Personal Finance

I've never filed my taxes before and have some questions

  • Last Updated:
  • Apr 15th, 2020 11:46 am
[OP]
Newbie
Oct 3, 2009
89 posts
36 upvotes

I've never filed my taxes before and have some questions

Hey all,

Apologies in advance for the long post.

First a little backstory about my situation and how I ended up here. I had no guidance about finances growing up and we were never taught about this subject in school. I've never had an actual job with an employer and I don't have any debt/loans/credit cards. I had some money just sitting in my bank not doing anything, so I decided to start researching into investing and learning about TFSAs and index funds. This lead to learning about taxes and I always knew that I'd have to file a tax return once I earned a certain amount. I then learned that taxes I may owe don't start around the basic personal amount, but instead around $3500 when you're required to contribute to CPP. When I learned of this, I started panicking thinking the taxman would bust down my door at any minute.

Since 2017 I started messing around with online affiliate marketing and earned a tiny amount income since then. Around $5000 in 2017, $12000 in 2018, and $8000 in 2019. I get paid in USD to my TD Cross-border US bank account and have no tax withholding from my W-8BEN form I've had to fill out. I keep the majority of the funds in USD and just use my US debit card for 95% of spending as there are no foreign exchange fees, unlike my TD Canadian debit card (2% or 3% fee the last time I've check) and I get the VISA rate which is basically the spot rate. However, I have exchanged some funds over to CAD, since a few Canadian online retailers and local restaurants that accept online payment don't accept debit cards that were issued outside of Canada.

I then threw the investing research to the side for the time being, and for the last 2 weeks have been learning as much as I can about taxes on the CRA website and other websites. I now feel comfortable enough to say I have a pretty good grasp on taxes for my situation and that I think I can handle my taxes alone without a tax preparer or accountant for my somewhat simple tax situation.

I do have a few questions to make sure I'm doing my tax return correctly though. Feel free to answer any one of them, or correct me where I'm wrong:

1) What type of banking fees can be considered expenses? In early 2018 I was getting paid to one of those e-wallet websites (Payoneer). I used their debit card to pay for some small things, but when I opened up my TD Cross Border US account I wire transferred the funds into my bank account and was charged a total of $50 in wire fees. Is this type of fee deductible? If they are deductible expenses, which category would I put them under on the T2125 form?

2) What about a USD -> CAD exchange fee? I use Transferwise and they charge a small fee for the transfer. Is this fee deductible?

3) My only other business expenses I incur are renewing my domains/hosting for the year. Which expense category should I be putting this under on my T2125? Advertising? or Other?

4) For capital expenses (CCA), I could add my computer as an addition (at the cost of what the fair market value would be), but I believe I don't want to do that if my taxable income will be 0, correct? Unless I add it as an addition, but deduct 0% (of the allowable class) of it for the year.

5) For CCA additions, you specify how much is for business, and how much of it will be for personal. I work on my websites sporadically throughout the year and according to the wording used in this paragraph: "If your business use changes from year to year, enter the total cost of the property in column 3 and column 5, and enter "0" in column 4.", it seems to be saying I can claim the addition as 100% business if I don't know exactly what my business/personal usage of the addition will be. This seems like it'd be easily abusable to make that claim, no? I guess it's more of a "good faith" thing?

6) This next question is the one that confuses me the most and where I've spent a considerable amount of time trying to figure out: Calculating potential capital gains/losses when holding/spending USD currency. Like I've mentioned above, I use my USD debit card for 95% of things I purchase, and from what I've researched and read, this can be EXTREMELY complicated to keep track of the Adjusted Cost Base, if not impossible if you've not kept receipts for every single thing you've spent USD on since the very beginning. Consider the following example:

---

USD -> CAD hypothetical example:

USD Net Income for tax year: $10,000 USD
In March I convert $2000 USD to $3000 CAD at a rate of 1.50
At end of year, the annual rate was actually only 1.30
I calculate my income for the year using annualized rate: $10,000 x 1.30 = $13,000 CAD
I calculate the capital gain/loss on that March conversion: $2000 x 1.50 = $3000; $2000 x 1.30 = $2600; $400 capital gain

Would I:
a) Report $13,000 as my income with a $400 capital gain? (excluding the $200 rule in this example for brevity)
b) Report $13,400 as my income?

