also working as freelancers in Quebec and/or Canada, we pay too much tax at the end of the fiscal year, almost $30,000 for my husband (also a freelancer) and I for both our federal and provincial income tax returns.

Is it possible to reduce those amounts?

We work from home, and our clients are based in the U.S. and the U.K. and other countries, but not in Canada, so we do not charge them QST/GST, but we cannot deduct our travel expenses or entertainment expenses.

Our RRSPs are full, and we paid the maximum allowed amount for childcare costs (day camps, school-day-care services, etc.)

We need to find tax deductions, any ideas for the future?

Because the paper, ink cartridges, and professional associations are not enough anymore...

Because, at the end of the day, after having invested in the RRSPs and having paid for the tax return...there's nothing left.

Since we work from home and that our clients are all foreigners, we cannot deduct expenses for a room, travel expenses or representation expenses.

Should we work less? Or do you have a better idea?icon_wink.gif

Thanks!

[Edited at 2018-01-19 14:34 GMT]


 

Tina Vonhof
Canada
Local time: 02:15
Member (2006)
Dutch to English
+ ...
Just a few ideas Jan 19

That does seem like an enormous amount of tax.

Do you have an accountant? If not, I would urge you to get one. An accountant often knows all those little things you can deduct that you might not think of yourself. It's well worth the cost (also deductable as a professional expense the next year) and if you have a registered or incorporated business, that is a requirement. Your accountant will then compute everything, fill out all the forms, and submit your tax return online. It may be advantageous for you to each file a separate return, look into it.

If you have a separate office that is not used for any other purpose, even it it's just a den or niche, you can deduct a percentage of your rent and utilities in proportion to the size of your office versus your whole house or apartment. Especially if you are both working from home, that would be worth looking into. Check also if daycare is deductable, either from the federal or provincial taxes.

If you incur parking costs when you visit your accountant, go to the bank, etc., those are deductable. Stamps for sending registered translations or UPS for urgent delivery. All professional memberships, such as your provincial organization, LinkedIn, proz.com. All computer expenses, internet (have it separate from your TV and phone under your business name), technical support or software. PayPal or other fees.

I wouldn't know all these things if it weren't for my accountant. I hope this helps.

P.S. Feel free to email me if you have questions.




[Edited at 2018-01-19 17:55 GMT]


 

Annie Estéphan  Identity Verified
Canada
Local time: 04:15
Member (2010)
English to French
+ ...
TOPIC STARTER
Yes Jan 19

Hi Tina,

Thanks for the advices...

I already have an accountant, but I see her once a year and there are no parking fees, I never go to my bank physically thanks to online banking...and there are no parking fees at the bank anyways, I never send anything physically to my clients... everything is done by email,... I know that $30,000 per year to pay in taxes is not huge, but with as much in "forced" RRSPs... it's a lot! Around $60,000 to pay every year... I just thought it was too much...


 

The Misha
Local time: 04:15
Russian to English
+ ...
Have you thought of moving to a more tax-friendly jurisdiction? Jan 20

Either inside your own country or overseas? Never mind that pen and paper. That's peanuts. In the absence of major deductions you could qualify for (which in the US would include mortgage interest, college tuition, retirement contributions, etc.), voting with your feet is just about the only effective solution to your problem. Unless, of course, you are willing to engage in some seriously "creative" accounting.

 

Jessica Noyes  Identity Verified
United States
Local time: 04:15
Spanish to English
+ ...
Courses abroad Jan 20

A translator friend of mine living in New Brunswick, Canada, was asked by someone *from Revenue Canada,* "Why don't you take some classes or attend some conferences? Most other translators spend quite a bit on that." So the next year she took a one-week stage in France (and did a week of sight-seeing.) The cost of the course, the plane fare, and food and travel during the course were all deductible, although the expenses during the vacation week were not. Another year, similarly, she went to Colombia.
I mention this because it appears that you might originally be from a country other than Canada. If you were to take a translation course near your home town, you could have a fully deductible trip home to visit your friends and family.
Naturally, it would be your accountant who could tell you if this is correct.

[Edited at 2018-01-20 14:19 GMT]


 

Annie Estéphan  Identity Verified
Canada
Local time: 04:15
Member (2010)
English to French
+ ...
TOPIC STARTER
Thank you, Jessica Jan 20

Thank you, Jessica. That's a great idea!

I was borned in Canada, but we travel a lot with the kids to Dominican Republic/Florida (everywhere where it's hotter than here, during the Winter holidays or the Spring break for example).

I always thought of local classes and conferences in Montreal, but I didn't think of that. So we could travel and attend to conferences related to our industry to deduct some part of our trips. Of course, I think we will find more conferences in Florida/or elsewhere in the U.S. than in Dominican Republic, but still.

That sounds great, I will ask more about that to my accountant.

I really love this idea!

From the official sites, I see that we can deduct a maximum of 50% (up to $2,000 per person), and only 2 trips per year, but still, it's worth it:)

But I don't know if the hotel can be deducted only during the days of the conference or a whole week if we decide to extend our vacations...we'll ask about that too.

Thank you so much, I love such advices!


