February 26, 2024; Accounting Live Session
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In this engaging and informative video, Carmela Pirillo, a seasoned CPA from Aurora, Ontario, takes you on a journey through the complex world of accounting for Amazon sellers. With nearly two decades of experience, she dives into essential topics like tax reports, bookkeeping practices, and the benefits of using her expertise. The session primarily features a live Q&A format, allowing viewers to ask pressing questions about tax obligations, expense claims, and the nuances of operating as either a sole proprietor or a corporation. Whether you're just starting out or looking to refine your accounting processes, Carmela shares insightful advice aimed at optimizing your financial strategies and navigating the intricacies of the Canadian tax system. Join the conversation and empower yourself with knowledge to enhance your Amazon selling experience!
Key Points Summary
Introduction to Carmela Pirillo Timecode: 0:00-3:30 Carmela Pirillo, CPA from Aurora, Ontario. Began her journey as an Amazon seller in 2016, gaining insight into Amazon's backend and tax processes. Transitioned to helping other Amazon sellers with accounting and bookkeeping since 2019. Focuses on small businesses across several Canadian provinces.
Q&A Session Format Timecode: 3:31-7:30 The session is informal, encouraging open dialogue regarding accounting and taxes. Carmela has been assisting members with their tax queries through a dedicated chat. Prepared questions and audience inquiries will drive the discussion.
Pricing and Services Overview Timecode: 7:31-20:00 Standard hourly rate for accounting services is $70. Bookkeeping offered on a flat monthly rate after assessing initial workload. Prices for sole proprietorship tax returns range from $400 to $850; corporate tax returns between $1,500 and $2,500. Additional offerings include financial statements particularly useful for banking or funding applications.
Sales Tax Clarifications Timecode: 20:01-38:00 Amazon collects and remits sales tax for registered sellers; sellers need to update tax settings upon registration. Distinction between HST and PST is crucial; specific rules apply to each province. Importance of updating accounts promptly to avoid disallowed claims during tax filings. Recommendations on managing taxable income and expenses effectively discussed.
Tax Filing and Business Expenses Timecode: 38:01-79:00 Discussion of how to manage home office and vehicle expenses; clarity on documenting and claiming these expenses. Importance of keeping accurate records of expenses, including donations for potential tax benefits. Tips on bookkeeping practices, including using tools like QuickBooks or A2X for streamlining accounts.
Transitioning from Sole Proprietorship to Corporation Timecode: 79:01-103:00 Detailed steps and considerations for transitioning to a corporation, including potential tax implications. Importance of keeping personal and business expenses documented. Strategies discussed for managing corporate tax burdens, including dividend payments and shareholder loans.
Final Q&A and Closing Remarks Timecode: 103:01-119:00 Addressed final questions regarding starting as a sole proprietor and the need to file taxes during loss periods. Affirmed the value of having an accountant for navigating complex tax regulations, especially with corporations.
Conclusion Timecode: 119:01-End Acknowledgment of audience engagement and value received from the session. Emphasized the importance of consistent bookkeeping and understanding business finances for success.
Detailed Summary:
In this comprehensive session, Carmela Pirillo, a CPA from Aurora, Ontario, introduces herself and shares her career journey, starting as an Amazon seller in 2016. After facing challenges with her Amazon venture, she transitioned into accounting for Amazon sellers by providing guidance on taxes, bookkeeping, and related processes. She emphasizes her experience in assisting various small businesses and the importance of understanding the tax implications that come with selling on platforms like Amazon.
The meeting primarily revolves around a live Q&A format, encouraging participants to ask questions on taxes, accounting, and bookkeeping without any strict formalities. Throughout the discussion, Carmela highlights the significance of seeking help with accounting, especially for those who may not yet have their own CPA, noting that many traditional accountants can charge substantial fees for consultation. Carmela offers her support and willingly answers questions from participants to eliminate any intimidation they might feel in reaching out for assistance.
One of the main topics discussed is Carmela's pricing structure for her accounting and bookkeeping services. She mentions that her hourly rate is $70, with flat monthly rates for bookkeeping depending on the workload assessed within the first month. She provides insight on personal tax return prices and mentions that her services do not usually extend to personal tax returns unless they are tied to a business. For sole proprietorships, her pricing ranges from $400 to $850 based on the complexity and activity of the business, while corporate returns tend to start from $1,500 to $2,500.
Carmela answers questions related to HST/GST registration and sales tax responsibilities for Amazon sellers. She clarifies that Amazon is required to collect and remit sales taxes on behalf of sellers, provided they are not registered for HST/GST. Once registered, sellers must ensure that their tax settings in Amazon are updated accordingly to avoid any discrepancies that could lead to tax audits. The conversation touches on the implications of not having tax settings in place and the need for sellers to stay informed about their obligations.
The importance of maintaining thorough records and documentation is also emphasized, especially when it comes to preparing for potential audits and ensuring that returns are accurately filed. Carmela advises participants to keep receipts and records organized, stating that CRA is generally reasonable but can be strict about documentation. She also touches on the significance of keeping accurate inventory records, as well as the potential advantages of maintaining a precise mileage log for trips involving business activities.
In terms of tax strategies, an overview is given regarding the separation and treatment of personal versus corporate expenses. Carmela explains the necessity of backing out personal expenses when accounting for business-related costs and discusses claiming expenses like transportation fees, storage costs, and other necessary business expenditures.
As the session progresses, participants inquire about specific situations like transferring inventory between sole proprietorships and corporations, and the implications of choice of year-end dates for corporations. Carmela provides insight into how profits are assessed, when to classify payments as dividends, and the corresponding tax implications.
Overall, Carmen presents a wealth of information, making the discussion valuable for both new and seasoned Amazon sellers. She encourages participants to consult professional accountants for accurate financial reporting and is willing to assist through one-on-one consultations, emphasizing the need to maintain good financial practices from the onset of their business ventures.
In summary, participants are reminded of the importance of keeping track of their business progress, understanding tax obligations, and reaching out for professional guidance when in doubt. As the session wraps up, there's an expressed appreciation for Carmela's dedication and the information shared during the Q&A. Participants leave with a clearer understanding of their financial responsibilities and the tools needed to succeed in their businesses.
(00:00) we are going to get started here so I'm just going to start the recording now so if you want to just um start us off with uh Carmel do you want to just introduce you yourself to everybody sure um hi everyone my name is Carmela Pirillo I'm a CPA in Aurora Ontario um I've back in 2016 I used to be an Amazon Seller um that's kind of where I started getting familiar with what I like to call the Beast cuz that's Amazon I'm sure a lot of people will agree with me um so anyway that Venture kind of Tanked um it was about three
(00:38) years long so that's where I started sort of um getting to know the back end of Amazon in terms of the tax reports that sort of thing um and then back in 2019 I thought you know what like maybe I can use that experience um for for other people so that's how it started um I got into some Facebook groups and I guess the rest is history um I have a lot of Amazon sellers at the moment both sole proprietorship and corporations uh they you they mostly come from BC Alberta Saskatchewan Manitoba and Ontario so that those are
(01:19) the provinces I work in um I've been at this game I suppose for almost uh 22 years so I've been in accounting for a long long time um and yeah so I I just focus on small businesses um being a small business myself I kind of know the the aches and pains that uh you guys go through um and so you know I'm here to help as uh best I can excellent thanks carela yeah and so yeah with everybody um what we're going to be doing is more so just a a live Q&A session with Carmela so nothing super formal so I do have some prepared questions um
(02:02) just in case everybody else is shy um but yeah just a opportunity to have a lot of good back and forth and specifically all related around taxes accounting bookkeeping and those types of processes right so yeah and then also for those that don't know uh Carmela has graciously been our in-house CPA for uh it's been uh a couple months now where she's been providing everybody personal um helping out everybody as answering their questions in their accounting and tax Channel and I think that's been a super great benefit to a lot of the
(02:34) members uh because like I said with Carmela um before we got the session started especially with those that don't have their own CPA already behind them sometimes it can be intimidating to try to ask questions to somebody that you don't know um and I found that there are some accountants that even just to have a brief conversation with them and ask questions they'll charge you massive amounts of money which I've never been a huge fan of just to to answer just basic questions around accounting so Carmela has graciously uh volunteered her time
(03:04) to answer any questions that she can in her chats here okay so if um I mentioned everybody that you should come with all your questions comments ready uh but I will start us off and then of course anybody else Always Feel Free at any time to just either cut in or um put your questions in the the uh voice Channel chat here and then we can get them all addressed if you don't want to come on the mic uh but Carmela did you want to start us off with just kind of giving us an indication of what kind of price range uh you personally charge for your
(03:41) accounting and bookkeeping services sure um so our bookkeeping is pretty much a flat rate um you know if people prefer something more of a fixed rate per month what we usually do is we'll you know ask to do a month of the bookkeeping and kind of see how long it takes and then quote from there but our hourly rate is $70 an hour um and that's just basically you know I we prefer you know if you do it on a monthly basis just because it keeps your books up to date so you can use your uh reports uh to manage but also you know it keeps
(04:18) kind of the flow because right now January February March is a huge influx of bookkeeping work right during tax season so that's just an aside has nothing to do with the pricing but um so there's uh personal tax returns so we generally don't do personal tax returns unless there's a business connected to it so that would be a sole proprietorship um or if you have a corporation um soulle prop returns can range from about $400 up to about 88850 and that really depends on how much um you know I don't want to say handholding you know because it it's not
(04:59) a negative thing we don't mind helping you through it and educating you through it so that next year you know maybe you can do some of that on your own but um yeah so it all depends just how much handson you do need um and how active your business is uh some people you know have only a month or two of activity because they started late in the year so I take that into account uh corporations you know same thing depending on how active the corporation is or how new it is is um but typically you can see pricing from about $1,500 up to$
(05:35) 2500 and with corporations it's a little different um there's a tax return involved but sometimes there could be financial statements now these are not the statements that you would print out from your software it's actual compiled financial statements so they would be signed by me um and these are these statements are normally required um if you know let's say say you need funding and you're going to a bank or you've got another lender they might want to see your financials um what I usually advise is in the first
(06:08) couple of years if you've got you know minimal sales or losses those financial statements might not do you a world of good right so why are you paying for them so I offer packages with and without the [Music] statements excellent it does look like we have a couple questions coming through on the chat here uh Rizzy just asked he had a question about taxes uh he's a relatively newer Amazon Seller so he his question is uh does Amazon remit taxes on your behalf or on behalf of the sellers yeah that's a good question um
(06:45) so when we say tax or when Amazon remits tax we're always talking about sales tax because I know some people get confused between tax income tax and sales tax so Amazon if you are not registered for HST or GST depending which province you're in um then Amazon is obligated to collect and remit the the sales tax to CRA on your behalf um as soon as you register for HST you need to let Amazon know you add that in your tax settings you ensure the proper tax codes are chosen for your listings and then Amazon will remit the sales tax to you in your
(07:28) payouts with that Carmela I know it wasn't the case up until like maybe just recently but do you know if that's also the case with every individual Province for like PST numbers yeah yeah it is um except for so uh HST GST HST it's for every single Province including Quebec and I say including Quebec because they have slightly different rules but for GST HST it's right across Canada um for your PST so I've actually I've got that here so for um Manitoba Saskatchewan uh British Columbia Amazon is obligated to collect
(08:15) and remit on the sellers behalf um so as long as you're only selling on marketplaces like Amazon Walmart Best Buy then you're fine but as soon as you start to venture into Shopify or you have your own website if you live in the provinces where there is PST um you may need to register and start collecting on those sales can I follow up on that Jordan yeah definitely so hi Cara it's hi so I am a new seller and um I recently we recently hit the 30k mark um and and we recently just registered in December because that's
(09:02) when we we didn't really know what's what's going to happen and we that's why we we didn't really register in the beginning and so when we hit that 30k Mark um that's when we registered so so do we have to now I haven't really updated my uh tax information on our account and so what what happens then um what what steps do need to take um to make sure that uh Amazon is reporting our taxes in in that sense because we really didn't have you didn't know until you told us told me right now yeah yeah you're not [Music]
(09:47) the only one actually um I'm going through a couple of audits right now with HST um so have like the first thing you should do is in your tax settings add that nine-digit um HST GST number and soon as you do that you should update your listings as well so each listing will have a product tax code to assign to it and I mean some people will say well I don't need to do that if I've put the HST number in I found in some cases of my clients um it wasn't Amazon wasn't charging the proper tax so I just do it like you know as just to kind of
(10:28) foolproof the thing so that you know that the proper amount will be collected because if Amazon doesn't collect the right amount you're going to be out of pocket because CRA still wants their money right so um you choose the proper tax code and that if it's a taxable item it should be aore genore tax um and so that's the first thing you should do um so if you can do that today you know if you haven't already then that's what you need to do um when you're filing your HST return or GST return for 2023 um you know you can't say that
(11:09) you've collected anything because you haven't so you're going to have to report your sales and show that zero was collected because that's the truth um so your return could be picked up for audit but if that's the case all you have to do is um you print out your sales summary report and at the bottom right it'll show what Amazon has withheld in taxes and basically you know this is what we do we provide that and we provide basically you know an explanation saying uh I believe you cut off there Carmela might have just briefly got dis
(12:09) connected oh jeez okay sorry maybe my internet is uh you know I'm sharing my internet with a gamer in the other room so that's that's okay I can hear you now so um sorry what were you mentioning about uh the return getting picked up for audit yeah so because you're going to have to report your sales on the HST return but you also have to indicate that zero amount was collected because Amazon collected not you so um that might get picked up for audit because that's going to look a little odd to CRA and then we explained that under the
(12:49) marketplace tax collection rules Amazon has had been collecting and remitting and we can show them the annual sales summary report cuz at the bottom right it'll show exactly what tax was withheld uh by Amazon so that's kind of how we're handling the HST audits um and up until now we've probably had a handful of them come through and CRA accepts our explanation so there's nothing else to be done does that help thank you thank you for yeah okay rzy in in the chat there I uh put some pass on where to update your tax
(13:28) settings and how to update your individual product tax codes just in case you were not familiar with that oh awesome yeah thank you for sure and then Carmela just to um just to elaborate on that just slightly more so so just to clarify um for those because I'm imagining that a lot of people are going to have this scenario so when you are in the process of registering for GST HST PST Etc um if you don't update those tax settings in Seller Central rway but you are registered you still can technically claim back the taxes
(14:02) from the date that you have registered correct yes correct okay perfect yeah so then we do have oh sorry go ahead yeah just to go I guess going into another possible question a lot of people will ask you know how far back can I claim the HST that was paid out on uh expenses so you can only claim from the date of registration but when you register you can request that the registration be backd 30 days that's as far as they will go without explanation or documentation if you want them to go further you need to go through a whole process and
