Taxes in Canada?

[-zero-]

Um, I thought the top tax bracket was 29%?

[SlightlyMad]

That's the top marginal federal tax bracket. Depending on the province you live in, you also owe another 10%-15% tax on top of that.

It is important to note that on the first $109,000 or so, the federal tax rate is lower than 29%, that's why I suggested he have about 23% (Fed) +12% (Prov) = 35% put aside.

[2218]

What about 65k as full time student?

[AAxxCracker]

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What about 65k as full time student?

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Or even just 20K-30K whether a student or just "at home"? Just enough to live on, and more fun than work. It seems to get vaguer as the amounts get smaller. I'd think and hope they would go after the big winners first as a public example.

[SlightlyMad]

I'll say again, I'm not a tax professional ... I'm just someone who likes doing their own taxes.

Well, if you want to get a rough idea of how much tax you have to pay, there are plenty of nice charts out there that give you a *rough* idea of how much you should pay.

This is the first link I hit on Google.

http://www.taxtips.ca/tax_rates.htm#...lTaxComparison

As you can see, I got the Ontario tax rate wrong by about 2% on $200,000; it's about 14% versus 12%, so about 37% total tax payable. (Every dollar after that is taxed at 46.41%, the top marginal rate in Ontario.)

If you live in Ontario, it looks like you'll owe about 22% on 65,000, and about 12% on $25K.

If you've never filed taxes before, and drop them a load of cash ($2000+) at the end of April, there's a law that you need to be aware of for next year's taxes. If you *know* you are going to be paying $2000+ at the filing deadline, you are required to pay by installments over the course of the year (March/June/September/December 15th). The first year you do it; no harm, no foul. However, if you plan on doing it in subsequent years, they charge you interest on the amount of tax that you owe!

You'll get a lovely letter from the CRA around July reminding you of this responsibility ... and if you choose to ignore it, be prepared to pay the penalty!

[Tuco]

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I am not a tax professional, and I wish I had your problem, but ...

It is really disingenuous to insinuate that an accountant wouldn't know about this. It will be VERY difficult to argue that $200K is a hobby or a windfall if you have no other income to speak of, are living on that money, and you don't have a full-time job or full-time schooling over a large part of the year.

Remember that the Canadian government does know about your large account; unless you keep it under your mattress, you are already raising eyebrows at your bank.

You should be prepared to pay taxes on the net income (as a self-employed professional) that you made in 2006. I hope you have (approximately) $70K saved for paying taxes on that $200K.

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I agree that it is disingenuous to insinuate that an accountant wouldn't know about this, but if your not a tax pro isnt it also disingenuous to speculate when you might not be correct?

Tuco.

[TorontoCFE]

If you tell them you won an online tournament, what are you going to say when they ask you to prove it?

Don't forget, if records are missing, they can shift the burden of proof to you to disporve their assumptions.

[TorontoCFE]

It isn't vague legally speaking, it is just the amount of risk you are willing to assume .
Do you think they would come after you for 10k of missed taxes or not? Will your income stadn out or not?
Can you convince them you got lucky a few times or not?

A business can result from a SINGLE activity lasting one day.
You can be a full time student and have a business on the side.

The issue is only whether you can claim it was just a hobby and they beleive you or not.

[TorontoCFE]

You also need to focus on the definition of a business.

There is a point where activities, even hobbies, stop being a hobby and become a business.

Once an activity can be classified a business, then you are stuck.

[SlightlyMad]

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I agree that it is disingenuous to insinuate that an accountant wouldn't know about this, but if your not a tax pro isnt it also disingenuous to speculate when you might not be correct?

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It may be misleading for me to speculate if I wasn't basing my response on multiple opinions from different accountants. If I pulled all of my opinions out of my ass, I might even be insincere. However, that is not the case.

From my experience, all three of them were prepared for questions regarding the questions regarding the windfall and hobby status of online poker.

Having said that, there is a non-infinitesmal likelihood that all three of them are incorrect in their interpretation of that section of Canadian tax law.

I'm just trying my best to give people the advice that I paid a few hundred dollars for so that they don't have to do it themselves.