CRA Reporting - I'm going to settle the argument from January

[sapphyres-designer-jewellery]

There was a big argument in the forum about when CRA reporting starts... accountants were telling people it starts in 2025 (sales from Jan 1 2025 and onward, and it would be reported in January next year). Other people said 2024.

I'm settling this argument...

The reporting started January 1, 2024, in 2025 (like today) all my 2024 sales were reported to the CRA.

So if you didn't declare your 2024 earnings and you have this report, CRA is going to find out. The report says how many transactions and a breakdown by quarter. I don't want to share my sales information, but if you qualify for this report you should find it in your eBay.

C.

[recped]

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@xmiketheripper wrote:

You can claim the ebay transaction fees when you make a sale?! 👀 i wonder if that's only for business accounts lol definitely something to keep in mind, Thank you for your response 🙏

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It depends although in most cases anyone reporting self-employment income can deduct virtually everything related to earning that income.

If you are selling personal goods and declaring as a Capital Gain then you cannot make any deductions (but any item you sell that is below $1000 has no capital gain).

As far as your eBay account, a personal or business account only means something to eBay it does not have anything to do with Revenue Canada. As far as CRA is concerned if you buy any item with the intent to resell then you are operating a business. Generally that would be a Sole Proprietorship.

Things you can deduct from your gross income (list not complete)

Cost of goods

eBay fees

shipping costs

packaging costs

Transportation costs (driving to the Post Office etc.)

Internet costs (if they are only used for business purposes)

Bank fees

Cost of a printer if it's for business use

Cost of paper, toner etc

Contents insurance (if you want to insure your inventory)

If you work from home you may be able to deduct a portion of your house expenses if you have areas that are dedicated to your business. This is a tricky deduction, you would want profession advice on this as it could affect the tax free status when you sell a primary residence.

Of course for any deductions you must have at least some documentation to prove that they were real expenses. Normally that means invoices or cancelled cheques/bank statements, credit card statement etc. If you obtain some of your inventory from individuals (yard sales and the like) in place of invoices you should keep a log of what you have bought. This should include the date, location, item description, price paid. The same kind of log would be used for vehicle expenses with dates, distance and reason. If you drive 5km to the Post Office and back you can deduct 72 cents per km (whatever you do never tell your car insurance company that you occasionally use your vehicle for business use, they will jack your rates up).

None of the documentation needs to be included with your tax return but you would need it if you had an audit.

[sapphyres-designer-jewellery]

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@flipistics wrote:

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@sapphyres-designer-jewellery wrote:

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One issue if you become a business is whether or not your home insurance and car insurance will still cover you. One way they determine if you're a business is if you're reporting the income (which there's no choice in anymore), and how much you're selling. If it's just a few hundred dollars or even a couple thousand here and there, the home insurance company won't consider you to be running a business.

C.

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Yeah, home insurance often seems to not care too much as you aren't having customers come to the house (you do have to tell them though). I'm guessing because of the number of people who run small businesses out of the home they can't afford to turn people away when there's little to no extra risk for them. Car insurance seems to be another matter entirely, and the commercial rates are MUCH higher.

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Home insurance cares a whole lot when you're selling lots of stuff and have lots of inventory, even if it's not covered by insurance. I sell inventory that belongs to a shop, and because it transits my house for processing and I have lots of sales they care a whole lot and many insurance companies wouldn't insure me without me getting liability insurance, but then no one wanted to insure me for that because it wasn't worthwhile to insure someone who has a few thousand dollars worth of things (and the things not being mine was a problem for them). I ended up getting insured by Desjardins who put a business exclusion on my home insurance policy but I had to insure them no in person commercial stuff was done here (no customers, no deliveries, no pick ups, etc). They were OK with me going to the post office to mail stuff and things coming back and forth from the shop as I bring things home that need to be shipped or photographed/processed for listing.

C.