(14:41) explain why right so I would take the 30 days that they give you and so you know whatever you've purchased in those 30 days you can claim back that will be your date of registration is that clear yeah definitely yeah and then just elaborate on that a little bit as well just for everybody that doesn't know so the whole purpose of registering for GST HST and PST depending on your province is one it's it's it's a legal requirement especially when you hit a certain uh threshold for sales and then for two it also allows you to claim back the taxes
(15:16) that you pay on inventory for the purposes of resale so I know that we've had a lot of people and have had uh quite intense discussions with some people who disagree um but you can claim back all the expens is all the taxes that you pay on inventory for the purposes of resale and then you after you're registered you actually would not count that in as part of your cost of goods and Carmel that's right Carmel I would imagine that you recommend that if before you're registered you would include the taxes of part of your cost
(15:44) of goods and then after you registered you would not include it is that correct yeah absolutely so registration I mean like you said right it one it can make you more competitive with pricing CU you know how horrible it is to compete with each other other you know on on these listings right so if you've got the advantage of getting back your sales tax you know that's a little bit more in your pocket definitely and then we just have a couple questions uh coming in regarding this specific situation and then we'll get on to the other questions
(16:15) as well so uh Jaden mentioned what happens if the item is a grocery item and I still select a default the default agen tax will autocollect and permit even though I didn't pay tax on it yes yeah yeah if you mention that it is a taxable item it's going to get uh tax will be charged on that yeah for sure so then yeah like Jaden with that it's it's going to be up to yourself um as far as I know once you do your initial tax settings and you have your um your default tax settings set up I believe in general most grocery products will
(16:52) default to a gen no tax uh but it will be up to you to confirm that on your personal end yeah so the you know the only way I could suppose because you know there's so many different rules as to what's taxable what's not taxable um if basically when you purchased it you were charged the GST or HST then you know reason goes to you know you have to charge it right so that's the only um 100% way to to know if you get um charged HST you have to charge your client your customer definitely and because we're kind of talking about um
(17:31) General registration um I know like with this specifically you might not be able to give advice on because I know with my accountant like I kind of had to talk to each individual uh tax Authority but do you know if it's required as a seller um like say if you're located in Ontario you're registered for HST do are you required to register for the provinces that have individual uh PST like cuac for qst Saskatchewan PST Manitoba PST or like if I'm in Saskatchewan is it required to register for qst and those provinces
(18:01) Etc yeah so that's a really good question because right now so I've got emails from these provinces um yes so you know this is just an aside that the provinces actually email you but CRA still doesn't email us you know it's just H it's frustrating but anyway I have these emails from uh BC Manitoba in Saskatchewan that as long as you're uh selling on Marketplace so on Amazon you do not have to register so because Amazon has to collect and remit for sure and see like when I did this a couple years ago um I got mixed
(18:46) opinions from all each individual provincial tax Authority because it's okay it's probably dependent on the person that you're talking to and how familiar they are with the process possibly yeah like CRA yeah exactly so like basically um what I personally ended up doing is I ended up I have my inkat and we have to register for GST and PST separately um and and then um I also reg ended up registering for qst in cubec because that's what they specifically told me I need to do if I was selling products or had chances of
(19:16) selling products to residents at cubec I was required to register and remit um qst so I don't believe that was necessarily actually a legal requirement like based on um like what Carmel there and for anybody that's here if you're not in cubec I would highly recommend um you try to not have to deal with Revenue Quebec they can be real pain in the ass to deal with yeah for sure for sure um because it I've had some conversations with uh Quebec but yeah like you said right it different person different explanation
(19:53) and then the language barrier was a little difficult as well um I know for certain the Manitoba Saskatchewan and British Columbia we we don't have to register beautiful and yeah like for for Just For example for qsd based out of Quebec when I first registered uh they would only send me Communications in French until I specifically demanded that they stop doing that all my tax returns and stuff were in French and then they were they were angry with me when I was trying to ask for it in English they're like well you're not
(20:24) based in cubec I'm like no I'm not based in cubec at all and I don't speak French yeah and unfortunately like I did have some Quebec Sellers as clients and I had to let them go because I they were making it so difficult for me to do my job so yeah yeah you know I I you know I I don't know that's just it's a little frustrating yeah forms are in French and that but uh I don't speak French unfortunately so I can't help anybody out there I I will say though I can't prepare returns and and that sort of thing for sellers in Quebec but if there
(21:05) are sellers here you know in in the group that have questions I can help you with questions right so at least you have that part um and unfortunately I don't know anyone in Quebec who handles uh seller um returns definitely we do have uh some sellers that are relatively um high-profile sellers that are based out of cubec so if anybody ever needs recommendations for accountant specifically in cubec good I'm sure that they probably do have some solid recommendations perfect can I just U jump in with a question about the sales tax regarding
(21:44) grocery items so for the most part I don't sell grocery items but occasionally um you know there is an opportunity to pick something up so if I'm set for a gen tax tax will it automatically charge sales tax on those grocery items well on the you know your listing for that grocery item you would actually choose a gen no tax okay so if I'm not creating that listing though yeah my tax settings on Amazon and change it back and forth from the default every time listing no so you would actually go into the specific listing and you can change the tax
(22:33) code and so okay I don't so Gina I'm going to share I'm going to share some screenshots but like so also like in your tax settings on Amazon so like where you enter in your your tax numbers at at the bottom at the bottom of that screen you have a section for your default tax code right so correct you you want to of course U ensure that that is a gen tax um I do I do know that in general um some items most items that are labeled as grocery on Amazon uh even when you have your default tax code set as a gen tax most of the grocery items
(23:09) or I I should say not most but a portion of them will not charge sales tax by default but like what carel mentioned if you want to ensure that they don't get charged sales tax you'll have to edit that individual listing after it's already either while you're listing it on Amazon directly or after it's already in your inventory and then change your individual product code on that individual asent and I'll share some screenshots here to show you so when you go into your inventory on Amazon you click edit just like if you're going to
(23:39) go in there and edit um the price specifically on the back end images Etc then there's the product tax code section where you would uh change that individually so I'll see I'll send a a picture in the chat here so that's really good information to know cuz I don't think most people really understand that whole situation right for sure yeah yeah I got into that you know I guess when they first started changing uh the rules when um Amazon was supposed to collect and remit um yeah people some of them don't even know that there's a a box where you
(24:19) can choose that um it's just I know you know in the past I had to make sure and I you know I'm more like I just want to be 100% sure so yes there's the default in your tax settings I don't know I just don't want to leave it to chance so I and I realize some sellers might have hundreds of listings um and it's painful to go through them but you know it the time you spend now can save you money later but I guess like um to kind of uh add on to this I guess by default the thing that I would imagine that and correct me if I'm wrong carel
(24:58) uh you would want to ensure that taxes are being charged and then if they are being charged on items that shouldn't have taxes being charged it's not going to be necessarily a net detriment to yourself um but you're just going to owe the CRA a bit of additional money that wasn't yours to begin with correct yes okay and and does the same scenario apply when if we're listing groceries in the US um that we'd have to make this adjustment in the to make sure that tax is not being charged so I mean obvious the sales tax
(25:35) wouldn't be charged to anybody you know buying from the states so yeah so if you're yeah um well that's a good question um with okay maybe for follow up later on Carmela yeah yeah no just because I'm trying to you know obviously I I don't know what a listing these days looks like right cuz you know I don't sell so I don't have a an active account but back in the day I mean actually we used to sell in the states too we sold on do so I don't uh recall I think I was doing the I was still doing um tax but it wasn't
(26:27) charging the the um uh the sales tax the Canadian sales tax to this Us customer and of course Amazon takes care of the the um state taxes or the St state sales tax so I don't think that would be an issue if you had a grocery item that said um agen tax I mean I could be wrong Jordan do you experience any of that like do you have listings that would fall under that description so like for us specific um I actually am not a US seller in any capacity um okay I do understand the processes quite well and as far as I'm aware with the US in
(27:13) general for when it comes to uh sales tax um as far as I'm aware the consensus is that you would have Amazon by default collect and remit whatever taxes you have in the US you then get to claim back 100% of whatever you pay for taxes on that purchase so then you're um you should always be experiencing a refund no matter what whenever you're selling in the US for that and then with the the the the tax agreements and treaties that we have with the US I think there's like an additional form or something that has
(27:48) to be filled up when you do your taxes and that more or less takes care of that entire situation yeah so how I understand it too yeah okay yeah perfect thank you both no problem definitely and so um I am going back and forth with everybody's um questions on on the chat here I will get addressed to everybody but if if there's questions related to the topic that we're talking about I just want to address them right now um so Rob just asked because we've already discussed it here so if I were to add my GST HST number today you were saying I can only
(28:24) go back 30 days and claim the sales tax for those sales and remit those myself to CRA and anything before the 30-day period Amazon would remit those sales tax to C directly so that's given that you're registering today and entering that into your uh tax setting but if you registered last November then you can claim from last November you know what I mean so it's it's different if you're if you're saying that you're going to add your HST and number today to your tax setting does that mean you registered today or
(29:01) you registered previously but you only you know new to add the the uh HST number to your account today in either case you can claim any GST HST paid on any business expense from the date of your registration not from the date that you enter it into your tax settings is that is that distinction clear CLE excellent uh so Rob mentioned registered for HS last year but added to Amazon today okay so you can claim from last year as as of the date that CRA gave you an HST number that's the date you can start claiming back any sales tax that
(29:48) you've paid out on business expenses beautiful and yeah like with um and again just in in case anybody's new here um I know everybody is kind of scared from the CRA and people always think that if they don't do things correctly they're just going to immediately go to prison um I've always found in my experience um because I've done this I've been doing this for some time obviously I haven't been in accounting as long as or in Amazon as long as carmel's been in accounting um but I found that CRA in general is quite easy
(30:21) to work with if you're open to actually discussing things with them even if you make mistakes even if you owe them money Etc um it's not like they're just going to come knock down your door and arrest you um you just have to ensure that you are open with your Communications with them and if you make mistakes you address it as soon as you can and if you do owe them money just ensure you're communicating with them and trying to get on payment plans things of that nature yeah absolutely I mean you know as long as you are you know on the up
(30:49) and up and you you know say to them look I really don't know how to do this I made a mistake or whatever they they're they're good yeah you might have to owe tax and you might have to pay some penalties and interest you know is no matter how nice you are to them the person on the phone can't wave those so you may have penalties and interest but communication is key cuz I've had clients who didn't communicate and they froze their bank accounts I mean that'll be your first thing is like you've got no access to your money so um yeah so
(31:26) communic a for sure and yeah as far as I'm aware and don't take this as legal advice um I don't believe it's illegal to owe the CRA money and specifically not pay them I mean obviously there's going to be steps that go through there and you obviously want to ensure you pay your bills but it is illegal to not file your taxes yeah you know I I you know most people I think know that um yeah I always say file the taxes you know don't hide no matter how scared you are cuz I know sometimes filing tax returns especially
(32:02) you know you're a business now and you don't really know how you know your income your sales your expenses how that all plays into maybe your other income that you have um you know in that case maybe you know getting some advice from an accountant just to kind of see where you're going to end up you know like what tax bracket what kind of taxes you're looking at because it's better to be prepared than to be you know freaked out April 30th or June 15 you know for you guys right so always ask questions okay so I'm just going to
(32:37) address these uh questions in regards to what we were just discussing and we'll start getting to the other questions as well so uh Rob said and I you might need some clarification there Rob um so said so do we have to write to Amazon to update that um I do you want to clarify exactly what you're asking there Rob and then while we do that I'll start um going into the additional questions here okay so Gina had mentioned um wanting to give an overview of how we as sellers need to deal with returns from creating removal orders from a financial
(33:11) perspective for annual tax filing I generally post and sell these items on Facebook Marketplace to recoup some of my original outlay okay yeah that's a really good question because um some of the I guess the removal orders you put in um maybe that stuff isn't sellable but let's assume that you can sell it so at the end of the year you kind of I I'm hoping at least during the year you're keeping track of all the product that has come back uh whether it's a return um whether you've created a removal order for it um
(33:47) and then maybe its subsequent sale on Facebook Marketplace or wherever um so at the end of the year you need to figure out what your ending inventory is so what I normally do is you know I have I ask my clients give me uh a listing or give me the cost of all the inventory you're holding so it could be some of these removal order items right because they could be in your basement somewhere um so I asked them for the total and then I asked them to detail out you know any unsellable Goods so let's say out of the $10,000 of
(34:25) ending inventory that you're holding whether it's in your house or at Amazon um how much of that is unsellable how much of that you know uh was created um removal orders um and then you arrive at your proper ending inventory so that once that information if you're a soulle prop when you post that and I say post it because you've got to put it in your tax return it kind of reflects and and the difference is going to be your cost goods sold it's a little I'm trying to you know explain I guess an accounting concept but it's uh it might be getting
(35:04) a little blurry here so can you yeah so Gina can you just let me know if I'm even close to answering what you're asking sorry I had to sorry I had to okay myself um yeah it's always been a bone of contention because always said to um yes this is my cost of goods for the year okay sometimes yes there's removal orders that come back that are sellable Sometimes they come back and they're garbage so they're donated or thrown away but I was always told that didn't matter because I already bought and paid for those
(35:50) goods and if they sold they sold if they didn't sell they didn't sell wasn't n told that I needed to keep accurate records of the value of that because who Mak Amazon or me as to whether it's sellable or unsellable Amazon will tell you everything's unsellable because you won't get it as AAL order and if it is sellable they'll just back in your inventory yeah so the reason so if let's say you know you said okay I bought $10,000 of goods this year um my question then would be how much of that so that you might say okay that's my
(36:33) cost of goods sold but I'll say okay how much of that 10,000 did you still have at the end of the year that wasn't sold right so yeah basically calculate that is in my remaining inventory that is sellable unsellable right okay so then that that's as long as you have an ending inventory number that gets put onto your tax return then you are accounting for everything that has been sold or that's unsellable because you didn't include the unsellable in your ending inventory and because you've already purchased it
(37:18) that's an expense so we can't expense it twice even though it's un like we can't call it you know cost of goods when you purchased it and then you know damage Goods when it's unsellable because then that's a double expense right so as long as the ending inventory that you provide that goes onto your tax return as long as that number does not include unsellable or damaged goods then you're you're good your cost of goods sold is is correct and you are expensing those unsellable goods yeah awesome okay that's all I was
