How to do your taxes with multiple currencies income Thread poster: Sarah Triboulet-L'Heureux
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Hello fellow linguists,
As many of you I'm sure, I have recently opened a USD account at my canadian bank, thinking it would make it easier to receive payments from certain clients.
Then comes tax time...
What do you do when you leave these payments in USD but have to report income in CAD?
Does anyone know which conversion rate I should use?
Is it the one from the day I received that payment? Is it the average one from that month?
Is it the one from th... See more Hello fellow linguists,
As many of you I'm sure, I have recently opened a USD account at my canadian bank, thinking it would make it easier to receive payments from certain clients.
Then comes tax time...
What do you do when you leave these payments in USD but have to report income in CAD?
Does anyone know which conversion rate I should use?
Is it the one from the day I received that payment? Is it the average one from that month?
Is it the one from the day I file my return?...
Thank you all in advance for your help!
S.TLH ▲ Collapse
| | | | Samuel Murray 
Netherlands
Local time: 03:04
Member (2006)
English to Afrikaans
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Sarah Triboulet-L'Heureux wrote:
What do you do when you leave these payments in USD but have to report income in CAD?
Does anyone know which conversion rate I should use? Is it the one from the day I received that payment?
This would depend on your country's tax laws, but in my country of residence, the conversion rate applies to the date of the invoice. This means that you are always going to win some, lose some, because the date of payment is usually not the same as the date of invoicing. Using the exchange rate of the actual day is probably the safest, but for my own tax returns I simply use the average of the month in which the invoice was sent (unless it's a wildly fluctuating currency).
I have clients who pay me before I invoice them, so I have to create dummy invoices for them, and in those cases I just put the actual amount received in my own currency on the invoice, even though the quote and/or purchase order may have been in a different currency. But that's just one way of doing it.
I can't advise you on how to deal with the increase or decrease in money received in the non-local currency account, because you're always going to win or lose money when you transfer the money. I tried keeping track of that myself, but it's a mess. Consider this situation:
Date of invoice A: 1 January (USD 1000 = CAD 1300)
Date of invoice B: 2 January (USD 1000 = CAD 1300)
Date of payment A into USD account: 30 January (USD 1000 = CAD 1320) (so you gain CAD 20)
Date of payment B into USD account: 28 February (USD 1000 = CAD 1290) (so you lose CAD 10)
Withdrawal from USD account to CAD account: half of it on 15 February the next year (USD 1005 = CAD 1500).
The problem here is that when you received the USD 1000, it was worth CAD 1320, and that is the amount that you reported to the tax authorities. However, the money sat in your USD account, and by the time you withdrew USD 1000, that USD 1000 was worth CAD 1500. So you get CAD 1500 into your CAD account even though you declared CAD 1320 to the tax authorities. One solution to this, of course, is to withdraw money from your USD account as soon as you receive it. But maybe a tax man can advise you -- perhaps the Canadian tax authorities don't care about mismatching pennies as long as you can explain your reasoning.
[Edited at 2022-03-12 19:47 GMT]
| | | | | Web resources | Mar 12, 2022 |
Maybe you will find some of the information you need here:
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| | | | | Country specific | Mar 15, 2022 |
As has already been said, this type of information is country specific. Might I also ass, that it may also depend on the type of business setup you have and a whole host of other elements that noone else could usefully advise you upon.
Contact your local tax authorities, the ones to whom you have to submit your statements/returns/declarations for your activity and stick to their advice. try to make sure you have some official up-to-date legal source you refer to when making these decisions... See more As has already been said, this type of information is country specific. Might I also ass, that it may also depend on the type of business setup you have and a whole host of other elements that noone else could usefully advise you upon.
Contact your local tax authorities, the ones to whom you have to submit your statements/returns/declarations for your activity and stick to their advice. try to make sure you have some official up-to-date legal source you refer to when making these decisions. ▲ Collapse
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Tina Vonhof (X)
Canada
Local time: 19:04
Dutch to English
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Sarah Triboulet-L'Heureux wrote:
Hello fellow linguists,
As many of you I'm sure, I have recently opened a USD account at my canadian bank, thinking it would make it easier to receive payments from certain clients.
Then comes tax time...
What do you do when you leave these payments in USD but have to report income in CAD?
Does anyone know which conversion rate I should use?
Is it the one from the day I received that payment? Is it the average one from that month?
Is it the one from the day I file my return?...
Thank you all in advance for your help!
S.TLH
I agree, it's best to get your information directly from the CRA. There must be some rule about conversion of moneys received. Ideally, you should check that on the day you receive the payment, but with bank transfers, you don't usually find out that it arrived until you get your monthly statement from the bank.
It's too late for this year, but I suggest that for next year you consider hiring an accountant. Accountants know how to deal with the conversion problem and not only that, they know exactly what expenses you can or cannot claim and a whole lot of other details we may not be aware of. In my experience, it's worth the money - and that is also an expense you can claim.
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