[sapphyres-designer-jewellery]

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@xmiketheripper wrote:

You can claim the ebay transaction fees when you make a sale?! 👀 i wonder if that's only for business accounts lol definitely something to keep in mind, Thank you for your response 🙏

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The fees are an expense that is deducted from what you receive. You pay tax on  your net proceeds, you don't have to pay tax on the money eBay's making, they pay their own tax on that.

I'm presuming the report that as the "consideration" amount means the consideration has already taken the fees off, but I reported the gross sales and deducted the fees as an administration expense. No issues with that, I have a monthly bill for my fees.

C.

[sapphyres-designer-jewellery]

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@recped wrote:

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If you work from home you may be able to deduct a portion of your house expenses if you have areas that are dedicated to your business. This is a tricky deduction, you would want profession advice on this as it could affect the tax free status when you sell a primary residence.

Of course for any deductions you must have at least some documentation to prove that they were real expenses. Normally that means invoices or cancelled cheques/bank statements, credit card statement etc. If you obtain some of your inventory from individuals (yard sales and the like) in place of invoices you should keep a log of what you have bought. This should include the date, location, item description, price paid. The same kind of log would be used for vehicle expenses with dates, distance and reason. If you drive 5km to the Post Office and back you can deduct 72 cents per km (whatever you do never tell your car insurance company that you occasionally use your vehicle for business use, they will jack your rates up).

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I plan to never move (at least until I'm retired by which time I'll probably not be operating a business anymore), so not so worried about the house deduction.

For the car insurance, if you tell the insurance company you use your car for business use, they'll upgrade you to a business and personal policy (which can cost as much as 50% more), but if you don't tell them and you get into an accident, they ask lots of very innocent questions when they're taking your claim (at least the questions sound innocent), and should you mention what you were doing and they determine it to be business use, they will deny your claim because you didn't have insurance covering business use.

In my experience in the industry, insurance people are very smart and they're good at getting to the bottom of a situation when they want to deny a claim. One question always asked when you file a claim is "where are you going?" and it could be followed up with "why were you going there?" Or "where were you coming from?" 

This is how they catch people in Toronto who get a policy with their relative's address in Niagara Falls to save premiums, they admit they're driving home and they're in Toronto, then an investigation will be triggered (which you won't know about until you get a letter asking for lots of stupid things like a picture of your car parked in front of your Niagara residence, copies of your maintenance records with your address, and all sorts of proof you won't have if you lied). In 2013 I used to set up investigations claims for auto, so I know these things to be true.

C.

[flipistics]

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Home insurance cares a whole lot when you're selling lots of stuff and have lots of inventory, even if it's not covered by insurance. I sell inventory that belongs to a shop, and because it transits my house for processing and I have lots of sales they care a whole lot and many insurance companies wouldn't insure me without me getting liability insurance, but then no one wanted to insure me for that because it wasn't worthwhile to insure someone who has a few thousand dollars worth of things (and the things not being mine was a problem for them). I ended up getting insured by Desjardins who put a business exclusion on my home insurance policy but I had to insure them no in person commercial stuff was done here (no customers, no deliveries, no pick ups, etc). They were OK with me going to the post office to mail stuff and things coming back and forth from the shop as I bring things home that need to be shipped or photographed/processed for listing.

C.

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I worded that poorly. I meant the home insurance is much more likely to work with you on it. It seems like the car insurance companies have their products so keyholed that there's no flexibility.

[lotzofuniquegoodies]

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@marnotom! wrote:

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@lotzofuniquegoodies wrote:

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My biggest concern in all this that IF ebay is going to submit numbers to CRA they also forward to seller at the same time so everyone is working off accurate current info. To advise us of 2024 info being sent at end of '25 sounds hinky. It may not be considered the same as a T4 but it's just as critical. By law a T4 needs to be received by last day of February for the previous year. 

How is this report just as “critical” as a T4?

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Could it have anything to do with the fact that it (Digital Sales Report) is being  reported to the CRA similar to T4 etc on our behalf? The timing is a whole other plotz show!!!

[bogdan.r]

If you’re selling on eBay in Canada as a sole proprietor:

Your tax identification number for income tax purposes is your SIN (Social Insurance Number), regardless of whether you make under or over $30,000 per year.