(37:58) looking foration on okay sometimes I tend to Ramble On so you oh I mean let's face it if you can if I can still sell some of that stuff even if it's damaged packaging or whatever it is on Facebook Marketplace at least I'm not completely losing out on the deal but it's totally separate from my Amazon account Y and so with that Carmelo and like a these are really good questions because a lot of these are things that I don't think a lot of people have good understandings for and this is like a lot of stuff that I don't think a lot of
(38:34) people think about um so with the unsellable inventory carela um I know in the US and I think it's specific States um you can get additional tax benefits from donating inventory do we have any additional benefits for disposing of unsellable inventory in Canada at all as far as you know well the only donation like as long as there a a charity a registered charity with a number a charity number um you can get a receipt for donation in kind so not money but you've donated Goods yeah so you know um if you can find a local charity as long as they are
(39:14) registered you should get a slip with their registration number um then yeah you can expense that beautiful and so yeah like with that I would certainly recommend for everybody that if you have inventory that just can't be sold even like say uh for example if it's um just past expiration date for example maybe there are local places that are Charities that also help out um a lot of homeless people and like these goods are not perishables obviously so they're probably still Goods like whether it's Salvation Army um local homeless
(39:48) shelters Etc as long as they're registered you could uh accumulate that stuff donate it in bulk see if they have that option to do so to get that re seat and uh that could be additional benefit you should be doing that with his inventory anyway like if if you're just going to throw in the garbage you should definitely put it to a better cause but if you can get that that additional benefit as well you you might as well ask yeah that's a good idea okay so let's see what else we have here uh so Jaden asked uh what happens
(40:25) if uh he buys a product in 23 and have inventory in stock at year end and in 2024 I decide to return the product to the retailer do I still record that transaction from a cost of goods and then the have a second transaction for the refund perspective even though it's Net Zero overall yeah so you do so in one year you it's going to be an expense as a cost of goods and then in the next year you're actually going to reverse that entry basically right cuz it's a return um so so it doesn't met out in the same year um but that that happens a lot you
(41:01) know with your accounting um you know from one year to the other that's not a problem but you should um I mean that's just the right way to do it right and um if you are returning it and you're getting uh money back you've got to record that money right so where did the money come from and then that's where your journal entry comes from excellent and then so just to follow up here um because Rob had clarified on the question that we asked earlier so was wondering about um backdating the the taxes registering for HS last year and
(41:41) then so clarified that considering I registered for HSC last year and added to Amazon today in order to claim the sales tax prior to today do I need to write to Amazon to adjust that or will Amazon automatically do that considering the original registration for HST was done last year so so that is based on your tax reports specifically in Amazon would that be correct carela yeah so maybe I'm misunderstanding so I was thinking more along the lines of the HST that you were charged on expenses but if you're thinking about
(42:14) the HST that's being charged to your customers for your sales then you don't need to write to Amazon because you know Amazon's not going to do anything um I've had a seller try and reach out to get um some sort of letter from them to show the government that they have in fact remitted on his behalf they they are not doing that so okay so we'll address first the HST charged on the sales so all the sales that you had prior to today when you entered your tax um number into your tax settings all of those sales Amazon has charged collected
(42:54) and remitted tax on your behalf there's nothing to be done it they've remitted um it's it's over so it's just when you file your 2023 HST return that might get picked up for audit just because your uh HST collected is zero but you've got sales so that's where so just expect that it's not a big deal uh you can get through that you know pretty painlessly um the HST that you've paid out on your business expenses since last year when you registered for HST that's you can start collecting from that date so when when you do your HST return
(43:41) you're going to have you know line 101 will be your gross sales um then we've got 105 your zero collected and then your itc's your input tax credits that's what you've paid out on your business expenses that's going to be let's say it's $1,000 so the difference is $11,000 right so you're going to get back a refund of a th but the government will come in and audit that most likely so it does that answer your question is was is that the right way I'm understanding Rob said yes yeah and isn't it this is all contingent Ona on the fact that you have
(44:24) all of the receipts to go back when they decide to audit you otherwise you're in big trouble absolutely good point good point yes yes I'm always yeah I'm assuming that all your receipts are filed away nicely and ready to be you know shown to CRA because they will if you have no receipt they'll just disallow it I I don't think they entertain too much explanation there um so yeah I always say when in doubt just keep that receipt whether you may or may not uh be able to expense it um I would I would hang on to it and then you know if you are talking
(45:04) to an accountant you can ask them you know is this a a deductible expense and if they say yes great if not you know you can throw it away so Carmel to elaborate on that so yes of course always best practice to always keep all receipts invoices everything that you have all documentation um but as far as I was aware um if by chance like say you didn't have a receipt or you lost it as long as there is some record of the transaction as far as I was aware that could be sufficient and record being like say um a a bank statement
(45:38) transaction or if you have like say if you if there's sellers in here that buy and sell used items say a screenshot of the conversation you had with that person would those things also suffice yeah so you know certainly it it's going to depend on the auditor unfort fortunately um but in the past um things like you know a credit card statement that shows the transaction and the amount um it doesn't provide the auditor with too much detail as you what you P purchased there so you know they're looking to see for things like
(46:14) you know let's say a gas receipt you know you're at petol Canada and you buy yourself a chocolate bar when you look at the credit card statement you can't see that there was a chocolate bar purchased right which would be a person expense not you know a vehicle expense so you know they're looking for things like that and I get it with you know the way things are these days everything is online and if you're buying off of um you know Facebook Marketplace no one's going to give you a receipt so yeah I would screenshot
(46:47) conversations um you know the person uh the amount that was uh agreed upon what you're buying um so really in the case you know where you don't have an actual receipt that's going to depend on the auditor see always best practice for everybody just um we used to say this a lot in the insurance finan financial industry always c ya cover your ass as much as possible yeah um and then also with that if there are any people in here that do purchase use items on a regular basis if you want I can also provide you I I'm
(47:23) quite certain I still have it kicking around a old purch agreement that I used to use when I bought a lot of used items off people and it's just indicating it's just it's just a quick agreement where you write in what you're purchasing who you're purchasing from how much you're paying and they're just signing it indicating that this is purchased is actually happening and they're indicating that the goods are not stolen so that at least you're taking a addition additional measure that you are trying to do your due diligence to
(47:47) ensure those items are not stolen all right well that's a really good point yeah I I never I'm sure there's Goods on Market could place that are stolen 100% never thought of that yeah and and the only reason I was so intent on explaining about having the receipts is because I did have to go through a CRA audit several years ago and they're going to ask you for random dates on random invoices that correspond to sales and they're going to look at your mileage to make sure that you were in that area on that day and it's just
(48:26) really important if you're going to go back and you're going to have a a fight with them you better have both legs to stand on otherwise they're going to just say forget it yeah yeah because honestly it's I had a client Way Way Back not a seller but uh anyway his books were an absolute mess but he got audited and so he's like well I'll just throw these two boxes at them and they can go through it yeah the Auditors are not going to sit there and sift through your paperwork you the onus is on you as the taxpayer to prove that
(49:03) what you reported and claimed is valid so unfortunately that is the way it is um so yeah keep your receipts electronically preferably that nothing Fades U I also had a client who was audited you know back three four years and his receipts had faded and they disallowed expenses so I mean the auditor yeah in my opinion I think that auditor is was brutal um I only ever came across one auditor who was absolutely I mean he must have been just a horrible miserable person honestly because he was taking Jo I mean he was
(49:46) you know kind of um rubbing his hands together can you like it's almost like this you know those those villains in these uh Marvel movies that you know they're like um rubbing their hands together and smiling because they know you know they've got you um that's what that auditor was like and I just I couldn't believe it I was sitting across the table from him I could not believe it that is the only bad one I've ever come across in like 22 years those are those are people that are acting like it's their money that they're trying to
(50:18) collect from you it's awful yeah yeah that he was a I don't think he he was a a nice person yeah you get those in every industry unfortunately yeah yeah um so just to uh go back up to the top of the question list here because there's a couple that we uh that I had missed so Vinnie just asked uh if he's planning to do a joint venture at Amazon son account which I'm assuming that you mean by selling with additional people on that account with my friend who's in the USA uh what would be the best way to start we both have incorporation uh he
(50:51) has an LLC in the USA in terms of tax and other cross border requirements okay so yeah that's a a good question so then are you going to be opening a new Corporation whereby your corporation and his Corporation are going to own shares in the new Corporation um you know is it going to be a Canadian Corporation and if so you know what's going to be the share structure because his LLC is non-resident and if you have a non-resident owning um a majority so like 50% of shares in a Canadian corporation that means that that
(51:34) Canadian Corporation is not benefit from the small business deduction so you're going to uh look at high uh interest sorry a high uh tax rates um so there's a a lot to like before we even get into the Amazon stuff I mean that's something that you'll need to consider but if you know let's say all that stuff is kind of settled and you know he's not going to be majority you're majority um then are are you using your existing Amazon uh seller account or are you creating a new one if you're using the existing one everything legally has to
(52:14) change so whatever the legal name of um your Amazon seller account is now the bank account that the payouts go to that all has to change to this new Corporation um I so I don't know a whole lot about you know going in and changing you know legal name bank accounts HST numbers all that stuff I've heard in the past that Amazon you know gets really nasty and shuts down your account or freezes your account if you're making too many changes I don't know if Jordan you have any experience on that or if heard the grape vine um I would just you know kind
(52:52) of consult with other season sellers to see you know what the best approach is there I just know that for tax purposes you have to change that existing account to reflect the new business the new Corporation if that's how you're going to go yeah so with that specifically Vinnie you'll probably need a more indepth conversation with an accountant and potentially even a lawyer just to ensure that you have proper structure and are covering your own personal ass um but yeah um in regards to Amazon shutting down your account for making
(53:27) changes um that certainly can and does happen but I don't find that's because Amazon's getting mad I think it's more so because they're trying to protect your account from potential um being compromised so when they see like a a lot of changes happening whether it's names accounts Etc they almost all almost always immediately remove access to it they don't shut down your selling privileges or anything right away uh but they will hold deposits and they will hold access to the account uh so that they have time to review it and ensure
(53:55) that it's actually you making the changes and somebody hasn't got access into your account um incorrectly wouldn't it create a problem as far as terms of service that you've got people accessing the same account one in Canada one in the United States I can't see how Amazon would possibly allow that so G because now you've got two IP addresses on the same account so I can address that for eugina so there is a lot of fear around people um you know connecting to the same the same internet connection as other Amazon
(54:31) sellers Etc so from my personal experience and from thought experiments and talking with a lot of people in the space you can think of it like this so like if this was an issue um then everybody utilizing a prep Center would have those issues as well right um there there are child accounts that are being connected to it so like for example if if you and a business partner were utilizing in the same seller account you could be under the you could be under the same login but you could also just have two separate logins for that
(55:01) account so you are technically two separate entities connected to that account um also there there is I don't believe there are any actual strict rules anymore about Amazon with like quote unquote um account sharing or multiple accounts so a couple years ago Amazon changed that terminology that you could have multiple selling accounts as long as you had a legitimate business reason but you didn't even need to contact Amazon in advance to do so right so the only issue that stems from that is if you are connected to same IP
(55:38) addresses as somebody else and that other person who has that same IP connection does something where they put their account at risk so for example if if I come and visit you and I connect my laptop to your uh to your Wi-Fi your house and then down the road uh you do something where you sell stolen goods on Amazon and they detect it or you attempt to manipulate in invoices and they detected and they suspend your account I have a higher likelihood of being also suspended because I am linked to you and they may think that there is a potential
(56:13) that our we have we have linkage in our accounts but it w it shouldn't trigger a suspension just for having multiple accounts connected on the same IP thank you yes very interesting and so like from my P for my personal experience um so from starting and selling off the Hop to scaling to a warehouse I have shown many family members and uh friends along the way sell on Amazon as well and they have utilized my resources my Warehouse Etc connecting to same laptops to their individual accounts and we've never had
(56:53) issues in regards to that I I look at it very similarly to like what a prep Center would be okay great to know thank you definitely and then I also wanted to address because it's something that I missed um for like the the last um section about um documenting everything and ensuring that you have receipts so Carmel mentioned about having digital receipts and I 100% agree with that um I do believe that there is a feature in QuickBooks where you can save receipts directly in there so at at a minimum I would say do that or utilize something
(57:26) where you like upload them to Google Docs or like your Google Drive um we personally utilize a service called hubdoc and I have found that that is a very helpful uh tool to use uh if you use the accounting software zero it comes with it for free if you don't I think it's like 10 or 15 bucks a month but you can basically take pictures of your receipts from the app on your phone it auto uploads it for you and then it automatically extracts the information from the receipts for you uh files them and makes all that information
(57:54) searchable so like if I purchase something from Costco it automatically extracts Costco Costco as my supplier it uh cataloges all the information on the receipt so like all the products that are on that receipt the amounts and automatically inputs um what the total bill was so that I can at any time go into hubdoc search it and it'll find that information for me and it'll also automatically file it by supplier as well so that has a a tool that I found personally very helpful you can also forward um say if you have uh emailed
(58:34) invoices or like say ra receipts or or rather OA receipts or wholesale invoices you can also just forward them directly from your email directly in top do as well okay so Jaden asked um how I can share any of my car expenses or home office considering it's shared with other businesses of mine or slash his full-time job okay so um obviously the most you can expense across the board is 100% um obviously but if you are using your vehicle to you know if you're doing Retail Arbitrage if you're you know picking up the goods if
(59:18) you're going you know shipping the boxes you know whatever it may be um if you are using it for business you should um be keeping track of the trips so you must have a mileage log so whether it your for Amazon or for your work or for other businesses a mileage log is the first thing that CRA is going to ask for so um I would just simply uh you can do it two ways one is I don't know how you're claiming it for your other businesses right now but um one is just tracking the business colomer so like let's say in the year you drove 300 km