---

I'm thinking I would do option (a) if my intention was just transferring some USD to CAD. However, if my intention was believing(speculating) that the rate was in my favour to transfer the funds, then I'd use option (b). I think this is what they are talking about when discussing "account of capital" vs. "account of income".

Like I've discussed above, in order to calculate the actual REAL capital gain/loss I'd have to keep track of every single purchase ever to know where my ACB stands. In my opinion, I think it shouldn't be necessary to do this since currencies fluctuate (at least USD/CAD) and not really appreciate over time. So even if I did keep exact track, for one year I might have a capital gain, but the next year I may have a capital loss. Over the long term it seems the capital gains/losses would just cancel out.

The simplest and fairest case IMO is calculating like I did in my example: Writing down the rate I got for any large USD to CAD transfers and USD purchases, and then at the end of the year use the annualized rate to see what my capital gain/loss was and report it appropriately.

7) A few questions about claiming certain tax benefits: After gathering/calculating all my business reports/income/expenses etc, I went on SimpleTax and began filling out my 2017 and 2018 returns and to my surprise, it says I won't owe a single dollar in tax, and in fact it says I'll be getting a nice little refund. I believe I'm able to claim the WITB/CWB. I'm single, over 19, and live at home with my parents. I believe I can also claim the Climate Action Incentive (plus the 10% bonus for living in a smaller town) since I live in Saskatchewan, but it does say only one person per family can claim it. One of my parents likely claimed it on their taxes, but does this mean I can't claim it just because I live at home with them?

8) I also made note of potential future considerations:

a) I believe I may need to fill out the T1135 form if my US Bank account grows to over $100,000 CAD. Does money sitting in a US bank count as "specified foreign property"?
b) Once I start needing to pay over $3000 in tax, the CRA will request tax to be paid in instalments. I'm guessing they email/send a letter once this requirement happens?
c) Once I start earning over $30,000 a year I might have to register for GST. This doesn't seem to make sense in my case though since i'm earning commissions through online affiliate marketing, so I don't have any "customers" to charge GST/HST per se. I've heard conflicting answers to this. Some people have said you still need to register, while other's have said you don't need to.

Anything other future considerations I haven't covered?

9) I plan to file through SimpleTax, so my final question is: Should I file my tax returns in any specific order? Should I just file in year order: 2017, 2018, and 2019 all back to back? Or should I only file one at a time and wait until I'm contacted by the CRA? Will I have access to the CRA MyAccount immediately?

Again, sorry for the long post and I appreciate any questions you guys can answer and any additional tips/remarks/recommendations are also welcome,

Thanks
3 replies
Member
May 24, 2018
266 posts
158 upvotes
Ontario
Wallboy wrote: ... and earned a tiny amount income since then. Around $5000 in 2017, $12000 in 2018, and $8000 in 2019.
...
7) A few questions about claiming certain tax benefits: After gathering/calculating all my business reports/income/expenses etc, I went on SimpleTax and began filling out my 2017 and 2018 returns and to my surprise, it says I won't owe a single dollar in tax, and in fact it says I'll be getting a nice little refund. I believe I'm able to claim the WITB/CWB. I'm single, over 19, and live at home with my parents. I believe I can also claim the Climate Action Incentive (plus the 10% bonus for living in a smaller town) since I live in Saskatchewan, but it does say only one person per family can claim it. One of my parents likely claimed it on their taxes, but does this mean I can't claim it just because I live at home with them?

...
At a glance, I think it is quite possible no tax owed at those level. Regarding CAI, once you turned 18, your parents cannot claim you as a qualified dependant (source from Schedule 14)

If you have not filed ever before, this link lists some of the reasons you have to.
[OP]
Newbie
Oct 3, 2009
89 posts
36 upvotes
Yes, later on in the post I mentioned I filled out the returns on SimpleTax just to see what I'd owe, and it said I didn't owe anything, and instead had a refund. As far as the CAI, I did a little more research and it looks like I can claim it in my situation. And I've read through that document you linked and the CPP was the reason I started panicking as I had no idea that I may have owed something when you make over $3500. I always thought it was around the basic personal amount where I'd have to.
Member
May 24, 2018
266 posts
158 upvotes
Ontario
Regarding CPP - it's not tax owed, it's for our "collective" retirement :-)
  • have you gone thru Schedule 8 Part 1 ?
  • Is there a number on line 31000 SimpleTax calculated ?
As a matter of fact, most of your questions are beyond my level. Hopefully, some experts will chime in on the conversation.

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