Taxes - ATB Entrepreneur Centre

Tax tips for creative entrepreneurs

Tax time when you’re self-employed can be stressful, but you’ll feel more peace of mind if you take the time to understand your business expenses as a creative entrepreneur, and it could help you save money on your taxes too. Here are our top four tax tips for creative entrepreneurs.

Determine your revenue

Creative entrepreneurs and artists tend to have fluctuating incomes, which can make it tricky to keep track of income. This process is much easier if you set aside time to record your income once or twice a month. So you don’t forget, you could book an hour as a recurring event in your calendar. Find a system that works for you, whether it’s an online bookkeeping system or a simple spreadsheet. If you’re using a spreadsheet, it’s helpful to have a column for your income, GST/HST if you’re collecting it, as well as columns with the date you invoiced, and the date you received payment. Depending on your preference, you can count your income according to the tax year you did the work, or the tax year you received payment for the work — just make sure you categorize all your payments using the same method. If you’re sending invoices for freelance contracts or gigs, ensure that you’re documenting your income clearly by client name, work description, invoice amount and invoice number, in the off chance that you get audited. (If you’re just keeping track of your incoming Interac e-Transfer™ history, you might miss out on payments or forget whether a payment was for income or an expense).

Break down your business expenses

Understanding what does and doesn’t qualify as a business tax deduction is one of the most important (and confusing) aspects of filing taxes. When you’re self-employed, keep track of any business-related expenses that you have incurred. If you’re not sure what expenses to deduct, try using the TurboTax Self-Employed Expenses Calculator to estimate your expenses. Depending on how you set up your business, you may be able to count part or all of your phone and internet bills, office items like printers and paper, a percentage of your car payments, meals with clients, and more. Keep your receipts, paper and digital, so you’re able to identify potential deductions and appropriately claim your expenses when the time comes. Depending on the complexity of your situation, it’s always a good idea to consider working with a bookkeeper or tax professional to help you figure out what counts as a business expense and how much of the cost you can write off when you file your tax return. (For example, while you might only be able to count 50% of a restaurant meal as an expense, you might be able to expense the entire cost of your new laptop.)

Consider getting GST/HST number, if you don’t have one yet

If you’re just starting out, or working for yourself only casually or part-time, you may not yet be collecting and remitting GST/HST. But if your sales exceed $30,000 per year, you are required to collect GST/HST from clients/customers, and remit it to the government at tax time. This chart from the Canada Revenue Agency can help you determine if you need to collect GST/HST. Whether you’re a sole proprietor, working as a contractor or freelancing, it can be beneficial to register your business for GST/HST collection before hitting the $30,000 threshold. This will save you hassle down the road if you hit the threshold unexpectedly. Register online by visiting the Business Registration Online (BRO) program page on the Canada Revenue Agency website.

Plan ahead

Just as you plan new projects and bookings for the months ahead, you can plan ahead for your taxes. Take advantage of the knowledge our team at the Branch for Arts & Culture has to offer; Discussing options that can work for your business, goals and lifestyle with our experienced Culture Bankers can make a big difference as you prepare your return both now and in the future. Reach out to our team here.

Self-employed: Tax preparation tips

Every entrepreneur and small business is unique, and tax time can bring different challenges. If you are preparing your tax returns, and need a hand, consider using tax preparation software.

There are user-friendly options to help you organize income and expenses and take advantage of tax credits and benefits. These helpful tools can guide you through preparing and filing your personal and business taxes, making tax season less daunting.

Understanding self-employment income

Income as a freelancer or solo entrepreneur can look different for everyone. When you’re self-employed, you should understand what you earned in business income or professional income and the difference between them.

Business income: Entrepreneurs who report business income have inventory and make sales. For example, a baker selling cookies on a buy & sell site or an artisan selling items in an online shop or to a retail store.

Professional income: Earning professional income means you’re governed by a regulatory body. Doctors, lawyers, and architects fall into this category.

Make sure you have a system to document clearly and accurately what funds are coming in, big or small. You can create your own tracking system using software like Microsoft Excel or invest in an online solution. It’s essential to keep track of earnings and expenses, so you can report them accurately come tax time.

Find possible deductions

When you’re self-employed, you can take advantage of possible deductions that lower your taxable income. For example, you can deduct a portion of your vehicle expenses if you use it for business purposes. Or, if you have a dedicated home office, you can deduct a percentage of expenses like utilities, mortgage interest, property taxes, etc. If you’ve kept good records and have receipts, there are many tax-saving deductions you can take advantage of.

If you’re not sure what you can deduct, tax filing software can help. For example, a program like TurboTax can help you determine expenses you used for business purposes, what is eligible, and provide instructions on how to calculate and report your deductions. If you want to see how it works, try using the TurboTax Self-Employed Expenses Calculator to estimate your expenses.

It’s important that you only deduct eligible expenses. If you’re unsure, ask yourself this question: If I don’t buy this, can I sell my product or service? This is a simple way of determining whether an expense is deductible or not.

As mentioned, tax preparation software can help you sort this out. However, if you’re still unsure and you want advice from a professional, consult with an accountant or a tax professional.

Be ready for tax time

Keeping detailed and accurate records of income and expenses throughout the year will make preparing for tax time easier. Remember to keep your receipts and file other important documents you might need to prepare your tax return. For example, tax receipts for charitable donations and records of tax-deductable RRSP contributions you made for that tax year.

You can also use TurboTax’s Self-Employed Tax Prep Checklist to make filing your self-employed return a little easier. It outlines everything you need to look for before you sit down to file.

Here to help

The ATB Entrepreneur Centre has resources that can help you prepare and file your personal and business tax returns. If you need help navigating these resources, or can’t find what you’re looking for, please contact us!

Check out our partners at TurboTax for more information on how you can leverage their tax expertise and get started.