(59:58) for your Amazon business you multiply that by the rate that CRA says is allowable that year I think they're at 63% for your vehicle expense um you don't expense fuel you don't expense Insurance repairs none of that you just take your mileage times the rate um if you do it the other way where it's a a percent percentage of your vehicle expenses you're going to have to you know on January 1st um or the start of your fiscal year I don't know if you're a corporation or not um so at the start you have to you know uh write down your
(1:00:38) odometer reading and then at the you know December 31st or the last day of your fiscal year you write down that odometer reading you know then in between you have to still log your business kilometers but then those numbers will help you generate the percentage that you can apply to your fuel Insurance repairs that sort of thing um so those are the two ways you can do that as long as across the board it's not more than 100% And then yeah I would imagine that also translate with like home office expenses as well so you just uh utilize
(1:01:20) the portion that you're utilizing for your business times the percentage you actually utilize for your business yes yeah so what is your perspective Carmela about like say for example if somebody has a corporation and say they decide where they're going to input their home internet uh being paid directly from that Corporation because they do a primary most of their work at home but some of it it's also personal or like say their their personal cell phone is being paid by the corporation uh they do obviously use it some personally but
(1:01:53) majority of it is for business what's your opinion on those types of things yeah so you know as long as you are backing out the personal portions so if your corporation is paying for your internet or your telephone bill but let's say the internet and telephone you know I don't know it let's say it's 50/50 so 50 personal 50 business as long as you're backing out 50% of that expense on a monthly basis and putting it to the shareholder account that's fine if you're leaving the 100% expense in there you know you're just I mean
(1:02:30) whether or not CRA picks you for audit I don't think you know having telephone expenses or Internet expenses is going to flag you at all but if they do end up auditing you they'll they'll want to see proof that it is 50/50 or it's 100% And then they'll you know adjust accordingly so I'm I'm fine with the corporation pain CU I you know most of the time that's where the funds are um just back out the personal portion so with that I think it all comes down to like realistically on what what like the CRA or like what kind
(1:03:07) of proof you would actually have because like how could you realistically prove to CRA that my internet is being used half personal half business yeah I mean the telephone is easier right because you do have uh a telephone log right right so that one's a bit easier for them to kind of zero in on personal calls but um so and you know with the telephone maybe this month it's you know 50% uh personal next month well now it's you know 20% personal it it can fluctuate because of you know depending on the log but yeah internet it is
(1:03:45) difficult um I I think they would probably uh restrict it to the percentage that you use your business uh your SP space for right so if you you use your space 50% of the time then I mean it's reasonable that 50% of the internet would be business um you know I it is difficult to um I've never had internet be questioned um you know I have had actually and this was you know I think it was taking it a bit far but uh a client bought a new laptop and he said it was for business and they're like it's in your home you know you've got
(1:04:27) kids what other laptops do you have in the house and so yeah he it was either disallow the expense or you know the the asset the purchase or he had to prove that you know he uses it a certain amount of time for business and personal um he basically didn't bother proving it so um you know so could be taken a little far yeah yeah so like in scenarios like that um like say you decide you want to claim that laptop for business and then you get audited and the C asks you why like worst case scenario is that CRA just doesn't count
(1:05:04) that towards a a viable business expense correct that's right yeah so so you're not going to get quote unquote actually in trouble or have legal consequences for oh no no honestly you know what it is like they're like oh no you know shame on you you shouldn't have and they just disallow it yeah they'll come down pretty hard if you're you know trying to hide income that's where they get nasty yeah so I've always come from the perspective of one C cya always cover your ass document as much as you can um I've always operated under the uh
(1:05:40) umbrella that I always attempt to document and claim any reasonable business expense that I can um I would always Factor it in and then if by chance one day I do get audited I have whatever documentation I need and then if it doesn't get provided oh well so be it but I at least want to to attempt to oh yeah for sure you know this isn't to you know I don't try to kind of I guess freak people out and and not claim things I absolutely like you know you you kind of go into the gray area knowing though 100% knowing that you
(1:06:16) could be audited and it could be disallowed if you're good with that then you know that's fine cuz you could go through life never being AUD right um it's just we don't really know so we try and do things as reasonable as possible um and you know what as honestly as possible too because you know the my client bought the laptop and you know he is using it for business right so it's not like you know he's lying about it he's trying to hide something um it just sometimes CRA makes it a little difficult but if you're able
(1:06:49) to you know I guess not get too scared when they they do send you a letter um in in that situation sometimes it might be handy to have an accountant or because you know we're kind of like that buffer between the taxpayer and CRA so you know if we speak with the with the CRA you know we're kind of sometimes talking the same language and you know we try and uh you know smooth things over so that they don't get too too and we don't provide more information than they request right so if they request A and B we don't volunteer C you know um
(1:07:32) so that's why sometimes you know because you want to be you know totally upfront you're like yeah yeah take it all take it look at everything I'm I'm good but sometimes you know you might think everything is like 100% but they start picking away at things and they have to justify their time right they're going to find something so um yeah that's why sometimes it's good to have um an accountant just kind of handle that for you yeah and with that as well like um I've thankfully not yet been audited um but I've heard experiences and I
(1:08:04) would imagine it be the case where um if somebody comes at you for the point of wanting to uh question the things that you're doing and this is like in any aspect of life if you actually have a a professional behind you they are less likely to try to overstep and take advantage of you because they know you already have that professional in place so that's just like if you get questioned from the police and you have a lawyer or if you come come at the uh the perspective of like an insurance claim happening and you're you have an
(1:08:36) actual good insurance broker behind you or you have that knowledge yourself you're less likely to be one taken advantage of and two those people like if they do have a superiority complex about them they're less likely to to try to overstep and just try to attempt to um do things that may be unreasonable because if you're a person that's timid or that you don't know they know that they'll just get away with it but if you actually have those professionals behind you or you know yourself then they know that it's probably not worth their
(1:09:04) time yeah for sure and I mean one thing that I would always say is sometimes it this doesn't happen a lot anyway but there were a couple of times in the past where um you know C has a certain amount of time where they can audit you and generally that's three years from the date um that it was assessed that the tax return was assessed um in one situation they they can have you sign a waiver that basically says that they're allow because of you know some of their timing issues whatever you know please sign this so that we can go back to this
(1:09:44) date to audit and one thing I'll say is never ever ever sign anything uh that the CRA asks you to sign sign without you know yeah yeah this person ended up signing um so yeah so if CRA is asking you to sign something like a waiver or anything like that yeah get it checked out yeah I would approach it doesn't matter that it's coming from the auditor I I would approach it the same way as like uh talking to the police and like they're asking to search something of yourself that doesn't benefit you in any way so if you're not requ if you're not
(1:10:21) required to do it don't do it yeah exactly you know um so yeah um so sarcasm had a question and I just want to know sarcasm if we've already address this because we did talk about some returns as well as with taxes and Reporting so if you want to just clarify the question that you had and if we had addressed it properly there uh all can you hear me yep yep yeah hi Camila and Jordan um hi there yeah hi yeah so just wanted to it was more about the expenses instead of the uh HS and GST so if I file so if I've already been paying for some sort of
(1:10:57) business expenses like subscriptions um and then I months down uh the road I uh I actually register with a as a soul prop um is all that prior stuff ineligible for whatever I'm reporting as income annually like after registering oh so it's not with it this hasn't to do nothing to do with HST then yeah yeah just like in terms of what I could actually expense that I yeah so when the nice thing about being a soul prop is that doesn't matter that you've got your business name registered it's still you right you're still an
(1:11:35) individual um just that your business is called you know ABC selling um so if you purchased stuff like six months prior to registering that ABC selling that still can be claimed as um an expense or if you had in income back then that's also income right so that's okay as long as you're Soul prop there isn't that hard line and so so yeah like there also may be question about that so like being Soul prop um I know it differs from provins to provin but you don't actually need to register for anything to be considered a soul prop you're a soul
(1:12:13) prop by default uh thank thankfully in this country so right now anyway uh we don't need somebody else's permission to actually start a business and conduct business in Canada right now right um so you're sole prop by default and so anything that you have for a quote unquote business expense you can claim as a business expense uh just the the big difference with a soul prop versus a corporation for tax purposes is that any net profit that you have with your soul prop is basically tacked onto your personal income and tax at your personal
(1:12:47) income your your personal marginal tax rate whereas with if you're Incorporated you would um be taxed on the profit of the actual Corporation and then you have your separate income tax right and the right generally speaking the the taxes that you're paying on net profit for a corporation are substantially less versus what your uh marginal tax rate would be unless you're a very very low tax bracket sounds good thanks cool so let's see what other what other ones we had here I just want to make sure that we're not
(1:13:25) missing anything uh so Vinnie you mentioned that uh there was the original question let me just go back to it here uh if we enter tax code now will that still be applicable for 2023 tax uh tax returns do you want to come on to the mic and kind of clarify what you were mentioning there if you're available hi Jordan hey um I mean uh the pro uh product on product listing if you enter tax code now yeah will it be applicable for last year 2023 tax returns no it won't it's just from today forward okay so hi car even I was
(1:14:13) talking to twinkle about the same thing so yeah I think I have not added any of the text code for my listings so probably I think I have to wait for next year returns I guess yes well so what's going to happen is for 2023 um you know it's just it it only affects your HST filing so if you were registered last year but you didn't enter the the tax codes until now then in 2023 Amazon did all the collecting and remitting on your behalf so that's the only thing that it would affect for 2023 but your income and expenses
(1:14:54) wouldn't be affected you'd still be able to claim back the HST that you paid out on the expenses okay thank you yeah and so yeah like it all comes down to based on when you're when you're registered and like the the thing that I believe that without IC that could cause a potential issue is if your individual inventory is a like say a gen no tax not collecting tax at all when it should be uh that can create cre a potential net negative for yourself because then technically you still need to pay that uh tax yourself
(1:15:30) out of pocket that should have been collected from the customer right right exactly yeah yeah so if Amazon didn't collect the proper tax and remit on your behalf then yeah you'll be out that money unfortunately right um question jayen here thanks for having us um you mentioned like so if we had our hsd GST number registered in set up but in the case if you didn't actually put it on Amazon so you can still claim your input tax credits even though you and Amazon's dealing with the tax credits like the GST hstd payable so I guess they're
(1:16:07) dealing with it and submitting it direct to the CRA but you can still claim itc's even though your number I guess is not on Amazon because that has no relation I guess but I guess uh they might ask you for a report to show that Amazon's paid it on your behalf wouldn't see that otherwise right because it'll be hsd netive right yeah so I mean we can't prove whether Amazon actually paid it to CRA we can show that Amazon uh collected it and then whatever they did with it after that it you know it it's out of our hands but on your sales
(1:16:43) summary it'll show how much um HST and you know if you sell in provinces that have PST that number is kind of combined B so you'd have to look at your detail uh sales summary but yeah um but you know just because Amazon will continue to collect and remit HST on your behalf if you are registered you must be doing the remitting so we can't just say well as long as Amazon's doing it I'm not going to change a thing I'll just claim my itc's and we're good no you know you'll get away with it this one time because you know there's a transition
(1:17:27) you didn't know but going forward if you're registered you are responsible to remit to CRA yeah and so that really comes back down to like what we had what we mentioned kind more so at the top of the conversation it's your business you're 100% accountable for it so if mistakes are made from other people's end you're still responsible for it so it's up to you to audit the processes and sure that things are being done correctly yeah so whether that's whether that's a bookkeeper doing your bookkeeping whether that's Amazon
(1:18:01) collecting taxes Etc you put certain Professionals in place to do things correctly uh but if you're hiring somebody that say is not really on the up and up for bookkeeping or that is not really a super qualified accountant then it's still it's still going to come back on you unless they make some blatant actual errors right right exactly yeah and then sometimes I mean the accountant I I've heard stories where the accountant made the error and I told my client I'm like well you need to go back to them and they should be paying
(1:18:32) the penalties not you right I mean it's only fair right whoever is mistaken is they own it and they have to pay for it you you'll have to pay the tax because the tax you would owe regardless of the error or not right so it's just the penalties and interest so yeah it you know CRA will always always come to you they won't go to the bookkeeper or the accountant if you have to do that yeah then it would just be up to yourself to um escalate that process so whether or not that accountant wants to take responsibility for it is another thing
(1:19:06) and whether or not you have to pursue legal action try to go through their errors and Emissions insurance which I assume accountants probably have to carry Etc oh yeah we do and it's not cheap right yeah um so Jaden had asked prior as well uh what are some steps you have to take one moving from a soulle prop to a corporation and how do you transfer over your inventory oh that's a really good question okay so I I I'll see if I can explain it so right now whenever you go from a soul prop to a corporation basically you transferring
(1:19:49) some value you're transferring the business over so cra will look at that as a sale so basically as a soul prop you've sold your business to this Corporation never mind the fact that you own the corporation but you know you're separate entities right so now they're saying well if you sold your soul prop what is it valued at what's what's it worth and so whenever there's a sale there's potential for a capital gain so in order to avoid that whole scenario we file what's called a section 85 rollover election so basically you're
(1:20:28) electing to transfer this Soul prop business to your corporation on a tax-free basis um so that's one thing that should be considered now if you let's say you were a soul prop for a month and you decide I better incorporate you have to file an election well you know we should probably take a look quickly at you know what numbers you were gener generating uh chances are the business doesn't really have a lot of value at you know one month old so um but if you've been operating for a couple years you know you're generating
(1:21:04) consistent income profits you definitely want to do a section 85 rollover so that's something um that a lot of people don't know so that's number one um the inventory gets during this election it gets transferred right it's it's all paper document ation right but um it basically the inventory becomes your um the corporations um so there's it's a little bit you know more technical a little bit complicated but that is something that you have to consider um doing when you're transferring to a Corp and a lot of those things are ideal
(1:21:47) situations to have an accountant for to be able to do that for you yeah yeah yeah you know I mean like I know some people actually come to me and they've already done this and so you know I have to kind of because as a as a Tax Advisor you know I kind of even though it's already done I I should advise them that that's this is what needed to be done do you want to do it like ultimately it's really the the uh the clients um I I can't force anybody to do anything right I advise I advise what the risks are and what the benefits
(1:22:25) are and then um yeah go from there excellent and then uh Janine had asked earlier as well uh so what do I need to give my new bookkeeper as to Amazon reports so like for that specifically um as far as I know depending on your processes you shouldn't really have to pull anything from Amazon unless they need to enter in the Amazon transactions so yeah I mean what we normally ask for when we're doing bookkeeping for our clients um we like to have the monthly sales summaries we like to have um not the payouts really because um the way we
