Work in Progress for Professionals
Self-employed professionals who are accountants, dentists, lawyers (including a Quebec notary), medical doctors, veterinarians, or chiropractors have the ability to defer a portion of their professional income for tax purposes. Where, in the normal course of operations, the professional tracks hours expended on a project that have not yet been billed, this unbilled time, or “work in progress” (WIP), would normally be included in the professional’s income for accounting purposes. However, the Income Tax Act provides that where the professional elects in his or her return of income, this WIP can be excluded from the determination of income for income tax purposes.
The election is made by either attaching a letter to the taxpayer’s return stating that the election has been made, or by clearly indicating this information in the financial statements or in an income reconciliation submitted with the return. Once made, the election is valid for all subsequent taxation years and can only be revoked with the consent of the Minister of National Revenue through your local Tax Services Office.
If you are a professional and believe you could qualify for this election, contact a Chartered Professional Accountant to help you determine if it is available to you.