Going from sole prop to full-time permanent | How to handle tax instalments?

Tax Topics
1

Hi dear forum,

I am new here. Please be aware that I am not an accountant, so please forgive me if some wording is not professional.

As I mentioned above, I am currently a sole prop and the company I am working for offered me to switch to a full-time permanent position, means I am leaving behind my freelancer career for now.

I am starting January 2023 and from that date on I am not invoicing anymore and not collecting GST, therefore my tax instalments and GST instalments will be significant less. Can I just use the Current-year option to calculate the amount? CRA will most likely send me notices asking for way more instalments but my situation changed and they are not aware of it now.

So my questions are:

Can I use the Current-year option to calculate my amout owing and “skip” the CRA notices?

From next year on my employer will do all the tax deductions. If I owe anything at the end of the year (e.g. due to inaccurate deductions from my employer), will CRA give me a penalty for that because it may counts as missed instalment from my freelancer business?

Any useful information is helpful.

Thanks

2

You do not have to make instalments in 2023 if you believe your tax payable for that year will be less than $3,000 so you can use the current year option. Once you file your last 2022 GST return, you can also apply to CRA to cancel the account on the basis that your business activities have ceased (I assuming this).

You’ll be charged interest/penalties only if you underestimate the instalments compared with your actual 2023 income tax payable. Based on your situation as you’ve presented it, I can’t imagine you would have much, if any, 2023 tax payable if your only income is employment income.

3

Likely the business final return will result in additional GST payable on asset transfer.
Also likely, the business will need its professional accountant to assist with the asset transfer/gst use issues. Not able to determine without looking at the books.

4

He’s a sole proprietor. There is no asset transfer.

5

Likely Joe is indicating that perhaps if business is closing there could be asset transfer to personal hence some GST/HST issues.

2 Likes
6

ETA S172 etc would beg to differ with you… :books:

7

Ah, okay, I see what you’re saying. I guess he should get an accountant to look at that to see if this applies:
" * 172 (1) For the purposes of this Part, where a registrant who is an individual and who has, in the course of commercial activities of the registrant, acquired, manufactured or produced any property (other than capital property of the registrant) or acquired or performed any service appropriates the property or service, at any time, for the personal use, consumption or enjoyment of the registrant or another individual related to the registrant, the registrant shall be deemed

  • (a) to have made a supply of the property or service for consideration paid at that time equal to the fair market value of the property or service at that time; and
  • (b) except where the supply is an exempt supply, to have collected, at that time, tax in respect of the supply, calculated on that consideration."
8

Thank you very much for your valuable input and time!

Are there any implications if I keep my sole prop running? (not generating any revenue, just keeping it up and file GST nil returns).

The reason why I want to keep it up and running is I am assuming that I will be back to the freelancer business in early 2023.

Thank you!

9

That shouldn’t be an issue.

10

Thank you all for your help and support!