(1:23:09) do the bookkeeping we we put that to a clearing account um and so at the end of the year so if we're working on a January to December um situation I'd like the last payout because there's always some Reserve that Amazon is holding on to so we like to book that properly um they you should give them some inventory numbers right because otherwise if you're not um update updating your inventory asset at the end of every month whenever you're looking at your reports your profit and loss it's always going to be over um sorry
(1:23:47) your your income or your profit will be understated as your expensing too much in your cost of good sold so that's a really important part if you are using your reports to manage your business um so obviously bank statements and your credit card statements and anything that you've paid personally through personal credit cards or personal cash or personal bank accounts so with that's kind of what we asked for with that Carmelo like I know I had um kind of mentioned to yourself on Faceook Facebook before we had the session
(1:24:23) earlier today but utilizing like a software like a2x or tax mate or something similar can substitute for manually entering those reports um yeah some of them can now I I've seen situations where a2x is duplicating transactions so that creates a little bit of a nightmare for the bookkeeper um but you know again if I and I don't know how the client set up the a2x whether they did it themselves or not um I would try and reach out to you know support for my clients I I actually just looked um before this session a lot of them are using
(1:25:03) a2x uh some are using taom mate so those are the two that my clients are using um and only in a couple of instances did a2x kind of uh make you know extra work for the bookkeeper but otherwise as long as yeah transactions are going in that should be fine um what I like to do I always like to make sure that the sales on the p&l are matching to the monthly sales summaries just to you know as a um you know a comfort level right I like to see that the numbers are matching as we go so that at the end of the year I know
(1:25:42) that the total sales are accurate for sure and so like I've personally utilized a2x quite extensively um from my experience um it's never produced duplicate transactions unless it was a fault of my own so you inside a2x itself you do have the option to Auto export stuff to your accounting software or you can do it manually right so there may there may be situations where they have it set for auto export and then they also do it themselves manually oh okay okay that yeah see I don't get into the little nitty-gritty of the uh a2x or tax onate
(1:26:20) um yeah I just you know whatever my bookkeepers are complaining about that day that's what you know I hear but um yeah so that makes sense so that that's good to know thanks yeah and so like so like just to clarify like I'll I'll kind of like just lay out my personal bookkeeping process just in case anybody like wants kind of like a reference on like how to start I can't tell you for sure and I can't say like this is the way to do it but this is the way that we've been successfully doing it for quite some time so like we have our
(1:26:50) accounting software um so weuse utilize zero but QuickBooks can uh uh accomplish the exact same thing so you have all your individual accounts set up your your bank accounts your credit cards Etc and those are being pulled in directly from your bank if they're not if they're not being pulled in directly from your bank and auto updated then you need to manually upload those to your software and then you're just basically reconciling the transactions against the the records that you have so our bookkeeper um has access to hubdoc with
(1:27:21) all of our re re seats and they go through and they look at the the transaction lines in zero they see that okay we made a purchase from Walmart for $30 they find that corresponding receipt on hubdoc uh they match it up so then they they say okay this was inventory that was purchased or this was a business expense so like equipment Etc they direct that to the corresponding tax account and ensure that the corresponding taxes uh paid are indicated so if we pay GST uh PST or both of that purchase they indicate both
(1:27:53) of those are being done properly and then uh we reconcile that transaction on that line we check off the receipt on hubdoc so we know both of those are sorted and that transaction is done and we do that throughout all the transactions that we have if you're doing um if you're paying like say if you're paying off a credit card from one of your bank accounts you would just initiate a transfer uh transfer I guess you call it a journal entry you transfer from one account to another right so like it's I know a lot of people are
(1:28:26) intimidated by bookkeeping but it's not that complicated once you actually sit down and just like think about it and you just have to like basically uh just you're you're telling the software where the money is coming from and where it's going essentially right um and then when it comes to the a2x portion we do utilize a2x to pull through all of our Amazon transactions and our cost and our cost of goods so okay like Carmella mentioned you can use a2x there's other software I'm not familiar with but I've heard a lot of people use taxim mates I
(1:28:57) believe they do the same thing you can also you can also do that manually but from what I've seen especially if you have extensive deposits and transactions with Amazon that could be very timeconsuming and very much so a pay ass so so the software in my opinion very much so pays for itself so though those transactions we only import the a2x transactions manually because we want to ensure all of our cost of goods are entered in first because if you don't enter your cost if you don't enter your cost of goods in first through a2x then
(1:29:30) I don't believe it automatically syncs with your software and you have to resend that transaction after you enter your cost of goods in okay so you know my my feeling is that yeah the couple of clients who may have been using it you know were were I guess not aware of uh I not its limitations but you know kind of little quirks that you need to know before you bring it into your accounting software yeah yeah and like I found like a2x supports specifically like they are actually pretty helpful um if you have questions about how their system works
(1:30:03) they are pretty helpful with how to um how to actually Implement that with your accounting uh your accounting system um oh good okay so then like those transactions get entered in basically as um I've it's been a while since I've done bookkeeping but I believe one uh some transactions get entered in as invoices and some get entered in as bills something like that and then okay and then we're just going in and we're um reconciling those transactions accordingly there's one at the end of every single month or the start of every
(1:30:34) single month where there's like a there's a credit and a debit that you have to uh match up a bill and um what are the individual categories let me pull up zero here it's been a long time since I've been in it but uh there's there's like just the the the the month transition period where there's like one credit transaction One debit you have to just match up those transactions together for it to equal but then that's basically our entire process it sounds it sounds complicated but once you do it and get the hang of it and start going it
(1:31:06) becomes a lot easier yeah well I always encourage my clients to you know if they have the time right if they're not working full-time jobs and you know have little kids um to try and you know do it for a month or two just so that they're understanding the process um because it is kind of empowering to be able to do it yourself um and then see the reports when you want to see them you know um and and if you know my clients will ask me you know to do a little review so I I you know just review it make sure things are
(1:31:41) looking right and if they're on the right track they just carry on for the rest of the year yeah and it it really um so I would say like although account in fees sound like they might be high on the high end um bookkeeping is really where your money is going to go because that's the tedious time consuming part so if you're able to do some or all of your bookkeeping you'll save money on that note of bookkeeping if you don't mind what's your thoughts on using uh virtual assistance based out of maybe Philippines who perhaps are working on
(1:32:21) other Amazon sellers in Canada and are working in Tangent with my you know accountant for that level and working on multiple other Canadian Amazon sellers house well I mean as long as they know what our Canadian rules are um how to and they know their accounting you know debits credits assets liabilities expenses that sort of thing um if they know how our HST works then doesn't matter who's doing in it doesn't matter where they're located I would just you know and if they are working in connection with your accountant then your accountant would
(1:33:01) tell you whether they're not they're doing things properly right because if if the accountant has to clean up a lot of the stuff you know the the QuickBooks or whatever it is you're using they should be telling you uh certainly they'll be charging you for the cleanup so um yeah as I I'm fine with it as long as there they are up to date on how we do things that's fine yeah again that comes back to like your own personal responsibility so like the only thing like with you utilizing somebody overseas if there is a massive
(1:33:36) mistake that does happen you just have less of an opportunity to rectify that or have them be responsible to pay for massive errors that they make right so not saying that you you can necessarily um have a bookkeeper um be responsible for like massive errors because it's still on you but you have less of a chance to to do that because you're you're not going to be able to force somebody overseas be able to pay you or try to litigate against them if it if it comes to that right yeah yeah that's going to be way too expensive unless
(1:34:07) you're doing like multi-million of dollars a year and they make some big screw-ups yeah oh well yeah no I and the good thing is like I haven't seen huge mistakes I've seen a bit of a mess but nothing that can't be you know cleaned up and sorted out um and always you know before it's been filed and that's why you know if people are looking for accountants you need to find someone who's actually going to look at the books as if they're just going to say all right give me the p&l the balance sheet put it into a tax return
(1:34:45) that isn't giving you any value whatsoever and I've had a lot of clients come to me from other accountants and they wonder why in Heaven's name I'm asking them all these questions and it's just because I do look I look to see if things are reconciled I look to see if there's duplications I look at your expenses so you know I'm looking at the paperwork because I'm not going to file anything under my e file registration number if I haven't reviewed it I'm just not going to do it that's me um you know I don't have to but if you
(1:35:25) are looking for an accountant who you know will give you some value make sure that they're looking at your books they're quickly reviewing things um you know they're advising you on what you can and can't do that sort of thing excellent um so Vinnie just had a question here um so what is the upper percent percentage limit to get an audit trigger I mean for example office based utilization tell what percentage I can claim yeah so I mean honestly there is no limit honestly like but you know there's going to be like these little
(1:36:06) sort of um like for home office you know if you ask any accountant they'll probably say anywhere between 10 and 20% you know when you start going higher I had a client who was claiming I think 80% and I get it like I know your boxes and everything are all over your house I I get that but when you're claiming 80% you need to be ready to be audited and to prove that you know you're using it 80% you know of your space um so yeah I would stick to you know the upper limit being 20 maybe 25 um for your home you know with the
(1:36:53) other stuff like you know so meals and entertainment is one big one that it c will disallow it it they've disallowed it for a number of sellers that are my clients because they can't see who they would be taking to lunch to dinner um if they're selling online to Perfect Strangers so um in one case I think the meals were like $200 like that's like nothing but no they disallowed the $200 they'll go in for $10 they'll disallow $5 like it's just it's the whole you know it's the principle right it's like no it's not allowed so we're not
(1:37:34) allowing it um so we kind of have to make sure that all your expenses are reasonable for your line of work what you know industry you're in um so really you know the home expense I can speak to that the other limit you know if there's something um let's say you know from year to year there's a big fluctuation That Could set off um an audit for sure uh the accounts that they really Zone in on are meals vehicle home expenses professional fees um and um so you've got um yeah professional Fe like we've had audits on
(1:38:19) that we've had to you know our invoices and everything just to make sure things cuz these are places where people can you know go a little too greedy I suppose um the other one is subcontractors so I know a lot of people use prep centers um that's different than a subcontractor so a subcontractor is someone who helps you pack so you know you say okay I need you for a couple of days here you know 7 hours 8 hours a day whatever it is um and they are are really not subcontractors they're just helping you as an employee
(1:38:55) a part-time or casual employee right so cra can come in and and start digging there and trying to figure out are they really an employee should you have paid them you know through payroll deduction zi CPP all that stuff so you know when you have situations like that it's always good to you know certainly do your research but also you know maybe contact a professional to to get another opin in regards to that Carmela for I have a a couple questions like so like for meals for example um so like say you are a corporation um so what constitutes a
(1:39:34) viable business meal like is it only like entertaining potential clients or is it paying for meals for like your team while you're working and also like to add on top of that if you're a corporation would you also be you you're considered a potentially an employee of your corporation so so would that Corporation be able to pay for a meal for you while you're working packing Etc yeah so any meals for yourself are never deductible um under any situation unfortunately um your clients 50% so obviously their their share you can
(1:40:12) claim your share you can't um with in terms of teams so yes certainly you can claim up so up to uh uh six meals for the year for your team so let's say you know you've got like I don't know quarterly meetings and you're ordering in lunch or something like that you can claim 100% of that so it's not subject to the 50% um rule gotcha so then like for example um because I am 100% uh guilty of this paying for meals through Corporation and Corporation cards um so like say CRA quote unquote disallows that so then that just wouldn't be considered a valid
(1:40:56) business expense yeah that's right yeah but like so you know I mean it can still be paid for through like corporate cards it just you can't utilize it as a tax seduction correct yes gotcha and then uh when oh sorry go ahead sorry so if I'm out on the road let's say I'm leaving home and I'm going to trouble all over Ontario to pick up yeah that day gone for seven or eight or nine hours not allowed to claim a meal for myself because I'm that far from home no BEC I've had one auditor say this to me he goes well he's there I
(1:41:40) travel cuz he I was working in Markham at the time so he he came there and I said well I don't understand this was a um he was in construction so you know he's going going from job site to job site and having a meal right for himself he's having lunch and the auditor said to me well I traveled here from bankton um I brought my lunch I didn't buy anything on the road otherwise you know CR is going to have to expense all my meals you can't it's if it's for you personally it's never an expense unfortunately that's interesting
(1:42:16) though because a salaried employee we are not Sal to employees right so for I mean what do you mean for salaried employees well if the guy was an auditor like if it's the auditor coming he's a salaried employee of course they're not going to pay for him but if I'm a it's really sticky isn't it well I I don't agree with it right I I certainly don't agree with it but they won't allow it they won't allow it okay you know yeah I I just you know I'm the messenger I sometimes I don't agree with it either right because I'm a business
(1:43:02) owner as well and I do travel as you know to clients and that um but no uh we can't expense our meals well they they make the rules and we have to play in their sandbox just like we have to play in Amazon sandbox so well that's the that's a thing right and unfortunately you know as an Amazon Seller you know like for myself you know can I put in some meals well you know I probably could because I'm not in the online space right I could be taking my clients out because I have a lot of local clients um but because you're a
(1:43:41) seller if you're audited then you know they'll be disallowed so you know do you want to just put some in there and risk again like Jordan said right all they're going to say is H yeah I don't think that you know this makes sense no meals for you and then just disallow it and so you just have to pay you know the tax back right so I mean is it a yeah yeah yeah and it's a case of degrees it's a case of if you're going to abuse it to the point where it sticks out like a sore thumb that's it here and there right yeah I mean this individual
(1:44:21) that got um audited he was audited his HST was audited because he was claiming back like almost $330,000 of itc's right so yeah I mean it was all valid you know except for the HST on the meals but you know they'll disallow that little bit right um yeah yeah that's how he got caught that's that's their job to find anything they can slap you on the hand for yeah you know you just you've got to be smart about what right yeah yeah I was going to say occasionally like we as Amazon folks take out us suppliers right who are wholesalers for
(1:45:06) example or I assume even like if you go decide to go to a trade show in Vegas or you go for an educational seminar or online courses I assume that could fall under training to a certain level right provided the trip is fully dedicated to business yeah and conferences or trade shows it's interesting um there's actually some rules on that where depends on if the entrance fee includes a meal at the conference or if it doesn't it gets very very technical um because generally they do not want to give you the expense of a
