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Discussion Starter · #1 ·
I am self-employed and have two businesses: one made a small profit last year, the other (a new one) made a loss. Elsewhere I read that it is not necessary to declare business expenses, although it is normally an advantage to do so. So, here's my question: Am I required to declare all business expenses?

Using taxation software, it looks like if I want to maximise my return this year I would declare all the expenses I can on the business that made a loss (including CCA on a vehicle that is used for both businesses), but omit some expenses for the business that made a small profit. I really don't want to do something wrong.

Thanks!
 

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I'm no tax expert, but I would be surprised to learn of any taxing authority (and I am assuming here we are talking about the CRA) that requires one to report expenses. There is certainly a requirement to report income, but I would expect the CRA to be just as happy to have you report income while claiming no offsetting expenses.

I have never heard of the CRA sending out a notice of reassessment saying, for example: "Last year you reported business income of $100,000. You reported no expenses and you were assessed tax of $35,000 accordingly. It has come to our attention that you failed to report business expenses of $60,000. We have reassessed your return accordingly and have determined that the correct net tax payable should have been $10,000. However, you are not entitled to refund because we have assessed a penalty in the amount of $25,000 due to your failure to report expenses as required."

Not reporting expenses and overpaying taxes is not an offence, so far as I know.
 

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If you declare less expenses, you make more profits and this pay more taxes (are you implying the only reason you made a small profit was because you didn't declare expenses? If so, then you are lying to yourself about the company's success). I would also expect that you could apply for more benefits at a lower income than you could at a higher income.

Government usually never gives out more money (unless your someone like bombardier) than they take from companies. They may give you back some of what they've taken from you though (because they took too much in the first place).

I think you need to recheck your math.
 

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I'm not an expert, but I recall reading something recently about a "business" being deemed a hobby, such that expenses if you declared them would much more than offset any revenue

this being the case, I wonder if one can make that determination themselves and not declare the small revenue as well, and if CRA was to question it later one could state that they had much more expenses pertaining to that small income so being a "hobby" they didn't delcare either revenue or expenses? an example I can think of is if someone bought and sold things on ebay, small time, and revenues might have been only $1000 for the year, but if they got into the nitty gritty of properly declaring all expenses (computer costs, internet, home office percentage, purchases, etc etc) that they could easily offset any income, and therefore they themselves might deem it a hobby to save themselves from the accounting hassles ... does this make sense?
 

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not to mention the possibility that CRA themselves might not think the business is more than a hobby and be unhappy with a loss (if you did tally up all expenses vs profits) being used to bring down profits of your other business

again, I am not an expert but just thinking aloud hoping someone that is an expert might clear up these questions that I have been wondering myself
 
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