bats

I paint and sometimes sell my work. I've had conflicting information about declaring this to the tax people.

One office told me that I can earn up to $2k from a hobby before the tax peeps are interested. On line I've read that it's not so much the amount earned but whether or not you run the activity like a business, i.e, have a website to sell your work, have business cards.

Other artists say I should declare the sums plus claim for materials, mileage to shows, society membership, and as I have a studio at home that I can claim part of the household bills.

So now I'm wondering what to do. I do hope to increase sales but I haven't made a profit yet to pay any tax on.

Aviator

According to CRA it is a business if you sell and intend to make a profit. Your title 'Earning Money' implies you earn from this or plan to.
How you operate it is irrelevant and there is no minimum amount set by CRA. Claiming expenses will offset tax liability, use of home office (proportional to what you do and earn). Losses can be offset against other income.

Meaning of the First Part of the Definition of Busines

JonboyE

^^^

If you will never make a profit it is a hobby. i.e. your expenses will always be more than the income you will receive from sales.

If you are doing it with the reasonable expectation that you will make a taxable profit at some point in the future it is a business and the advice above is correct.

A "reasonable expectation" is a matter of interpretation. If you buy an investment property it may take many years to pay off the mortgage sufficiently to show a profit. The CRA allow the losses in the earlier years as they know eventually it will produce taxable income. For other businesses they may look after 2 - 3 years of reported losses just to check.

bats

Ok, thank you both. So really I should declare my sales and expenses for 2014, but my records are not very accurate. Or should I resolve to keep proper accounts from now on and declare for 2015? At some stage I want to work fewer hours and eventually retire from my real job and spend more time painting.

JonboyE

If you made a profit in 2014 you must report it. Reasonable estimates are better than nothing. If you made a loss it is up to you whether or not to put the loss on your tax return - there is no penalty for not reporting a loss.

But yes, from now on try and keep good records including receipts and details of business trips - how many kilometers driven and why.

bats

Right, I'll cobble together what I have. I know what I've sold but am vague on supplies and can work out mileage for exhibitions etc.

Many thanks.

Tramps_mate

Unless you sell for cash and there's no receipt....

Steve_

If you're actually engaged in a business, you should probably register as self-employed, i.e. get a business number and GST/HST number and file T2125 with your T1.

No doubt someone will pitch in and say you don't need a GST number below whatever limit it is, but imo you should always apply for one because then you can claim ITCs (i.e. claim back GST/HST on your supplies). So if you end up selling nothing, you can at least claim back the tax. GST return takes about a minute to fill in imx, provided you've added up all the GST from your receipts, obviously.