(1:45:42) meal even when you're traveling to a conference for business so again if you have a sit situation like that better to you know check with a professional or and when you're checking online always go to the CRA right um I know there's a lot of stuff out there and I'm not saying it's wrong because I also go looking through that but unless I see it on the CRA website I don't use that as my advice you know because if it's not on the CRA website and it might not be valid so caremel I just want to ask of course we want to be respectful of your
(1:46:22) time is there a certain amount of time that we have you for today well you know I mean we can still keep going a little bit I yeah I could talk forever just want to make sure I'm not cut we're not cutting into anything for yourself no no no okay perfect yeah my son is is old enough he doesn't need to be he doesn't want to be around me so so I just wanted to address some of the earlier questions that we had in the chat as well so uh dixa asked and I don't recall if this is if if um it might be different by province or if
(1:46:55) this is the case but wanted to know if there's any charges for the process of filing for HST GST Etc um what do you mean um charges like if the accountant charges or so like to register for HST like do you have to pay go an application fee oh no no so with uh CRA for the HST you can um go online and uh register and it's free make sure you go to the CRA I mean I can even I can share the link if Jordan if if you don't have it handy like we can um share it because I had someone she she went to register on her own and she you know how
(1:47:39) sometimes there's certain sites that come up that are sponsored and they're just looking to you know get your money so I think she had to pay I don't know if it was almost $100 and and I'm like I don't understand why you had to pay and then she showed me the website and I'm like oo that's not the right one so we have to make sure it's a c website so yeah I I me you know I put one in the it's not funny but you know it's like okay all these little things that I you know I didn't I I realize so now whenever someone asks me I send them
(1:48:12) the link I'm like go here um and for PST I mean I do have links for PST um man TOA rst that stuff if people need it um yeah but no no charge at all for that stuff perfect and yeah I put I put a link in the chat there for uh Canada uh canada.ca which is to register for GST hsd okay so what other questions did we have here I know there was a couple that I was missing uh Jaden ask can you claim expenses like a storage unit you're renting from a neighbor I have an agreement and just e transfer yeah so I mean it's nice that
(1:49:00) the agreement was on paper um that would be great because whenever you're you know these e transfers and you're transferring it to an individual they're like okay what is this money for really right so if again paperwork right if you can just get a simple agreement if you know just saying you're going to be renting the space you know it's on a month-to-month basis for this amount um then yeah for sure you can uh expense that perfect I'm just going through the list here making sure that we don't miss anything uh while I'm looking through
(1:49:37) the list here because you had mentioned it earlier um for subcontractors what's your opinion about hiring overseas employees as sub subcontractors versus employees um well I mean if they can do the same job I don't have a problem um they you do have to have invoices though um you have to have some kind of paperwork to support you know the uh transfer that you're you know you're paying them um yeah I I have some people who are using uh vas overseas and they just make sure they get an invoice they send the payment and and that's it so
(1:50:19) you know I don't I don't think CRA would have an issue with that very cool that's what exactly what I thought uh so w be asked maybe a question more for Jordan uh this might be more more for Carmela uh when I look up on reports repository and I take the summary for the entire year the tax section is only the tax that I collected or is it the tax I collected minus the tax I paid on storage fulfillment reeven uh fees Etc no so that's just the tax on your sales so whatever was collected based on your sales the HST or GST that you paid
(1:51:03) out on storage fees um FBA fees that the seller fees those are on your seller fee invoices that you get every month those two or three or four that you get every month um that's where you're going to have to you know what we do um basically we we put every single one of them in an Excel spreadsheet and total of the HS paid um so it's again very tedious uh I've had to download I think like 80 of those invoices um at one time so yeah that that's and those are important if you're registered for HST you want to look at
(1:51:41) those because the fees are you know Amazon charges crazy fees and there's HST on that that you want to get back 100% uh Rob had to asked and I believe this is a question um in regards to what we're discussing earlier uh on a similar note how is inventory transferred if you decide to change from one Corporation a 9 to-5 job to another Corporation set up solely for Amazon would that process be similar from transfering from a soulle prop to a corporation well yeah so if you're not going from a soul prop to you know the a
(1:52:14) corporation you're just doing from Corporation to Corporation um yeah if you don't do that transfer the section 885 then basically your the first corporation that owns the inventory is deemed to have sold it to the other Corporation so it has to claim that sale right so um yeah I mean if it's a small amount um I wouldn't worry about it but if it's a large amount I I'd consider that uh election perfect uh Jaden asked what's the the best way to calculate year end inventory if you didn't do a manual count of what was at your home can I see
(1:52:54) how much I bought in terms of quantity what's sold on Amazon and an Amazon warehouse and deduct the difference so H yeah so you could you could get um the Amazon report uh so now I don't remember the exact place I have instructions that I could share um the only trouble with that inventory report it would only tell you what you have at you know at the warehouse so if you had anything at home you you'd have to you know guesstimate that portion but the report from Amazon will let let you know what you had on hand the only trouble with that is it'll
(1:53:37) only go back 30 days so if you're a soul prop or a corporation December 31st year end we're kind of out of luck CU you can only go back to January 2 6 um I mean in my opinion that's better than nothing than you know just pulling numbers out of the air um so yeah you'd have to find some sort of listing because if CRA it you know comes in they'll want to see an actual listing of your inventory so you know you'd have to have whatever like your the skew number a a brief description and the quantity and the cost um they won't just yeah you
(1:54:20) know and the reason for this is because people can play around with their inventory and that will affect how much tax they pay right so if they say o I didn't have that much at year end I had very little that means they're going to expense everything they purchased that year which means their profit is going to be less right so taxable income is less so you know I've had my client say to me well what number is most benefit official for ending inventory um I can't really say that right um I need the accurate number
(1:54:57) please so this is why it's important to try and keep um you know on a monthly basis I would say download this inventory report so on February 29th download the inventory report fill in the costs and there you go you've got this month and then you do it for every single month and for sure you'll have one for December 31st right and if you are doing your bookkeeping every month the monthly inventory count matters so you know you're doing it for two reasons um so if any anybody needs that report uh I know Amazon changes things a
(1:55:37) lot but um this one was at as of October 2023 so hopefully it's the right report perfect and then so with that I want to add on a couple things as well so I'm not 100% certain if CRA would accept it but like one thing that I personally like with utilizing something like a2x is with a2x I can run reports inside that software and it tells me what my inventory valuation was at any period of time so yeah Will it give you the cost of the inventory or the Val like the sale price both because on a2x you have the option
(1:56:15) you have the option to enter in your cost of goods on a2x okay yeah that's awesome I I know some clients use seller board that works as well yeah so like taking probably taking a screenshot or run a report through solell board at that either month end or year end right yeah yeah so it might be a good idea you know because the inventory is that's another tedious part you know of bookkeeping um if you can spend 10 or5 $20 a month and have um some software that will do it for you that's a big headache um you know dealt with and so with that
(1:56:53) I wanted to add on as well and we've had these conversations in the past so one thing I always recommend to everybody is when you are making MCS for your asens on Amazon I would recommend utilizing that space for your actual purposes so you can make uh like the M skes the personal SKS that you're utilizing on Amazon they can just default to random text Amazon does that by default but I would recommend utilizing that information more intently and it can help help you with processes like this so with all of our MCS we always
(1:57:23) indicate our supplier where we bought that item from put a dash put our buy cost and then put a dash and put a random placeholder number so when we are when we are entering um if say if you wanted to figure out your cost of goods in a spreadsheet from the report you pull from Amazon or you're entering your cost of goods on sellerboard or you're entering your cost of goods on a2x you'll see that MC right next to the information that you're doing and it's easily transferable instead of you trying to go and pull your receipts or
(1:57:49) pull your from from a spreadsheet it saves a ton of time yeah sounds like a good system yeah for sure yeah I can't imagine having to flip through invoices everywhere you know trying to find your cost right it's really helpful for yearend inventory can just see that information right there course great yeah and you know that's why having a community of sellers right you can just kind of share your tips and tricks that you have because I mean your accountant is you know fine you know we we know what to ask for we
(1:58:29) know what to look for and advise but you know the Daily Grind so to speak that's yours right um so it's it's just nice to hear that there are some good ideas out there all Jordan for if prices changes at Supply like how you manage that so I can't tell you if this is is the best way to do it but this is the way that I've always done it so whenever we buy something from a new supplier or at a new price that is a new unique as or you new unique msq so as like say if we buy something from Costco one day and it's
(1:59:05) $12.99 we send that in it's we send that in under that that msq if we buy it a month later and now it's $16.99 we create a new McQ for that and so it does take a little bit more work to uh help properly manage your inventory because technically speaking it's against the rules to have multiple SKS under the same asent right because then that means that you have you're potentially manipulating the buy box percentage so we would typically we're sending in inventory and it's basically hitting the warehouse as we're stocking
(1:59:35) out of our existing inventory so we don't usually have to worry about that but if our if our inventory under our new mcus is hitting the warehouse well we still have existing inventory in stock we will typically deactivate that listing um or or at the bare minimum price it extremely high just so that we can ensure that we're not in the buy box range until we sell out of the existing inventory so I always I always separate it out and that has worked the best for us then we're able to really accurately track our
(2:00:07) costs and um with that as well so if you do have a system like that in place it becomes a lot easier to Outsource um just some data entry so whether you have like a local employee um a kid um a a vaa etc they can literally just transfer that information from your McQ into like seller board cost of goods or a2x cost of goods Etc um Janine said McQ so yeah McQ so when you are um show you here I'll send a screenshot so it's it's I think in the Amazon sent Amazon workflow it's called the contribution skew so if you're
(2:00:44) making the listing directly in Amazon it's the first field when you are adding it to your inventory it's called contribution skew um it's also called M skew so Merchant skew so it's your own personal stock keeping uh stock keeping unit it would be right so it's just uh if you don't put anything in there it's not a required field it'll just default to some random text from Amazon but when you are making that listing instead of defaulting to random text you can input your own information and so if you're listing
(2:01:12) products directly through Amazon um it does it does take a little bit more time it's 100% worth it in my opinion but uh if you start utilizing like say listing software or something in the future uh most of those have features where you can kind of automate that uh so KB asked what's the reasonable amount and accountant can charge to file corporate taxes so Carmela had U mentioned kind of what she charges at the top of the conversation and so she can certainly go over that again and I can just tell you from experience so I have a local accountant
(2:01:47) that I use um the amount that it sounds like she charges is very similar to what my local accountant charges as well okay yeah um you know so ranging between, 1500 to 2500 depending if you need financial statements I I know there's accountants that are probably cheaper and some that are more expensive so you know it just it depends who you're comfortable with um and really you know whether you feel they provide value um to you so I know you kind of mentioned a little bit earlier Carmela uh but could you kind of like walk through the
(2:02:23) process if you don't mind about like kind of what goes into tax filing and why um why accountants kind of charge the fees that they do yeah for sure so I mean you know part of the process um because you know most people most business people or individuals you know they're not aware of um you know what goes into a tax return or what things can be expensed and that sort of thing or how to organize their documents so we do spend some time you know myself for sure but also my team um I usually assign someone to that client um and they work with
(2:03:05) them right getting the information that we need from them uh sometimes it's quick right so all the information is provided to us sometimes I and I'm not kidding it could take a couple weeks to to get the information right so um there is that that initial time if the books are nice and clean then you know we immediately go into the tax return process um and and so you know of course we're going to input the amounts into the tax return but we also have to make sure that you know we're following um you know the the rules the tax rules
(2:03:46) making sure everything is looking right making sure you're getting the credits that you're supposed to be uh supposed to be getting um and if the books are not cleaned then we have to clean them because like I said earlier on that unless I I'm comfortable with the information um I'm not going to report it I won't put it into a tax return um so we do some a bit of due diligence on that work making sure sales agree to some kind of um statement right because if you're audited how are we going to prove that you had you know
(2:04:24) $10,500 of sales how do we prove that so you know they usually want to see invoices um if we have the seller the uh Amazon sales summary that sort of thing so there is a bit of leg work on that end um and usually the the team member that's assigned to it will will do that um I do review everything that goes out so that's a little bit of um you know it's a lot of lot of work for me but again I I'm not going to e file with my name on it without um doing my final review and making sure I'm comfortable so you know if there's tax planning to
(2:05:06) be done during our you know our uh I guess session our year end uh when we're preparing for the tax return we'll do that um advising on how to pay yourself these are all things that I don't charge extra for um and so unless it's something completely different um that has nothing to do with that year's tax return then you know I'm I I don't charge so the fee that you see is the fee that you get um you know if there is let's say some unexpected work um that you know if it's going to take me a little extra time I might just like that
(2:05:48) that's fine it's a first year we we're not going to you know charge for that if it's going to take us a little bit longer depending on what that um that issue is then you know I always make sure I let my clients know ahead of time and get approval for that um but otherwise yeah it's it could be like a long discussion short discussion it depends on what the the client needs but certainly tax planning is part of that because as a business owner we have to see the entire picture so you come to me for your Biz but someone else is doing
(2:06:23) your personal tax return I can only advise you on your business because I don't know anything about your personal um and sometimes that's good sometimes that's not good you know it depends what your personal financial situation is you know if you're married if you have kids all of this has to kind of be taken into account when you're tax planning so that's you know kind of you know for sole props for the the Corporation sometimes it's a little bit more involved just because the reporting requirements are more involved but
(2:06:55) otherwise that's that's basically what I do whether you're a soul prop or a corporation very cool and so with accounting and a CPA in general so the way that I personally look at it is a good a good CPA should rically be able to pay for themselves so just in personal saving you on headaches having to deal with the C when situations come up um and overall saving you money based on the current tax codes and what you can claim and overall just save you time from having to do do and utilize those things yourself especially if you're
(2:07:31) unfamiliar right so like say if for example you are a brand new Soul prop it's not going to probably be that difficult depending on your situation and what kind of expenses you have Etc to file your taxes because you'll be filing them very similar to like a personal Tax Claim with a business portion attached to it um so if you're comfortable doing taxes and you understand everything and you see the whole big picture for your own personal situation it may not be that difficult to do your filing for a soul prop when
(2:08:01) it comes into corporations and whatnot um I would like to think that I'm relatively Adept when it comes to tax fings Etc um I don't want to personally deal with Corporation stuff at all um to me it just seems like too much of a headache and more so um I could better utilize my time doing something else where I can pay a professional to ensure that things are done properly yeah agreed I mean really if you're going to do your um the soul prop right um because you know if you want to do your own taxes by all means do that
