client in US refuses to pay cad employer

Also a friend tells me that since I work from my home, I can designate 1 room as office, and then take some kind of tax break or deduction for that room or home office. he did not know more on it.

he said even as an employee and also as a self employed I could do that. This friend is in US, so I wonder if it applies to Canadian rules too.

Is it true?

hi

Do I have to fill up form RC59. is this the form to register as self employed.

I see only this at the CRA site.

cra-arc.gc.ca/tx/bsnss/tpcs/slprtnr/menu-eng.html

geetam,

Let me answer what I can. You do not need to charge a US client GST as it is only collectible for services offered in Canada. While technically you should show GST on an invoice to a US company (or at least your tax ID number), the tax rate for out of country is 0%.

Now the taxes. Yes you can do it as you suggest. What you won't need though is an experienced accountant. All you do is add the income from December onto your tax form as self-employed. The tables will tell you how much you owe based on the fact you had no deductions for the month. If you aren't sure how to do it, get a tax calculation program - they can be very helpful.

Okay the rent. Yes you can charge yourself rent for an office, and deduct the expenses as well. While the expenses are easy, a self-employment deduction, any rent you pay as a sole proprietor will have to be declared as income as an individual. When you are unincorporated it is a wash (if you rent from yourself). It only makes a tax difference when you are a incorporated. For the short period of time you are doing this, I wouldn't bother with the hassle.

I just scanned the RC59 and that is not what I used. When I registered as a sole proprietor, I used my real name as the business name and obtained a GST number. Nothing else. The only form I completed for CRA is the GST registration and then the quarterly tax statements.

Hope this helps.

Steven when you say this, " I used my real name as the business name and obtained a GST number."

Does that mean that you formed a company or did you do that to be a sole proprietor?

Also a friend tells me that since I work from my home, I can designate 1 room as office, and then take some kind of tax break or deduction for that room or home office. he did not know more on it.

he said even as an employee and also as a self employed I could do that. This friend is in US, so I wonder if it applies to Canadian rules too.

Is it true?

It is true but don't do it unless you plan on never moving. If you designate part of your home as an office, it is no longer part of your residence, which means it is subject to capital gains tax if you ever sell it. It's a complete con because the tax break will almost always be massively exceeded by the CGT.

I suppose if you charge yourself rent you get a bigger tax deduction but charging yourself rent is dicey if it's not arm's length.

Steven when you say this, " I used my real name as the business name and obtained a GST number."

Does that mean that you formed a company or did you do that to be a sole proprietor?

I didn't say that but once you're registered as self-employed you get a business number, and you have to register a payroll account and a GST account.

GST on exports (which includes services) is zero-rated, so you just put GST down on your invoices at $0. However you can still claim input tax credits for anything you buy for your business, so basically you get the GST refunded by the CRA for anything you buy for legitimate use by the business.

You can also claim tax credits against your income tax for equipment acquired for business use, but for six months it will be more trouble than it's worth as you have to use a depreciation schedule assigned by the Capital Cost Allowance.

Like I said, you need to download all the blurb from the CRA website and read it. It does take some time to wrap your head around it.

The payroll taxes are the key thing as that is the main difference when you are self-employed, you have to pay them and prepare your T4 yourself.

I have one more problem. I have 1 month notice period agreement with my employer.

That the client won't pay my employer thing, I came to know on 30 Nov.

My employer does not know it as yet, neither do I want to tell them as they might stop my whole month Nov salary which they will direct deposit in my account on 15th Dec.

If I tell them, I wonder if they will adopt their H1B mentality and stop whole or some part of Nov salary. How do I deal with them? I really can't afford to lose any money.

My next timesheet is due on 16th dec for the 1st 15 days of dec.

Thinking that I will empty my bank account and send them a timesheet of 0 hrs worked between 1st - 15th Dec. They verify, client will say On vacation.

on 16th tell them sacked by the client.
then the employer looks for some other cleints or job, tell them not in a mood to work, have to take care of the baby. A perfect women's (being a women) excuse , will this work.

I have called and spoken to so many different reps, some tell me to go to cra.gc.ca/bro and register there, but then the GST rep told me to call the provincial registration number. Reading from Ontario website, it says,

"if a sole proprietor establishes a business in his/her own name, without adding any other words, it is not necessary to register the business. "

is it correct? I do not intend to add any words to my name for the business as a sole proprietor. So am I done or do I still have to call them up.

If you will be billing them more than $30K then it is a good idea to get a GST number, even if you are billing exclusively to US companies in USD which will be GST exempt.

CRA will see the revenue level above the $30K and may ask why you don't have a number. Besides if you have the number, you can claim back any GST you pay on items acquired to complete your work (paper, toner cartridges etc.).

If you are using your own name, then you don't need to formally register, but I would consider using something like First Name, XXX as your business name as it would distinguish personal and business deposits/income. The XXX can be whatever you want it to be - when I was self-employed my XXX was MBA.