If your eBay activity is a business (regular sales with a profit motive), you report this income on your personal tax return (T1) using Form T2125 – Statement of Business or Professional Activities.

On Form T2125, you include:

Your name

Your SIN

And, if you have one, your CRA Business Number (BN).
Your SIN and Business Number are not the same thing. You only get a Business Number if you register for things like GST/HST, payroll, etc.

GST/HST registration (the $30,000 rule)

The $30,000 figure is the “small supplier” threshold for GST/HST, not a limit for using your SIN.

If your worldwide taxable sales (including eBay and any other business income) are more than $30,000 in any 12-month period, you generally must register for a GST/HST number and charge/remit GST/HST (unless a specific exception applies).

If you are under $30,000, you are usually not required to register for GST/HST, but you still must report your business income for income tax.

eBay and HST

eBay already collects and remit sales tax (GST/HST) on transactions as a marketplace operator, depending on the rules and the type/location of the sale.

However, even if eBay collects HST from buyers:

You are still responsible for reporting your business income and expenses to the CRA.

eBay collecting tax does not replace your obligation to pay income tax on your profits. That's a different type of tax.

About giving your SIN to eBay

Your SIN is sensitive personal information, and you should only provide it through secure, official channels and only when it is truly required (for example, to comply with tax reporting regulations).

Some platforms may be legally required to collect tax identification information to report seller income to the tax authorities. The name and address is enough for CRA to find you in the system and verify whether you declare income or not. eBay has outsourced mostcof their operations to Asia and I won't want my SSN to float there, freely in the system. I could get the office of the privacy commissioner to agree with me if I would ever be obliged to do so.

[zee-chan-jpn-books]

I got the e-mail asking me to submit my SIN too since my sales this year is over $2800... I literally got that e-mail right after my Spain repeat buyer made her seasonal big purchase lol. The e-mail did say if I don't provide my SIN I could be fined $500 by CRA so I gave it. 

I didn't really keep track of my sales (~$3000 a year?) since it's all just slowly selling my comic book collection so I'll worry about it when CRA actually comes after me. 

[femmefan1946]

I'll worry about it when CRA actually comes after me.

Start today.

I just have a Hilroy exercise book with extra lines to record my costs.

Basically at this point, I'm liquidating the remaining contents of our shop. 

As above  Post 61 by @recped :

Things you can deduct from your gross income (list not complete)

Cost of goods

eBay fees

shipping costs

packaging costs

Transportation costs (driving to the Post Office etc.)

Internet costs (if they are only used for business purposes)

Bank fees

Cost of a printer if it's for business use

Cost of paper, toner etc

Contents insurance (if you want to insure your inventory)

However, it sounds as if you would be claiming as a Capital Gain since you are not buying new stock for resale.

But keep records anyway so you can prove that. 

[recped]

"eBay has outsourced mostcof their operations to Asia and I won't want my SSN to float there"

False!

eBay does use a third-party in the Phillipines for basic customer support but that is all. eBay customer support does not have access to your SIN.

[widgetc]

'

"However, it sounds as if you would be claiming as a Capital Gain since you are not buying new stock for resale.

But keep records anyway so you can prove that. "

Actually many selling off their collections would actually have a capital loss if that were allowed. But to declair a loss you must have had a reasonable epectation of making a profit otherwise it is deemed to be a hoby. So the whole situation is messy. Simolarily for those who sell of their other possetions. The thing is some hobies can involve thousands of items like sporrts cards etc.

[widgetc]

Plus one might have no idea what one paid for a hockey card  25 years ago.

[marnotom!]

Declaring Revenue: Is it a Hobby or a Business?

https://www.bccpa.ca/news-events/cpabc-newsroom/2021/september/declaring-revenue-is-it-a-hobby-or-a-...

[sapphyres-designer-jewellery]

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@widgetc wrote:

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"However, it sounds as if you would be claiming as a Capital Gain since you are not buying new stock for resale.