 

Michal Fabian  Identity Verified
Canada
Local time: 04:15
Member (2012)
Dutch to Slovak
+ ...
Some ideas. Jan 20

The best tax-saving tip is to move out of Québec or better yet, Canada. I wish I were kidding.

Some other tips which might have been mentioned already:
a tax-free savings account (TSFA, different from RRSP)
transaction fees to move your money from any foreign accounts to Canada
professional memberships. office furniture. software and hardware.
spend less money (based on your tax estimate, you might be making around 100,000 a year. This makes you very rich).


[Edited at 2018-01-20 19:27 GMT]


 

Annie Estéphan  Identity Verified
Canada
Local time: 04:15
Member (2010)
English to French
+ ...
TOPIC STARTER
spending less...maybe Jan 21

That's funny... I am not rich at all, we make like all our freelancer colleagues around $150,000 (yeah, for both, so it's not too much) - taxes, RRSPs, RESPs, RDSPs (both our kids are autistic), the rent (yeah not that rich after all, the bank doesn't like freelancers), groceries, the car, insurances, 1 ou 2 family trips per year, debts (student loans), activities (the gym, pilates classes, the spa, the movies, the restaurants, you name it)...

and then all is left is a big $0

And repeat, year after year... yes we are forced to invest a lot for the future (to pay less income taxes), but who knows what will happen to us tomorrow, or to the world, will everything still be there one day?...

Maybe we should spend less, but I think that if we work less too, it will help, looks like a "desguised" communist-country, the more you make the more they take from you, so that everybody stays poor, except the Governement friends, even the Minister of Finance, and the PM of Canada are corrupted, all the city mayors, in Quebec, the UPAC (anti-corruption) officials who are supposed to find the corrupted ones are the ones who are corrupted, so we don't have faith anymore.

Yeah, maybe we should move somewhere, but with the kids conditions, we were told that we shouldn't, apparently it's worst out there...

We feel trapped, don't you? I guess every Canadian freelancer here should be in the same situation...

But since we are apparently all "polite" nobody's complainingicon_smile.gif


 

Michal Fabian  Identity Verified
Canada
Local time: 04:15
Member (2012)
Dutch to Slovak
+ ...
Reality check. Jan 21

The median household income in Canada (before tax) hovers around 70,000. "Median" meaning, of course, that exactly half the families make less money, sometimes substantially so. It is only fair, then, that the top income earners should contribute their fair share to the society, especially a society that some people risk their lives to be a part of (apparently, this stance makes one a communist in North America).

I found a shift in attitude and "counting my blessings" really helpful to my overall well-being. If you can afford adequate healthcare for your children, a car, family trips, sports, the occasional social outing, and paying off your debts on top of that, and still come even, well, you are doing more than OK. That being said, there are always ways to further optimize your spending, and your tax situation.

Best of luck!


 

Annie Estéphan  Identity Verified
Canada
Local time: 04:15
Member (2010)
English to French
+ ...
TOPIC STARTER
Right Jan 21

I think you're right, I just realized than instead of looking for tax deductions, I should cut my expenses a little bit:) but despacito since All work and no play...

 

Pavle Perencevic  Identity Verified
Canada
Local time: 01:15
Member (2002)
Serbian to English
+ ...
The pros outweigh the cons Jan 22

Hi Annie,

I think you're being a little too negative icon_smile.gif

Whenever I think my income tax is exorbitant, I remember the wise advice my former accountant gave in her regular newspaper column years ago: don’t complain about the high income tax you have to pay. It only means you earned loads of money in the previous year.

Racking one’s brains over how to pay less income tax is really a waste of time and energy in our line of work as our expenses are generally low. We don’t have to buy new computers, printers and scanners every single year. Even with all the bank fees, membership dues and software and paperclip purchases, my tax deductions rarely amount to more than a couple of thousand dollars a year, not including, of course, the RRSP contributions.

As for feeling trapped, I’m sure at one point or another we have all felt trapped in this routine of working and earning and paying bills, only to be left with a little more than squat at the end of the month. All work, no play – I understand that. However, people who haven’t lived in countries less fortunate than Canada often don’t know how good they have it. While I agree with you that your family’s income of $150,000 a year is not what most people in the West would associate with being rich, it most likely puts you in the top 10% of Canadian households in terms of annual earnings. I’m sure you will agree with me that it’s much better to live in a $150,000 trap (one that includes pilates classes and trips abroad) than in a $50,000 one, which allows a much more reduced existence. Not to mention the trap of living on two dollars a day or being a refugee.

Don’t forget that we all have a choice. No one is forcing us to do what we do. We can get off our hamster wheel and try something completely different at any time. Nothing really stops us! So, the trap is to a great extent of our own making.

Another reason not to despair – you are your own boss in this so-called trap. You don’t have to put up with the toxic atmosphere of an office. You’re not a little cogwheel in a big corporation, but a stand-alone wheel with its own sense of direction. And knowing that you have been able to carve out your own niche and be successful in a free market should really make you proud of yourself, not grumpy. There are way worse jobs than this – and a lot, if not most, of them pay nowhere near what you get.

