Client was working out of province doing sub contract work. It is the same kind of work he does at home under his registered business. He was wondering if to put his income and expenses under his Corporate or Personal Tax Return. He stated that there wasn’t much profit if any. Here is my reply.
If you charged the company you were doing sub contract work for GST/HST then you will have to claim all income and expenses under your business. There is no choice on this matter. If however you charged them GST/HST on only part of your sub contract work then you can divide up the income between your Corporate and Personal Tax Returns. By doing it this way you will also have to separate all of your expenses to match the dates for each pay period.
It is important to remember that if you charged and collected GST, that the company you charged it to will be claiming it back. The government a few years ago hired more auditors to go over GST returns, as well as Corporate and Personal tax returns. This is one department in the government that does earn their keep. I have seen GST return audits in the past with not so good things happen to those that GST was paid out to. Some were collecting it without having registered for a GST number. Others that had not filed a GST return for years but were collecting it. So the government in turn knew these companies were active and wanted their money.
If no profit was made and you didn’t take money your of your business or didn’t charge any GST to the company you worked for then claim it under your personal tax return. The loss can be carried forward to when you do make more money. If you did take money out of your business to pay for some of the expenses then this would be a draw and you will have to pay taxes on your draws. But this may be minimal if you didn’t make a profit.
The government likes the taxes paid immediately on owners draws. As they consider this stealing from the Corporation and more importantly stealing from the CRA. This is why I recommend setting up payroll for the owner under a Corporation. The payroll taxes are paid monthly and a T4 is issued once a year. Very clean and simple.