At this time of year, writers across Canada are scrambling to organize their receipts and invoices before filing their income tax. I’ve been preparing taxes for several decades. These are five questions I often get asked by writers and artists.
1. If a writer has a day job and freelances too, can she claim writing expenses?
Yes. A freelance writer earning revenue is considered a small business operator or sole proprietor, and therefore can deduct expenses like any other small business owner. Many people work as an employee at one job and run a business on the side. A freelance writer is no different. And the tax department requires you to declare any and all income you earn worldwide from whatever source.
That said, you will notice that I use the phrase “a freelance writer earning revenue.” If you are writing and submitting but not yet earning income, there are still circumstances when you can be considered to be “running a writing business,” but the tax department has guidelines that differentiate a “hobbyist” from a “small business person” that you should check first.
2. What kinds of expenses can writers claim?
Assuming that you are not considered a “hobbyist”, but are a “small business person,” then you can expense anything that you pay out “to earn revenue.”
Some examples would be: all the usual office type expenses like stationery and computer software and postage; also travel and phone costs for assignments; research expenses; professional fees for accounting; editing, transcribing, researching etc.; advertising; a portion of your computer and photography equipment, professional membership dues, professional development courses, conferences and writing retreats; and resources such as subscriptions to trade magazines.
Some meals and some entertainment expenses can be written off too. If you operate out of your home, you can also consider a “use of home” office expense, and if you use your own car you can consider a motor vehicle expense too. All these expenses, however, have rules and limitations attached, so check the Canada Revenue Agency website for details.
The golden rule is that the expense should be incurred to earn revenue and should be “reasonable in the circumstances.” Trying to write off a $4,000 trip to Paris to write an $800 article is not reasonable. But don’t short-change yourself either. Don’t forget the little things like parking and banking fees and taxis. And keep all your receipts!
3. What are the tax implications of a Canadian writer working with a USA or UK publisher?
Money earned outside Canada will be have tax withheld at source AND must be declared on your Canadian tax return. But, Canada and the USA and UK have “double taxation agreements” in place, so there is a mechanism for you to apply to have your foreign taxes refunded.
4. What are the biggest mistakes you see writers making with their taxes?
Not starting to consider themselves a writing business soon enough. Most writers feel they should either be working full-time at writing to qualify, or that they should be making a profit first.
Also, not keeping receipts. You can’t claim things you have no receipts for, even if you genuinely spent the money on them. A good rule of thumb is to keep all receipts even if you are not sure if the expense qualifies and then decide later.
5. When does a writer need to register for a GST/HST number?
Writers, resident in Canada, are subject to the same requirements as any other self-employed persons or companies when it comes to mandatory GST/HST registration.
So when do you need to register? The simple answer for mandatory registration is: as soon as you hit the $30,000 gross revenue mark.
But it’s not quite that simple. Timing is everything. When you reach that $30,000 threshold is important. You are required to become a GST/HST registrant once you “exceed the small supplier limit of $30,000 in a single calendar quarter or in four consecutive calendar quarters.”
Say, for instance, you’ve only earned $10,000 by the end of November 2017. Then you land a large contract and they pay you on three separate $15,000 invoices: in December 2017, and January and February 2018. You earn $2,000 in March.
At the end of December 2017, your annual revenue [four consecutive calendar quarters] is $25,000 [$15K plus $10K]. You don’t need to register at this point, because you are under the $30,000 threshold.
By the end of March [1st calendar quarter], however, you exceed the $30,000 limit [January $15K + February $15K + March $2K.] Now you must register, even if you remain at the lower earning levels in April and beyond.
You also have the option of voluntary registration at any time. If you are prepared to do the added bookkeeping required, you can voluntarily register and take advantage of recouping any GST/HST you pay out on your expenses. Sometimes too, if you want to give the allusion that you are a bigger operator than you are, you can register and charge HST from day one. The client will likely assume then that you earn over $30,000 a year.
- CRA Bulletin for Writers and Artists
- Use of Home expense
- Meals and entertainment expenses
- HST Registration
DlD YOU KNOW?
Writing retreats are allowable expenses for a writing business.
And our next retreat on offer from Writescape is Spring Thaw 2018,. April 20 to 24.This all-inclusive writing retreat is held at the fabulous Elmhirst’s Resort on Rice Lake in Keene. Stay for the weekend or treat yourself to an extra two days of writing.
Looking for writing time? Polishing a project? Looking for feedback from two professional editors? Or just want time to rejuvenate your creativity? Don’t miss Spring Thaw.