(2:08:35) the the two things that I would say to look out for if you are doing that is ensuring that you're at you've got a beginning inventory and an ending inventory so those two amounts are very very important um and make sure that if you're registered for HST you're not including HST in your amounts that you're reporting just yeah those you know th those could be some know costly mistakes yeah and then like doing filings like say if you're um I would assume filing for HST is identical to filing GST and very similar to filing
(2:09:15) PST um if you're again Adept at doing these types of things those types of filings are not overly difficult especially if you are confident in your personal numbers and are able to do it yourself and like most of the forms I think the last time I checked it's been quite a while since I've done uh those returns like it's one or two pages it's not crazy so like those things are probably things that most people can do if they really want to um but but I believe like even accountant um whether they factor into your yearly package or
(2:09:44) just charge a an additional fee to do those filings for you um if you can better utilize that time yourself to make more Revenue in my opinion it's more worth it um but At the Hop like at the start when I first started uh when I was a so prop if I and when I had less money I did definitely file my own PST and GST it does take some time to ensure you have everything sorted and all your numbers together um and you need to be confident that you know what you're doing you're not going to be making any mistakes you don't have
(2:10:11) any issues down the road but assuming that you do that is not overly complicated yeah I I would agree with you um and I I do encourage my clients to do as as much or as little as they want right some people want absolutely nothing to do with it and some really do they they want to be involved so you know um yeah we work with both both uh extremes I guess you want to call them for sure um so Jaden has one additional question here but I also wanted to ask um so we'll get into his question first so he just wanted to know
(2:10:50) if you offer consultation one-on-one and if so if the person was complimentary or what you would charge and is that just an intro call or can it be to review my QuickBook setup Etc yes so normally what I do I I offer the 30 minutes free um and really you can ask anything you want um and what I if you do have QuickBooks um I'm I'm actually doing that for someone right now before we have her call she invited me as an accountant so that I can you know review the books before and then on our call we can discuss you know what I
(2:11:29) find um so yeah so that we can do that for sure I do those reviews I don't let my team do them not because they don't know how to do them but you know it is free of charge so I you know my time is my time I I'd rather you know not have to pay my own you know my staff to to do stuff right so yeah for sure um 30 minutes and usually in 30 minutes we can cover quite a bit excellent and then just like curiosity for myself because I know I think like at like entry levels for business positions I don't think it applies as much as when you start
(2:12:06) getting very large um but like for personal income tax in Canada obviously like there's some Tax Strategies that you can use to help minimize your tax burden like just doing like rsps Etc yeah do you have any recommendations for like um Tax Strategies to help reduce tax burdens for corporations or businesses in general well I mean the the businesses or the corporations that I deal with I mean generally speaking they're small on the smaller end um probably I don't know I I guess my biggest one now was about 3 million so
(2:12:42) that's the largest so that that's not exactly small but um so what we kind of do is um if you've got like a holding company sometimes that can provide some uh benefits I wouldn't suggest it like right from the start um but in terms of um you know if you've got uh a spouse or a partner who is helping you a bit you know in the business or you've got kids that are of a certain age and they're helping you you can consider paying them to reduce your um taxable income um you know we have to go a little bit um easy
(2:13:21) there because they are related to you so cra um you know we'll make sure that everything has to look reasonable that you would pay a stranger the same amount of money for the same job um so that's really is just making sure that we're taking advantage of all the expenses um but yeah later down the road it's possible to have a holding company and you know you can uh move some um uh non-t taxable corporate dividends to the holding company so the one thing as a corporation and it you know as a Canadian controlled private Corporation
(2:14:01) want to make sure that you don't have a lot of cash accumulating so there's a a certain ratio that you've got to look out for um and so if you have excess cash sitting in your bank account um your small business status could be at risk um um so that you know that's something to take a look at so you know again having an accountant can can help with that and then we can figure out what to do with that money um so yeah you know anything specific like for the soul props you're right like rsps there aren't you know
(2:14:36) too many strategies there but um yeah speaking with an accountant can certainly help like you know your situation is all different right every situation has its little quirks and and little you know special things you have to consider but yeah always willing to to have a a call on that kind of like a a semi joke but I've definitely considered looking into it about like eventually moving Corporation from Canada to to somewhere that's more more taxfree yeah yeah uh I mean you know I can't say oh actually no I I I can say
(2:15:16) but at that point you know when they became a non-canadian corporation they stopped being my my client cuz you know I I don't handle that but yeah yeah so you know certainly when you get to a certain um I guess size this this client I think he was he was nearing about $3 million gross oh yeah you know because there's only so much right like and the thing to keep in mind if you're a corporation um we we've got a limit as to where the small business tax rate will apply right so anything over that you're going to be
(2:15:56) in a high tax bracket and there's only so much you know like how much expenses can you have and how much if you pay yourself in order to reduce that income the you know the the profit in your corporation then you've got personal tax to deal with which is even worse right so yeah it's um inter there are things um as you get bigger as a a business that you can kind of take advantage of and yeah one of them is uh move to maybe Monaco I think there's no T there's zero tax there right yeah definitely something that's been in the books about
(2:16:36) consideration for us over the last little while yeah um so correct me if I'm wrong I believe this is correct um but for Corporation you're tax based on your actual net profit and uh I believe I'm not sure if it if it changes by province but like I think it's like the first couple hundred K profit the corporation tax rate is like 11% it's actually more than a couple hundred I believe it's at 550 oh okay yeah and I mean in your Province yeah here it's 12.
(2:17:15) 2% in Ontario right yeah and and I think Ontario's one of the higher ones uh wobby asked um would you suggest me waiting for 2025 to switch from Soul prop to a corporation I feel like it's going to be a mess to declare at the end of the year if I switch up in the middle um I've had lots of people switch in the middle you know if it makes Financial sense I don't think you should delay it um but that's something you know to kind of take a look as to you know one why did you you know why do you want to move to a corporation does it
(2:17:50) make sense to move to a corporation there's a few different things that you know we would consider um and your personal finance is one of them um but yeah if it makes sense I would move I would move right away because otherwise I mean we're only at the end of February right um the rest of this year if if you're worried about paying too much tax then you know I I'd say do it and so we'll we'll figure I mean as long as you have someone or you know how to navigate through you know separating you know the so prop
(2:18:25) from the corporation making sure your section 85 roll over is done then that's fine right I mean i' I've done it for clients before um it's it's not a big because there are you know there's distinct dates and so you know we collect the reports from those dates and and we can report properly yeah and so when you uh switch to a corporation you are able and have the ability to choose your own year end correct correct yes um yeah as long as it's not um 53 weeks from the date of uh or more than 53 weeks from the date of
(2:19:06) incorporation yeah oh I always try to like um I mean there is a little bit of a benefit to choosing a year end that's like July 31st to December 31st first um one little I guess it's not a trick but it's a strategy that corporations can utilize is if your year end is let's say July 31st or August 31st um and you have some excess profit um and you want to kind of bonus something out to yourself so let's say you know for the fiscal year uh or sorry the calendar year you've taken already you know $50,000 out and you're going to
(2:19:47) be t taxed on 50,000 salary then at the end of the year you're like well you know my profit is high why don't I just bonus out another 50 Grand to myself so if you had um a let's say a June or May or April year end that $50,000 bonus that you're going to claim as an expense in the current fiscal year so you reduce your profit and you pay less tax you don't have to declare that 50,000 till the following year right so you've got a year of deferral there you know so you need to have at least 180 days so that's why
(2:20:28) July 31st to December 31st will give you that little bit of flexibility if you want to do some uh tax planning that way um so that's what I would suggest is July 31st to December 31st yeah and then you also and it's always the last day of the month you also have the additional benefit of not uh having year end right in the heart of tax seon like April so it'll probably be easier to deal with your accountant yeah I wasn't going to make it all about me but since you mentioned it yeah so I have you know a ton of
(2:21:03) December year ends that we're trying to like get through um because you know in April you know time basically stands still and accountants turn their focus to personal tax so we don't do any corporate work in April um that you know I mean you also have to take into account making making sure that your accountant isn't bugging you during quarter 4 right um I do have sometimes I I forget and it's like oh crap you know I'm I'm asking them for all this information but it's like in the middle or end of November they're
(2:21:39) busy right so you have to see when it makes sense for you yeah so we have a year end ourselves for September for that reason it's worked the best for both parties yeah yeah um so I wanted to also touch base just in regards to Corporation because you mentioned like whether or not it makes sense for yourself so everybody has to keep in mind that there will be some additional cost associated with incorporating um I I think it may differ from Province to Province uh depending if you're incorporating provincially or
(2:22:11) federally um but from what I recall it's not that expensive if you do it yourself like it's literally a couple hundred bucks you can get services that do it for you that charge you substantially more but it's not hard the application's online you literally fill out a couple questions and some information it's not hard to do and then I from um I believe like there's renewal fees every year as well um and then yeah you just need to ask yourself whether it makes sense for you so if you're a brand new seller you're just started you're not sure if
(2:22:42) Amazon's going to make um make a Long play for yourself you probably want to hold off a little bit because you're going to have some additional complications in the event you decide to uh to to call in with Amazon and say quit Amazon whereas if you're a sold prop it's a lot easier just to to to finish right um but my recommendation is basically whenever you know that you are going to be sticking with Amazon it almost always makes sense to start incorporating as as long as of course that you can personally afford the
(2:23:11) additional cost associated with it so like the higher cost for your tax return and the cost for incorporating because you're going to be saving for most people quite a lot on um the taxes that you're paying for your year end profit because you're going to have your your 11 to 12% profit for the money that's in the corporation for net profit versus your personal marginal tax rate which is probably anywhere from like 20 to 30 plus perc depending on your tax bracket um yeah and then you also have the um the additional ability to um Shield
(2:23:43) yourself in the event that there's any type of litigation and you can also disconnect yourself from a lot of um financial responsibility that you can put on to the owners of the corporation so for like insurance purposes or uh litigation purposes it's not going to guarantee that you are shielding your personal assets if you're ever litigated against but it provides a additional blanket on that so like if you by chance ever sell a product on Amazon and somebody's kid takes that and they choke on it and they die any good insurance
(2:24:14) lawyer um or any good lawyer in enal is going to try to go after any party that's responsible so they're going to go after Amazon they're going to go after the manufacturer and they're probably going to include you in the case not saying that you're going to be held personally responsible because you're are just a vendor but you may have to go through that process right and so like you you should have um business insurance or liability insurance to help with that um but in the event that something doesn't go your
(2:24:41) way being Incorporated detaches your personal assets from being being uh targeted it's not going to guarantee that your assets are not going to be pulled into it but it helps provide that additional blanket right and there's something else I was going to say um oh you also have just like in general more flexibility with um just value taxwise Etc things I'm not sure if you have any more um additional benefits for things that you can claim because a business expense is a business expense but like what what car mentioned
(2:25:17) about like having like shareholder loans dividends Etc that can also help with reducing your overall taxes that you owe uh Jaden said if polling you're if you're pulling out money from the corporation anyways won't count to your personal income and just delay the taxes outed if any so yeah so I mean it depends on what your sharehold older balance looks like um you're basically you're deferring right so you know we can't avoid tax we can minimize it and we can defer it so as a soulle prop or if you choose a year
(2:26:01) end that doesn't allow you that flexibility then you know you're let's say you know in 2023 you don't have that flexibility because you chose a year end other than what I mentioned then what if that year you also had you know a sale of a rental property in there so your income is high already and now you're just adding more from the corporation but if you have that flexibility you can move that 50,000 into the next year where your income might be lower so it just yeah you know it just provides you some flexibility um whereas choosing
(2:26:40) let's say a a non non- ideal year end will give you no flexibility right you may not use it at all um or you may not feel that you know that's right for you but at least you have it just in case depending on how what your personal finance is for that particular year yeah and then I could also see it being uh potentially beneficial so you have more time to plan so like if you owe a bunch of taxes and you're trying to say get that out of the company and say go towards yourself just to help that uh immediate liability that you may
(2:27:16) have right away uh you could then also potentially use that money that you pay yourself and you have the time frame to do it to say put into an RSP to uh reduce your personal tax burden right so like you're not having to do it all at once or you're not having to wait an entire year before you realize those additional tax benefits right yeah so I think we'll probably uh answer these last additional questions here then we'll probably get close to our wrapup um okay KB said uh could you transfer funds from your corporation to
(2:27:50) your personal account via e transfer then at your end issue yourself a large payroll payment and reimbursed loan this approach aims to retain more cash flow rather than deducting taxes monthly through regular payroll yeah so as the shareholder you can do that so we have lots of clients who you know they don't know if they can or want to take payroll or dividends they're not really sure so I just tell them pay yourself you know transfer the money then at the end of the year we take a look at how much you transferred
(2:28:21) out we take a look at your shareholder balance uh make sure that it's in a credit not a debit position um and then yeah we issue basically um you know a big payroll amount so let's say it was $50,000 as long as the remittance for that $50,000 is paid by January 15 so that I'm I'm just assuming that it's a December year end um so if it's a dece end and we're deeming it at the end of the year which is December the payroll remittance is always due by the following month by the 15th so is you know pay the remittance by the 15th that
(2:29:01) way you're not charged any late fees or penalties um and then you get your T4 slip in uh February so yeah you can do that so then KB just had a followup question and just mentioned so it's fine to payroll yourself say $70,000 in December yes Y and it's interesting because we had this has been you know I've been doing this for 22 years and uh when I used to work at an accounting firm we we this is what we were doing and a client was audited and she's like well no you should be doing monthly payroll as a shareh as long as you're
(2:29:39) not doing this for your employees so I mean they want to get paid monthly or weekly anyway but um as a shareholder holder you're able to look at your year end and go I'd rather call you know 20 of it as dividends and 50 as payroll so you can kind of play with that so it's it's fine it's I mean everybody does every single accountant does this and uh yeah C is fine with it yeah so in regards to dividends Janine just asked Dividends are tax at a lower rate uh well yes and no um so first of all they do not lower
(2:30:19) your corporate profit right because they come out after tax money um but at the low rate so when you pay yourself if you have zero other income for your personal tax return and you take out about $40,000 of dividends that is generally taxfree on your personal tax return um you do get so they have to get grossed up so if you take 40,000 out you have to gross It Up by right now the rate is 1.