Finally, paying more tax because you earn more hardly makes Canada a “disguised Communist country”. Just knowing that some of that income tax will actually be used for good purposes such as education, health care and pensions (including eventually your own) and for helping those that need help should also give us at least some comfort.

I also think it is much better to pay your RRSP contributions to save money for the future and reduce your income tax now simply on the off chance that the world will indeed still be there in 20 or 30 years’ time. Again, we have a choice. Nobody’s forcing us into the RRSP scheme year in year out. We can use that money, for instance, to buy gold bars and keep them buried in our backyards for a rainy day. Just an idea – and probably not a good one! I don’t claim to know what’s best. I doubt anyone can give you universally reliable advice on that. I’m just saying we always have choices, and making RRSP contributions is probably not the worst of them.

As for moving out of Canada – I too would recommend against it given your kids’ condition. It really is worse out there. The only place I can think of as possibly being capable of providing better care would be Scandinavia. But there you would have to pay way more in income tax than you already do in Canada! Also, moving your entire life, including your children, work and finances to another country or continent, while hardly impossible, can be pretty traumatic. One should really weigh one’s options depending on one’s particular life situation.

As for corruption in Canada, I would guess that it’s more or less on the same level as in other Western countries, with Scandinavia probably being on the low end of the corruption scale. There are countries with much, much more corruption than there is in Canada. Again, you don’t know how good you actually have it in Canada! Case in point (true story): the minister of defense of an unnamed Eastern European country was discovered a few months ago to have paid EUR 250,000 for an apartment in the country’s capital in cash. The median net monthly income in this hotbed of corruption is about CA$ 300.00. Said minister earns between CA$ 1,500 and 2,000 a month, which is high by that country’s standards, but still nowhere near enough to account for the gigantic cash splurge. Critics worked out that it would have taken him 14 years (without eating or drinking anything or buying any clothes at all) to come up with enough money for the purchase in question. When asked about the origin of the money, the minister said: “My wife’s aunt in Canada gave us a loan!” Yeah right. When told that there were no records of such a transaction in any bank, he dug himself further into a hole by saying he had made numerous airplane trips to Canada over the previous several years, bringing the maximum allowed amount of EUR 10,000 in cash from Canada on each of these trips. Hence, no bank records! Needless to say, there has been no real official investigation or prosecution, and he’s still minister of defense.

Anyway, whatever the level of corruption in Canada, it is hardly the reason for complaining about income tax. One can condemn or even actively fight corruption while still paying one’s fair share to society. The two do not exclude each other.

One of the best things a person in our position can do is invest in one’s health by following a reasonable, healthy lifestyle. Other than the obvious benefit of a longer health span, this will also ensure that you can be productive and able to work longer years if necessary just in case things do get much worse two or three decades from now. Your earning power is your biggest asset, especially if your net worth happens to be on the low side.

To sum it up: keep working, think about the pros rather than cons of your job, stay healthy and out of debt and pay your taxes without thinking twice. And try to have some fun in the process!


 

Laura Messer  Identity Verified
Canada
Member (2014)
Spanish to English
I concur with Tina Feb 2

I concur with Tina's suggestions. You can also deduct any new computer/office equipment you buy as well as dictionaries, etc. You can also deduct the costs for any services related to your business (email, website, advertising, etc.) If you file a GST/HST return, you should get a small refund for the tax on the items you buy from Canadian businesses since most of your clients are outside Canada and thus zero-rated for sales tax.

I also find it helps for tax planning to try to put about 35% of what I earn into savings. This covers tax and any expenses that come up between the times I get paid. When tax time comes around, the money is already there to be transferred to CRA and I am not scrambling to come up with a big sum.


 

Erik Freitag  Identity Verified
Germany
Local time: 10:15
Member (2006)
Dutch to German
+ ...
High tax? Feb 3

Sorry if I’m raining on your parade, but I don‘t think you‘re paying that much after all. Now I know that you can‘t compare figures for different tax and social systems directly, but still: In Germany you‘d be paying approx. 52000 CAD at your level of income, and I wouldn‘t consider Germany particularly unattractive for taxpayers, at least when compared to other, similarly developed countries.

I also fully agree with what Michal and Pavle have contributed.

That said, you should of course try to deduct as much as possible.




[Edited at 2018-02-03 08:26 GMT]


 

John Fossey  Identity Verified
Canada
Local time: 02:15
Member (2008)
French to English
Quarterly tax payments Feb 3

One other thing is to make sure you are paying your quarterly tax prepayments on time to CRA and Revenu Québec that you are required to do as a self-employed person. That helps relieve the tax shock at the end of the year when you figure out your year-end tax bill, because 3/4 of it will already have been paid. What I do is save a certain amount each week into a separate Tangerine bank account, which is rather like what an employee has deducted from their paycheque. Then when the quarterly tax payment is due the money is already set aside.

If you don't pay the quarterly tax prepayment when it is due (March 15, June 15, Sept 15 and Dec 15) you will be assessed interest and a penalty, which can be avoided.


 


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Help...too many taxes to pay....Any tax deductions ideas? (Quebec/Canada)

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