Several Jane users have asked us recently about tax reporting so we thought we’d go through this with you.
Note: The following information is geared towards Canadian clinics and practitioners adhering to Canadian accounting and tax regulations. If you are practicing in another country, we recommend following your local accounting standards for year-end reporting.
If you are reporting taxes in Canada, read on!
For clinics: the Compensation Report in the Cash (Collected) version is good to see what has been applied towards a particular staff member.
For employees of clinics: you can report your income based on the total indicated on your T4 slip. This would be the amount that the clinic has paid you over the course of the year. It can be based on the Compensation report or the business contract that you have with the clinic outside of Jane’s reporting. Therefore, you may first need to determine if you are currently considered an employee or an independent contractor at the clinic.
Employee or Self-Employed Contractor?
The first and foremost step is to determine whether the worker is considered an employee or an independent contractor of the clinic.
- We recommend going through this CRA guide here that outlines a two-step approach to determine a worker’s employment status in provinces and territories outside of Quebec.
Normally, if the therapist is being paid a commission rate, they are presumably an employee of the business which means that the clinic would be responsible for the employee’s taxes. During payroll periods throughout the year, the employee would have been paid based on agreements set out in their employment contract.
- Eg. Dr. Coleman receives 50% commission or $50 for every $100 treatment he provides.
If the therapist is deemed an independent contractor based on answers to the questions set out by the CRA in the above link, then the therapist would be responsible for reporting their own income and taxes.
Often, independant contractors will pay a rent to use the clinic space. In this case, the therapist would want a copy of their Billing Summary report for the year and report income based on the invoiced total to the CRA.
- Eg. Dr. Coleman pays the clinic a flat fee rate of $450 per month.
Again, we recommend reviewing the CRA’s guide document to determine the worker’s status.
Accounting for Earnings
The CRA states here that business income is generally reported based on the accrual method (invoiced) and NOT based on the cash method, although there are some exceptions where individuals can choose to report via the cash method OR accrual method.
We advise that you refer to the CRA document to verify the method you qualify for.
Reporting for Earnings in Jane
If you are an independent contractor and have read this far (bravo!), here is where you can find your numbers to report your annual income under the accrual method.
1 - As a therapist, you can look at the Total Invoiced amount on the Billing Summary Report when reporting income for tax purposes.
2 - However, this Total Invoiced amount is inclusive of taxes, so to find the Pre-Tax Invoiced Total, subtract the Total Invoiced amount by the Total Tax Invoiced value in the Tax Section.
For example: Cam is an independant contractor looking to report his income at year-end. Here is his Billing Summary report filtered to a one year date range:
The Total Invoiced amount $23,235.50 is inclusive of taxes.
Further down the report, shows his Total Tax Invoiced as $123.50:
3 - So to calculate his Pre-Tax Invoiced Total to report to the CRA, he would subtract the Total Invoiced amount of $23,235.50 by the Total Tax Invoiced amount of $123.50.
- Pre-Tax Invoiced Total = $23,235.50 - $123.50 = $23,112.00
Therefore, $23,112.00 is the amount that Cam would report to the CRA as his annual income for the year.
We hope that made sense! As always, don’t hesitate to reach out if you have any questions about this.