(2:30:56) 15 um and then you get a tax credit to offset it it's just a weird way of um CRA wants that done but otherwise um if you have other income so let's say you're making income um at another job you know of 100 Grand and you pay yourself 40,000 or 20,000 it just gets tacked on to your 100,000 so it could put you in a different tax bracket so you just have to you know be aware of where your the existing tax bracket is and then how much more would put you over right and just be prepared to pay that extra tax and yeah like this is where like doing proper tax planning
(2:31:36) comes into play and whether you're doing it yourself Andor with a CPA um obviously if you don't understand all this yourself a CPA comes into real help but yeah with me personally I pay myself basically just a little bit more to just live and my expenses are relatively low because we're trying to massively grow our company so last year I paid basically nothing in personal income tax yeah I mean you know it's it's not that you're you know avoiding tax or what you're minimizing your ta overall tax burden right so yeah you know you
(2:32:13) might be paying tax that's why when clients hate paying the the corporate tax rate I'm like but that's 12.2% that's about as low as you're going to get you know so you want to pay that rather than personally right so yeah having a corporation does provide you with a little bit more flexibility than a soul prop for sure yeah I like that's like obviously um that's playing within the rules that are given to you playing the game that the sies um so there's nothing Shady about it but we want to ensure that we can take advantage of that as much as
(2:32:48) possible to keep as much money in our own pocket as possible yeah that's the name of the game uh wobby said maybe dumb question but if I pay per later for example to ship a wholesale order from US to Canada can I count it as an expense yep you can yeah like again we operate under the assumption like any reasonable business expense uh typically can and should be utilized as an expense for your business whether that's soul pro or Corporation agreed and Wy said so any shipping fees can count too yes oh yeah and then so with that so like just just
(2:33:28) to ask so I believe some people have mixed uh opinions about this whether like say if they get charged Freight or shipping fees should I consistently uh put that into my cost of goods or should I consistently claim that as an as a additional expense yeah well that's a I mean I guess you're asking because that kind of um allows you to you know determine what profit margin you're operating on right because otherwise I mean everything's an expense so at the end of the day the bottom line is what matters but um if you're kind of
(2:34:08) taking that into consideration I I would probably do it that way because then you're you're already um how do how do I say this so when you're when you're sourcing and and that kind of stuff taking the shipping into consideration will put you on the conservative side right the conservative end of you know gauging whether or not that product is going to be uh a good fit for you because I've had clients who source and they're you know the the margins that they look at the rois all that looks all wonderful and then we you
(2:34:48) know deduct the shipping we deduct you know other operating expenses and at the end of the day their 35 or so per uh margin that they were expecting has come down to 15 right so I think the more conservative you can be um when you're sourcing your products in terms of you know adding the shipping to the and the freight to the cost of goods sold I think that's probably good a good practice to have um I mean you know Jordan you say you know everybody's got a differing opinion on that um sometimes like it back in the day I guess in theory when
(2:35:31) you know accounting Theory um usually the cost of your good would include everything that it needed in order to make it ready to to be sold right so basically it can't be sold if it doesn't get to you right so the shipping was generally added to to the cost of a product um whether you have to uh I don't think you have to um I just think in this type of business um adding it could um you know help you Source sort of um I guess better products does that make sense how I'm explaining it yeah and so the way that we do it is so yes
(2:36:18) it's it's in my opinion very important to understand what your total costs are going to be when you are sourcing products and you're utilizing a calculator like seller amp rev seller a Insight whatever you're whatever you're using because you do want a realistic idea that your products are going to be profitable and that without even having to think about it you're basically operating a profitable business that makes it more on the surface of things brainless right to ensure that you're going to be a profitable business um so
(2:36:45) yeah like ensuring you you know your expenses and factoring that into those calculations I think are very good to do um when it comes to actual uh bookkeeping the way that we do it is and this was the advice that I person I got from my accountant is that whether you want to put the freight into your cost of goods for accounting purposes or not like you said doesn't really matter as long as whatever option you're choosing is consistent um he never specifically mentioned this to me but I always just done it so that we
(2:37:19) on the accounting end we separate it out so that the freight charges that we're claiming are in expense right now versus an expense when we sell that inventory yes yes that's a a good point because then you know your ending inventory is going to include some shipping which you know what you've already paid for so you should yeah yeah so for accounting purposes you know you can certainly split it out um but you know when you're working on because there's two sides right the accounting side and the selling side um so yeah
(2:37:57) that's a a good point uh to bring up yeah and like so it's really sorry Dean I didn't mean to cut you off I'll just you want to go ahead yeah um I just had a question um car you just mentioned earlier I'm not sure if I did not understand clear clearly but U you you said to not add the HST with the cost of goods when you're filing as a sole proprietor I mean for myself you know if I wasn't registered for HSC last year would the HSC be added to the cost of goods when I'm folling my taxes you know like added you know when I'm going to
(2:38:33) file my tax just wonder so so if in 2023 you were not registered for GST HST then it would become part of um your cost of goods like even all your other expenses will have the HST included so it becomes an expense to you yeah okay I just want to make sure because I've you just mentioned that earlier and I I did not understand but thank you no problem so then yeah what I was going to mention is um it's very important to know your numbers so like doing your bookkeeping consistently especially when you're getting going and building a business is
(2:39:14) very important so you can keep track of your profit and loss and it's very important to understand your personal costs because if you really understand your numbers especially at a high level you can make much better decisions in your business for the purchases that you're making so like we're able to effectively sell items that profit us a dollar right and I'm cool with that depending on volume because we know what our actual production costs are I know we have it down for what our average cost is per as for our warehousing our
(2:39:44) employees our labor our suppli Etc and we we are able to do that because we have a good grip on our actual finances right so this may not be super important when you're first starting but as you're scaling and you want to make good decisions in your business it's very important to have a good understanding of your numbers and then being able to factor in things like oh this is going to cost me this this additional amount to ship maybe I have a prep fee uh entered in to seller amp of 50 cents but I know we can run through a thousand of
(2:40:14) these in an hour so you're able to kind of adjust that mental calculation on the fly so you know that no this unit doesn't profit me a dollar maybe this actually profits me $1.75 and maybe that's a world of world of difference for your bottom line yeah I mean you know I always say like even when you're starting out I think that's the best time to really get familiar with all the processes right and accounting your tax your bookkeeping that's one process that you should get familiar with and if you're doing it
(2:40:46) from from the beginning you have I don't know let's say you're starting really slow so there's like I don't know a few sales every week or you know it's easier to learn with less volume because you're not overwhelmed with like hundreds of transactions so if you get a grip on you know how to do it for you know let's say a $1,000 a month of sales then you know when you scale to 10,000 or 20 or 100 you're you're already doing it you don't have to learn it at that point when you've got the all these transactions
(2:41:21) coming at you so I just think you know learning when you're small is probably a an easier time to learn because there is a you know there's a lot to learn right there's a learning curve um so it's just better when you're starting out rather than when you're you know really really going and and you're sourcing uh consistent like you don't have time to sit and learn the bookkeeping but you know at the start you do 100% And yeah like all these things like with everybody nobody just starts with knowing all this information
(2:41:57) and knowing everything off the Hop these are all things that you learn as you grow as you build a business and the more you do it the more consistent you are as with everything else uh the better understanding you'll have of things the better financial decisions and business decisions you all to make and then you'll ensure that you're always operating at a net profit which I know a lot of sellers they don't know their numbers and they have no idea what they're profiting and if and when they ever actually do proper bookkeeping in
(2:42:25) taxes they sometimes are quite surprised at what their actual numbers are yeah it is disappointing because I know how much work goes into it um and to not have what you expect to happen or even you know worse have a loss that's a bit of a shock at the end of the year definitely so it looks like we just have a couple additional questions here so Jaden said if you use a local supplier for example doing your bookkeeping versus a VA abroad I assume you can claim HST uh itc's and not just a business expense right as some say oh
(2:43:02) use a prep Center in a lower tax Province but in theory it helps lower your net HST um so yes so exactly that so if it's let's say here we 133% so if your prep Center you know is in BC um then you've got a lower um but but the thing is if you're if this is an ITC you want to have higher itc's no you're going to get it back so that's why like when it's the sales tax I'm not convinced that you know moving just because of that um the sales tax is lower uh sure you're not paying paying out 133% but you're also you're you're claiming it back right um
(2:43:51) is that what you're asking and yeah we we've had we've had yeah that was it we were having a discussion on you know doing a prep Center some was like oh I have a prep Center out cuz it's cheaper I don't have to pay you know 13% H to but we were like in you get her back anyway right so it's not yeah maybe I wonder if maybe that person isn't registered for HST yet so and wants to reduce the costs so I know in this scenario like we've had quite extensive conversations about this so like uh one guy who's in our community and he's certainly registered
(2:44:27) for HST uh mey uh we've had this conversation I've had it specifically with him where uh we're kind of going back and forth where he saw it was a net benefit of having a prep Center in Alberta versus Ontario and I said like that doesn't maybe for short-term cash flow yes CU you're going to be get in charge 5% sales tax instead of 13 but net net net at the end of the day it's going to be the same thing because the additional HST or PST that you're paying utilizing an onario prep Center you're going to be claiming those additional
(2:44:58) costs back anyway so net at the end of the year it's going to be the exact same but it can help your short-term cash flow right yeah yeah and then um uh KB asked what is the maximum amount you can owe your corporation without uh needing to classify it as a dividend and issue a T5 after the year end yeah so there's no max amount even if it's $500 it's $500 but um what happens is at the end of your year your fiscal year I'm going to just assume it's December so if at the end of December the balance in your shareholder account is is a debit which
(2:45:39) means it's negative so if it's negative $4,000 $10,000 you have an option of reporting some or all of it for 2023 year or you can wait and see if you can repay it by the following year end so you have a chance right so because you know who am I to say whether you're going to pay it back or not right so if you say to me no I'm not paying it back then the full amount it gets uh dividend so gets a T5 slip so even if it's $1,000 it's $1,000 but you know if you're if you're saying to me well you know I I might um
(2:46:22) I might be paying it back or you might be still paying for some business expenses personally with personal cards um that's going to that balance is going to keep fluctuating so we can wait until the following year so you have a year to to kind of see how things pan out so I have clients who I know 100% cuz they've been with me for like 20 years I know they don't pay anything back so I make sure you know we dividend at at that point but you can sort of carry it forward to the next year but if by you know December 31st 2024 that balance is
(2:47:02) still there it must be reported as a dividend to you excellent um so uh yeah I think we're getting too close to the end the conversation so if anybody else has any additional last minute questions that they'd like to ask certainly feel free uh but we're going to be getting close to wrap up here we covered a lot in this session I think there's a lot of value provided in here so definitely appreciate you Carmela oh well I you know I know as I say I can you know ramble on because this is what I love to do um and sometimes maybe you know I might
(2:47:42) complicate things or make things sound a bit more complicated than they might be you know um especially when you know I start talking accounting terms um but yeah I'm I'm always free again here on Discord if you need clarification or if you wanted to have a call um you know for the next I will be say that for this week I can't take any more calls because we've got uh February 29th uh filing for t4s and t5s so we're pretty hectic until Thursday um but starting next week you know if somebody wants to get on a call
(2:48:21) uh I'm happy to do that excellent so anybody have any last minute questions before we wrap it up here I'm actually uh I'm actually quite surprised and very impressed with everybody's questions today I wasn't sure if everybody was going to come with all these loaded questions but everybody came with a lot of good good Insight yeah yeah yeah no it's no it's good to know what people are you know struggling with um and you know what it's You're Not Alone um I'll say like a good 80 85% of my clients struggle with the same
(2:49:00) thing so it's not you know it's not you it's just our tax system it isn't the easiest to follow or understand and sometimes we get different opinions and that but um yeah it's always good to to check with um you know sometimes a an accountant or CRA I hate to say that but you know if you deal with CRA maybe call a couple times ask different people ask them if they can send you that information and writing VI an email too yeah I've had some people you know she's like oh just wait a second I'm gonna email it to you I said email since
(2:49:37) when do you guys email but she emailed me information yeah if you have if you have them on record St something then that's more covers your ass oh yeah always I mean you know I always ask them can you guide me to whatever you know publication that is or whatever article that is because I like to print things out and keep it in the client's file right just for future reference 100% Okay cool so it looks like we have some people saying thank you so wobby Janine KB you're very welcome hey good good night everybody
(2:50:16) I just joined the chat well I just joined the Money Team um around 5 minutes ago so I'm new to it I only have one question if I I just started two weeks ago and um I plan to do start a corporation within the next month but if I am if I am in the negative do I still file tax taxes same way before I start my Corporation um in the negative how do how do you mean like you're operating at a loss right now yes as I said I started two weeks ago so um all the startup costs uh so I'm still in the negative and I know I'm I'm planning to start my
(2:50:59) Corporation within a one's time yeah so I mean if you think a corporation is right for you then yeah you would still you would still start the corporation even though you're at operating at a loss yeah no what I'm trying to say is do I still file the taxes for the month that's oh for your personal yes yes you have to yeah okay thank you and and the reason why if you have other income that loss that you have as a sole proprietorship that can help your tax return okay great beautiful so then yeah with everybody here uh in case you join
(2:51:43) partway through the conversation or in case you missed anything uh whole session has been recorded and we're going to be uploading that and I should be getting it shared with everybody probably tonight uh so if you want to reference back to that of course you can at any time um yeah like I said it was a great session Carmela I definitely appreciate you doing this uh you spent basically three hours with us which is super awesome it went by so fast yeah like who would have thought that talking about accounting things would be this
(2:52:13) interesting well you know what at least you know people want to my family my friends they don't want to listen to me anymore I think that's like with us with our Amazon bus yeah that's with us like with our Amazon business but yeah but yeah thank you Carmela definitely really appreciate it you're very welcome and then