Income Taxes in Canada & USA Are More Similar Than You Think!Jul 07, 2022
It’s hard to believe that March 2020 was when the world began to shut-down. "Lockdowns", "shelter in place" and "Pandemic"...all became daily buzz words as an every day part of our life.
That’s when I had this wild idea of writing a book about home-based business tax write-offs. It was my distraction from the outside world. I never imagined I would write a book on home business tax write-offs. Being an author was never something I aspired to be or do as a list of accomplishments.
When I started the writing process my intention was not to create a “here’s how to file your taxes” kind of book. I wanted to create a guide on all the tax write-offs we can claim because we have a home-based business.
The ideal reader I had in mind what the person with a home-based business (or interested in a business)… they have a full-time job and are part-time in Direct Sales, started some sort of a new online venture or freelance side hustle, or they are an Uber driver. They're just doing their thing trying to carve out a little extra income… but they just don’t understand the tax write-off side of things.
For most, this topic always seems to be this big scary stressful side of being an entrepreneur… and everywhere they turn they hear and read conflicting information.
So now, here we are almost 2 years later after the book was published on Amazon. Thousands of copies have made it into the hands of aspiring home business owners across North America, all who want to learn more about these tax write-offs.
The biggest enjoyment for me personally has been hearing from many of them, and watching the Home Business Tax Secrets Facebook group go from a handful of members to now well over 1,000 members.
In retrospect, I have learned so much over these last two years. Here is just a few things I have learned.
- I have discovered that the need for information on this topic is greater today than it was 2 years ago. In fact, the pandemic has caused more people to venture into starting an income from home. The need and desire to learn home business tax write-offs is greater today than it was in history.
- Not only did I suspect that taxes would increase to support the pandemic spending, I never imaged inflation would rise to the extent it has. This has all put families at such a financial burden and risk of losing everything. As recent Angus Reid survey reported that “53% of those surveyed say they can’t keep up with the cost of living” and “Half of of them say they couldn’t manage a sudden expense of more than $1,000”.
- This is probably the most profound one for me personally... it's the widespread lack of understanding in the similarities of the tax system between the United States (IRS - Internal Revenue Service) and Canada (CRA - Canada Revenue Agency) when it comes to home-based business tax write-offs. My book has been criticized by some just by the simple fact that it was written by a Canadian, and some think I should have no place talking about the US Tax System. It is this type of ignorance, that keeps so many in the dark when it comes to understanding and claiming tax write-offs.
Let me explain #3 a little more! The IRS and CRA are similar in many more ways than you would think!
Both of the US and Canadian governments have departments who ensure that the federal and local governments collect taxes from individuals and businesses, and review tax returns. They oversee how tax laws are interpreted and applied during tax collection and management. Within these tax laws are a subset of tax guidelines that fall under “Small Business”, in which we are part of as a sole proprietor. Here is where the similarities come in.
The only difference between the IRS and CRA is in the language used for tax filing!
Here's a few examples:
- Employment Income Statement: W2 = T4
- Personal Tax Return: 1040 = T1
- Statement of Business Profit/Loss: Schedule C = T2125
- Business Use of Home: 8829 = Part 7 on T2125
Perhaps when I wrote the book, I should have explained this in more detail in the early chapters... that might have avoided some of the criticism.
The interesting thing about all this is that I have not seen, heard of or met anyone who talks about this. Those in the taxation field in the US stay focused only on the US, and those in Canada stay focused only in Canada. I find it fascinating that very few actually see the similarities.
If you are not a member of the Facebook Group come join the community. I look forward to meeting you there.
Take the Mystery Out of Home-Based Business Tax Write-Offs!