But keep records anyway so you can prove that. "

Actually many selling off their collections would actually have a capital loss if that were allowed. But to declair a loss you must have had a reasonable epectation of making a profit otherwise it is deemed to be a hoby. So the whole situation is messy. Simolarily for those who sell of their other possetions. The thing is some hobies can involve thousands of items like sporrts cards etc.

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I have some coins that were purchased for quite a bit at the time 20-25 years ago, but now that all the baby boomers are dying off these coins are coming into the shop in every collection we see making them common and pushing the price down.

How exactly to you prove to CRA you made no money selling  your coin collection when eBay is reporting it to CRA and you  have no receipts from 1999-2004 when the coins were purchased? Who keeps receipts that long? At some point the collection is going to be sold, it's just not certain if that will be before I pass away, or by the person who inherits it after.

C.

[sapphyres-designer-jewellery]

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@widgetc wrote:

Plus one might have no idea what one paid for a hockey card  25 years ago.

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Ah, that was kind of my point in my reply to your previous post.

Some of my coins have prices on them, so I can determine from that what I might have paid (assuming I paid the price, sometimes I got a discount). You don't put prices on coins when you list eBay auctions, it's against policy plus if you show the price people will complain today's prices is too high (if it works out that way, which it would for anything silver I bought around 2003 when silver was way down).

C.

[recped]

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@widgetc wrote:

'

"However, it sounds as if you would be claiming as a Capital Gain since you are not buying new stock for resale.

But keep records anyway so you can prove that. "

Actually many selling off their collections would actually have a capital loss if that were allowed. But to declair a loss you must have had a reasonable epectation of making a profit otherwise it is deemed to be a hoby. So the whole situation is messy. Simolarily for those who sell of their other possetions. The thing is some hobies can involve thousands of items like sporrts cards etc.

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You can't claim a capital loss on personal goods against any other income.

The quantity of items is irrelevant. I sell vinyl records, cd's, cassette, what I'm selling on eBay are not personal goods. When I do sell my personal collection it will be at least 20,000 records (I haven't counted them in at least 3 decades). In fact over the last 30 years I have only added less than 10 records to my personal collection.

Then there is my personal book collection, another 5,000+ of those.

[intimewithmusic]

@recped 

20,000!?  Holey moley...professional musoid most of my life. I have 300 now.

Thank you for your service!

[widgetc]

“You can't claim a capital loss on personal goods against any other income.”

That’s why I put the if in the below.

“Actually many selling off their collections would actually have a capital loss IF that were allowed. But to declare a loss you must have had a reasonable expectation of making a profit otherwise it is deemed to be a hobby.”

Certainly for a hobby it is personal goods.

But it is complex because the line between hobby and business is very fuzzy.

From the CRA website. 

Walking a fine line

"There are no hard and fast rules for determining whether a hobby is actually a business. Ultimately, it is a question of fact as to whether a hobby activity generates a sufficient level of commercial activity to support a pursuit of profit and whether a taxpayer has established a clear distinction between a businesslike endeavour and a personal one.

Furthermore, it will always be difficult to distinguish a hobby from a business, because all hobbies have a personal element. For this reason, it is only where a personal endeavour is an activity primarily undertaken for pleasure, entertainment, or enjoyment rather than for profit, business, or commercial reasons that it may be considered merely a hobby and not a business."

I once knew someone that genuinely tried to run a business but had losses for  4 consecutive years. The CRA invalidated the the busiiness loss claims on the basis that in spite of intentions there was no reasonable epectation of ever turning a profit so it was not really a business.

[manitoba-maid]

Good morning, I stand to be corrected but the form submited k-1090 is a form used and submited to american IRS, and not the Canadian CRA

[recped]

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@manitoba-maid wrote:

Good morning, I stand to be corrected but the form submited k-1090 is a form used and submited to american IRS, and not the Canadian CRA

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The US tax reporting form is a 1099K but that is totally irrelavant to this discusion which is about the "new" CRA reporting requirements for Canadian sellers.

https://www.canada.ca/en/revenue-agency/programs/about-canada-revenue-agency-cra/compliance/reportin...