math question: do higher expenses preserve a greater 'set aside' amount? wha?!?

[scrubbyfish]

This -and the thread I started some minutes back- is me moving forward with things that have terrified me for many months. As always, I deeply appreciate all help with these things that absolutely confound my brain! I think it might be obvious to some, but every month I crack under this question. My head hurts just trying to understand what I'm trying to understand. I hope the same doesn't happen to you! Here goes...

A self-employment support program offers a subsidy.
The math confuses me.
Here it is:

Any business income over $800 reduces the subsidy dollar-for-dollar.
However, the business income can be reduced by
(a) that month's business expenses and/or
(b) setting any amount of the income aside for the business's future.
The maximum that can be set aside (saved from the net income for the business's future) is $5000, then we are booted off the program.

All good.

Question:
 
In this scenario, is there any advantage to claiming all the business expenses I actually have in a given month? i.e. Does doing so inherently preserve more 'set aside' room?? This is the crux of the question.

Or is it exactly equal if I claim just those sufficient to bring me just under $800 (using the "setting aside" option only when the income is over $800, even after expenses are factored in)?

If you are wondering why it matters: Each expense claimed must be accompanied by an official receipt. Most of the business services I use are online, and do not automatically provide a receipt. Thus, to claim every actual expense, I need to spend about three hours each month finding my passwords, logging in, finding the billing area, finding the most recent receipt, printing, doing the math, collating, and photocopying. This is putting me off being in the program at all. But if it's of exactly equal benefit to claim just those expenses sufficient to bring me under $800 (and often that can be done with just one receipt!), the problemo is solved.

[chicagomeg]

From my reading, you just need to claim enough expenses to be under $800.

The set aside seems to apply to INCOME not EXPENSES. So, if in November you had 2000 in revenue & 1000 in expenses, for a profit of 1000, you could "set aside" 200 and then still claim the full subsidy. You can do this until the full sum of your set asides equals 5000.

From the description you give, it is not clear what would happen if in December, you had 700 in income. Could you take 100 from your set aside, leaving a balance of 100 in the set aside "account"? If that's the case, then IF you start building a balance in your set aside "account", then, it would be beneficial to maximize the expense you claim. Otherwise, I can't see what difference it would make.

Hope that helps!

[scrubbyfish]

So, if in November you had 2000 in revenue & 1000 in expenses, for a profit of 1000, you could "set aside" 200 and then still claim the full subsidy. You can do this until the full sum of your set asides equals 5000.

All absolutely correct, yes.

From the description you give, it is not clear what would happen if in December, you had 700 in income. Could you take 100 from your set aside, leaving a balance of 100 in the set aside "account"?

No, that would not be permitted.

So, your sense in this case is that I only need to show enough receipts to bring me under the $800.

Thank you, mlipps! (I don't know you yet! I appreciate you stepping in here!)

Anyone else have same or differing take?

[scrubbyfish]

Anyone else have any other math thoughts on this one? I will dive into the paperwork tomorrow morning...

[MDM]

Some thoughts, in no particular order:

  - Is the $800 "per month" or "total"?  I'm guessing "per month" for the purpose of commenting.

  - If you are running a business and intend to file taxes accordingly, you should have receipts for all expenses (or at least for amounts required by the IRS).  If you have to do it for the IRS, you might as well claim the expenses for the subsidy program purpose.  Although, I agree with mlipps that once you can show <$800 profit for a given month you don't need to justify less profit for the purposes of the subsidy program.

  - Seems you could say "...business income profit over $800 per month reduces the subsidy dollar-for-dollar" - is that correct?  Maybe only a semantic difference but it helps me to think of it that way.

  - It appears you are in a program that gives you some ongoing (monthly?) subsidy.  The sentence "The maximum that can be set aside (saved from the net income for the business's future) is $5000, then we are booted off the program."  If you had, say, $100,000 profit it makes sense that you wouldn't need a subsidy.  What happens, however, if you have $750 profit each month ($9,000/yr)?  Do you continue to get the subsidy because you never use any "set aside"?

[scrubbyfish]

Thanks, MDM!! Answers below...

- Is the $800 "per month" or "total"?  I'm guessing "per month" for the purpose of commenting.

Per month, yes.

  - If you are running a business and intend to file taxes accordingly, you should have receipts for all expenses (or at least for amounts required by the IRS).

I do print receipts for all expenses for annual tax reporting, yes. (I simply prefer to go through the pain once per year, printing all receipts from each company in one go, vs doing the entire process monthly for one receipt each.)

Although, I agree with mlipps that once you can show <$800 profit for a given month you don't need to justify less profit for the purposes of the subsidy program.

Excellent news!

Seems you could say "...business income profit over $800 per month reduces the subsidy dollar-for-dollar" - is that correct?

My brain gets stuck when I ponder this. In think it might be correct, but my brain isn't quite grasping if it's the case. Your rephrase might be successfully touching on the essence of my primary question.

It appears you are in a program that gives you some ongoing (monthly?) subsidy.

Yes. (Well, it says it will. Whether it actually does or not is hit or miss from month to month, which is a large part of why I want to keep my time-and-stress investment as low as possible.)

The sentence "The maximum that can be set aside (saved from the net income for the business's future) is $5000, then we are booted off the program."  If you had, say, $100,000 profit it makes sense that you wouldn't need a subsidy.  What happens, however, if you have $750 profit each month ($9,000/yr)?  Do you continue to get the subsidy because you never use any "set aside"?

Yes. If my total profit is consistently less than $800/mo, such that I can't even make use of the set aside, I could continue receiving the subsidy indefinitely.

As it stands, my monthly profit over the years has been anywhere from $0-$3000/mo, depending on what's happening in each project and overall. It was at $0/mo for a good while, and has been hovering right around $800/mo lately. Through the lens of the CRA (Canadian version of IRS), there has actually been no profit at all for two years, due to a business disaster, but the subsidy program only looks at the most recent month, and does not entertain the bigger picture, tax perspectives, loan repayments, Corporation-specific costs, etc. Just what bare necessities were needed in the last month in order to bring in last month's income -the calculation can include only those. So, it's very skewed in any case, which makes it harder for me to understand and report to. I have to have an entirely different understanding/headspace to prepare each report, which is challenging for me.