Disclaimer: this information is meant for Canadian creators. You should consult an accountant before relying on this information.
Tax season is frustrating, we get it. That’s why we hosted a creator workshop, focused on taxes and personal finance, on March 28th. We invited leading industry-specific accountants from D. Jae Gold Entertainment Accountants to present. From working with renowned artists to prominent content creators, they are well-versed in operating businesses in the entertainment and creator spheres. We’ve rounded up some advice to help you manage the financial side of your creator career but note that everyone’s situation is different. We recommend that you talk to a professional accountant about your unique situation, so they can properly advise you on how you should operate.
As a creator, you are running your own business and it is important to understand how to manage the financial side of it. Here are some things you can do to maximize your wealth:
Write off every type of deductible expense
By writing off business-related expenses and decreasing your total taxable income, you can reduce the amount of income tax you would have otherwise owed.
Generally, when you’re spending money to earn or try to earn income within the tax act, it is considered a deductible expense. Some examples include the following:
Of course, these should be reported within reasonable limits—backing out personal use of things like cell phone/internet and vehicle is necessary. For a more comprehensive list of examples, refer to this checklist. The list is the same, regardless of whether you are operating as a sole proprietor, partnership, or corporation.
Things that are not deductible include single meals (unless specific to a post), groceries (unless part of props or supplies), gym membership (unless you’re a stunt worker, professional athlete, or fitness blogger, then a percentage of it is deductible), golf green fees, medical, home, pets, kids, savings, school, and other debt (if it’s debt related to business, the interest is deductible).
When it comes time to doing your taxes, there are several things you need to prepare. If your accountant is doing the bookkeeping, provide 12 months of business bank statements, credit card statements, and petty cash receipts. If you don’t have a separate bank account, coded bank and credit card statements with business expenses highlighted will suffice. If you are doing the bookkeeping, your accountant needs summaries of income, expenses, GST/HST collected, and GST/HST spent (if registered). For the CRA, you need to keep all itemized receipts, from 6 years from the date of assessment. They do not accept bank or credit card statements as proof. Meal receipts need to have some written indication that it was for business (ie. topic/campaign of discussion). If you want to write off part of transportation, you must be able to provide a vehicle log if the CRA ever asks for proof of vehicle business percentage. A great app to keep track of your usage is Mile IQ.
Register for GST/HST
Once you are earning more than $30k in self-employed income, it is mandatory to register for GST/HST; before that, it is voluntary. When you are registered, you collect GST/HST as part of your transaction when working with Canadian companies. The benefit of registering is that you’re collecting GST/HST on top of your fees, so your income stays the same but you get back the GST/HST on all your expenses. Once registered, some mistakes people make include not charging the correct amount, deciding they aren’t actually going to collect until they hit $30k in sales, and spending the HST collected. Therefore, if you register for GST/HST, ensure that you are collecting and that you have enough to pay the CRA at the end of the year.
Make sure excess money is working for you
If you have excess money after paying off your high-interest debts and establishing sufficient cash reserves, ensure that it isn’t just sitting in a bank account. In order to increase your wealth, consider tax-advantaged registered accounts, like RRSPs or TFSAs, and individual investment accounts. It’s best to consult an accountant or financial advisor before making any decisions involving money.
Incorporate when it’s the right time for you
As your business grows and the legal and tax situations change, it’s a good idea to revisit the question of whether to incorporate. This decision is dependant on a lot of individual factors. When you’re making more money than you need to live on, you may choose to incorporate. A Canadian Controlled private corporation pays 15% tax on the first $500k of profit per year. If you can leave some earnings in the company, you can defer personal taxes on withdrawals and let it get taxed at the lower rate. Once incorporated, you can also choose the most tax-efficient way of paying yourself. Another reason you may decide to incorporate is legal liability. As your business is a separate legal entity, legal actions go against your corporation and its assets. Therefore, your personal assets are protected to some degree.
Leverage the tips above to maximize your wealth and build your empire in the influencer marketing industry. If you have further questions, seek the advice of an industry-specific accountant.
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