11 Taxes

Taxes

INDIVIDUAL – Self-Employment

As a freelance or self-employed artist, you will have to file additional paperwork with your standard tax return. As noted previously, those who are self-employed do not get deductions taken off their pay. This means you still owe taxes on monies earned. However, you can also claim eligible expenses (as defined by the Canada Revenue Agency) that supported your self-employment and deduct these from your professional income in order to reduce the amount of taxes owed. Plus, you get until June to file!

You will complete a T2125 form, Statement of Business or Professional Activities. Here is the necessary link to the paperwork from CRA:

Statement of Business or Professional Activities (canada.ca)

You will basically list all your professional income in Part 3B. Then all eligible expenses in Part 4. See the provided example. There are accountants who specialize in tax preparation for arts workers so if you don’t mind paying, this can be a wise investment. Ask other independent contractors who does their taxes and get recommendations If you are doing it yourself for the first time read all the guides, talk to those who have done it before, and follow these tips:

Tax Tips

• Keep all receipts and records of income.
  • You should receive T4As from any company that paid you more than $500, but you need to claim all professional income even if you do not have a T4A for it.
  • If you were also employed in a job as an employee, you will get a T4 and this income is not part of what you claim on the T2125 as professional income, but is reported in a standard method on your T1.
• It is easier to keep things organized as you go then to sort through twelve months of receipts.
  • I keep all my receipts for eligible expenses separate from any other personal receipts. These would include receipts for show tickets, books, printing…all things that supported my contracted theatre work.
  • Since you can also claim mileage used for business purposes. I also keep a log book in my car and note all trips related to my freelance work. In addition to the number of kilometers, this includes noting the date, where I traveled and for what purpose. It is good to know that you will be required to provide your odometer reading for the start of the year and the reading at the end of the year. Then the portion of this used for business. As part of this you can also claim the related portion of your auto insurance, gas, and car maintenance.
• Note on receipts the purpose of the expense so that you don’t forget (for example if I buy thank you cards for a show I directed, I note that on the receipt).
• Do not highlight receipts as it can cause the printing on the receipt to fade. Pencil can also fade quickly so pen is best.
• Err on the side of honest and conservative expenses rather than trying to get away with anything.
  • Eligible expense are outlined in the guide from CRA, and you can only claim things or portions of things used for business purposes.
• Filing date for self-employed individuals and their co-habiting spouse/partner is June 15th, but you must pay any owing amounts by April 30 in order to avoid interest.
  • Basically, if you are sure you will not have to pay taxes, you can wait. This applies even if you do have some income from regular employment as well as self-employment.

A few other things to be aware of are Goods and Services Tax (GST) registration, as well as Employment Insurance (EI) and Canadian Pension Plan (CPP) deductions on self-employment income. These aren’t real concerns until you are earning a fair amount of income. You can decide to register for GST (and/or HST depending on the province you work in) but you only have to register for GST/HST if you are earning more than $30,000 in a calendar quarter (3 months) or over four consecutive quarters. At that point you would need to charge GST to all those who pay you. Basically you would include the additional 5% on top of your fee, or applicable HST amount for your province, on any invoices or contracts. In order to register for GST you need to first register your business with CRA even if you are the sole proprietor (i.e. the business is just you doing freelance work).

Also, as a self-employed individual, you might be eligible to contribute to EI for yourself. Check with Service Canada for details on eligibility. Some choose to opt-in so they can access special benefits such as maternity/paternity leave, family care and so forth. You need to register in advance to access these benefits.

You will also have to pay CPP on any amount you earn over $3,500 in a given tax year, if you haven’t maxed out CPP contributions on your non-self-employment income.

ORGANIZATIONS

A bit of general information so you understand the theatre company end of the tax equation:

• Charities submit an annual return to CRA’s Charities Directorate reporting on their activities and financials (you can search any registered charity and find out things from their annual report, such as the breakdown of their revenue/expenses and the range of salaries they paid)
• The filing date is 6 months after the organization’s year-end (every organization has their own year-end based on when they incorporated and what they have set-up with the CRA), after that point a late filing fee will apply
• Non-profits need to submit a T2 if they have had any revenue, even though they do not have to pay taxes on it
• Employers need to do T4s for employees and T4As for those who were contracted (if they were paid over $500 in the year)
• T4 or T4A filing deadline is end of February

*Sidenote: CRA reporting connects back to understanding funding and budgets for theatre companies, for example if you look up the Shaw Festival  on CRA you’ll see they had revenue of $36,639,532 in their 2022 report and of this 28.08% was government funding. We can also see that they spent 9.17% of their budget on management and administration.