Day Trading Canadian Taxes and Business Structures

[Palashe 1]

Hi BBT Family!!

I just wanted to start a discussion on Canadian Taxes and Business Structures. (Sorry, US neighbors but this may not benefit you but feel free to read if you like  ). I understand there are many ways to file taxes and set-up your trading business structure so I wanted to hear from the community on how they do that works best for them and why. I think this would benefit the Canadian community (or any American's who are think of moving to Canada!). I'm about to go live in the next for weeks and would like to get some input from you guys/gals!

I like to know what business structure you've decided to choose (Eg. Individual, partnership, corporation, etc.....)

If individual, how you report your income depending on your business structure (Eg. Capital gains or business income).

How you file your taxes (Hire a CPA or do-it-yourself).

Any general comments, suggestions, tips, accountant referrals, tax software recommendations, etc....

Thanks,

Steve

 

 

[k1l0d3lta 0]

Looking for the same info, would really appreciate if someone can share their experience / thoughts about the above questions.

Also, did you have to pick  a 'professional' account type when opening an account with your broker if you are trading as a business entity(e.g. IB makes you select account type as 'personal' or 'professional')?

[Palashe 1]

Hey,

I opened up a personal account since I'm trading (and filing taxes) under an individual (non-business). In your case, I would assume you open up as a professional if you are trading under a business entity. However, I would double check with IB to see what their definition of "professional" because it can be confused with a "pro" trader (IE. insider, director, spouse of insider, etc...)

Currently, I'm trading as under "personal" and plan to file taxes under self-employed (if I make money LOL). This is because it's the simplest way so far. Once I get consistent and profitable with my trading, I'll eventually incorporate and file taxes as a corporation.  The main benefits to doing so would be limited liability and decrease taxes. Some disadvantages would be cost and complexity for accounting (book keeping and tax reporting). I plan to do all the bookkeeping and tax reporting myself as I really don't trust accountants especially for the cost to pay them.

In general, there are 3 ways to file day trading taxes as a Canadian:

1) Self employment

2)Business Income

3) Corporation

**Also this is not to be confused with swing trading or investing as you can utilize a TFSA account for tax benefits. I'm talking strictly day trading.**

Check out these resources for the details:

https://bearbulltraders.com/course/technology-monday/lesson/broker-trading-platform-tax-services/topic/managing-taxes-for-canadians/

 

 

[k1l0d3lta 0]

Thanks Palashe for all that info! Funny I watched the same video right after I looked up this thread, and didn't look for the information I was seeking!

For now, I am in a similar boat as you. I am fairly new to trading, and am doing it for a couple of hours in the morning before I start my day job. But would like to eventually convert this to my main profession once I get more consistent. Sounds like for now I would just continue to file whatever gains I made as personal income tax, and think of incorporating this as a business.

Also, am new to Canada. Just moved here couple of months ago from US, so haven't filed any taxes in Canada yet. 

 

[Brad 18]

Hi,

BBT actually did a webinar on Taxes for Canadians with some guys from KPMG and I thought it was pretty good:

 

https://bearbulltraders.com/course/technology-monday/lesson/broker-trading-platform-tax-services/topic/managing-taxes-for-canadians/

[Olivier 0]

Any of you guys have opened an account with Interactive Brokers for a Canadian corporation? I'm interested to know if there are significant hurdles to be aware of. Thanks in advance. 

[Justin 262]

10 hours ago, Olivier said:

Any of you guys have opened an account with Interactive Brokers for a Canadian corporation? I'm interested to know if there are significant hurdles to be aware of. Thanks in advance. 

None at all. Just a long ass application process.

[Roberto 10]

Tagged for interest, as I plan to trade under my own corporation.

[SeaDub 2]

I'm Canadian and getting ready to go live soon and I'm feeling stumped on bookkeeping, especially to be prepared for a tax audit.
I'm going to claim as individual business income and am looking for how others do their day-to-day bookkeeping. Excel? QuickBooks? Etc.
And if Excel, how to track each trade?
Do you track each transaction? Each trade as a whole with average entry, average exit, ignoring partialling?
And how to record fees? DAS reports total commission for the day, do you split it up per trade/transaction or just put it as an expense for the day? Same questions for the ECN/SEC/FINRA fees.
If anyone has a sample Excel file they could share, that would be amazing.
Want to have my ducks in a row from the beginning, for my business sake and in case CRA comes knocking.
EDIT: just thought that maybe IB, which I plan to use, may have some exporting feature that's useful as well, so let me know if some of your bookkeeping happens there as well.

Edited August 20, 2021 by ChrisW
Wrong finance software name

[Olivier 0]

On 8/19/2021 at 6:07 PM, ChrisW said:

I'm Canadian and getting ready to go live soon and I'm feeling stumped on bookkeeping, especially to be prepared for a tax audit.
I'm going to claim as individual business income and am looking for how others do their day-to-day bookkeeping. Excel? QuickBooks? Etc.
And if Excel, how to track each trade?
Do you track each transaction? Each trade as a whole with average entry, average exit, ignoring partialling?
And how to record fees? DAS reports total commission for the day, do you split it up per trade/transaction or just put it as an expense for the day? Same questions for the ECN/SEC/FINRA fees.
If anyone has a sample Excel file they could share, that would be amazing.
Want to have my ducks in a row from the beginning, for my business sake and in case CRA comes knocking.
EDIT: just thought that maybe IB, which I plan to use, may have some exporting feature that's useful as well, so let me know if some of your bookkeeping happens there as well.

Hi ChrisW,

I keep track of all my trades with the data from DAS Trader after each day of trades. The same data is also available from IB. There is a difference due to the fact that DAS Trader doesn't calculate your exact fees. I use a proxy for these fees. I only use this tracking for trading assessment purposes. 

For my taxes, IB makes tax slips available for each year. On these slips, you'll find the total sales and total cost. With this information, you can fill your taxes. I also keep track of my business spending (DAS memberships, electronic, etc.) in a Accounting ledger. This information is usefull at the end of the year for my taxes. 

Hope this help,

Oli 

 

 

[SeaDub 2]

On 8/24/2021 at 8:03 AM, Olivier said:

Hi ChrisW,

I keep track of all my trades with the data from DAS Trader after each day of trades. The same data is also available from IB. There is a difference due to the fact that DAS Trader doesn't calculate your exact fees. I use a proxy for these fees. I only use this tracking for trading assessment purposes. 

For my taxes, IB makes tax slips available for each year. On these slips, you'll find the total sales and total cost. With this information, you can fill your taxes. I also keep track of my business spending (DAS memberships, electronic, etc.) in a Accounting ledger. This information is usefull at the end of the year for my taxes. 

Hope this help,

Oli 

 

 

Thanks Oli, sorry for the late reply. It does help. It's good to know you only use the IB tax slips, I was getting the impression from random websites that I needed to be super accurate on each and every trade in case I got audited. But it also sounds like I could run a daily IB report if I do decide to be overly-cautious about it.
Cheers,