“Taxes and Other Issues for Small Business”

For our meeting on February 10, we were looking forward to hearing a presentation by Line Commeau of Shoebox Services, a local business that offers income tax preparation as well as bookkeeping and accounting services. Unfortunately, at the last minute, she was unwell and had to cancel. Nevertheless, everyone had information and experiences to share, and it was a great meeting.

To give us context, we assessed our work situations: five of us are self-employed full-time, one is self-employed part-time and employed by an organization part-time, and one is considering starting an editing business.

Many things need to be considered when starting and running a small business.

Company name

Do you establish a company name that is your own name, or do you create a descriptive name? About half of us use a descriptive name, while the other half use their own name.

Business cards

We agreed that business cards aren’t really a thing anymore. Some members had cards designed and printed when they started their business, but hardly use them anymore. One member used them when she attended networking events early on. (She didn’t get any business out of it.) Still, they can support word-of-mouth advertising. If you have business cards printed, do a test run to see how large or small your company name appears, whether it breaks awkwardly over a line, etc.

Web presence

Of those who are self-employed, all have a web presence of some sort: all are on LinkedIn to some extent, four have websites, and two rely on their Editors Canada online directory profile. Having a website can legitimize your presence and your business. Creating a website was considered a good investment and one that didn’t take a lot of time to set up. Blogs are another type of web presence; they’re a place to write up general information about what you do or information that you’re repeatedly asked for.

Email address

Some people use their own name in their email address, while others use their company name. When choosing a name, be cautious about the spelling: “eagleeyeediting” will incur too many spelling errors, so it isn’t a good choice.

Collecting HST

If you expect your business to bring in at least $30,000 in income per year, you need to collect HST, and to do that, you need to apply to the Canada Revenue Agency (CRA) for a business number. One member recommended collecting HST partly because self-employed editors have few expenses to deduct from their business income.

Of course, then you need to file HST every quarter. However, you can use the Quick Method of Accounting to pay only 8.8% on your business income rather than the full 13% (5% federal and 8% provincial) that you collect. And you can deduct 1% of your income up to the first $30,000.

If you do work for clients in other jurisdictions, you charge the tax that applies there (e.g., 5% in Quebec, 0% in Alberta).

What about working under the table? It might mean that you always work in the same genre. To avoid this, join Editors Canada and add your profile to the Online Directory. Then you can work on projects that are really varied. For at least one member, this was the best part of her work experience.

You can set up a business in order to write off certain expenses.

Bank account

One member had to set up a business account in order to be paid by direct deposit. Up to that point, she’d used her personal chequing account. For the bank she chose (RBC), she had to have an Ontario Master Business Licence – which she didn’t even know existed. No one else had that experience.

Business expenses

  • We can deduct a portion of our rent or mortgage based on how much space we use for our office (e.g., one room out of the four or six in our apartment or house). The same applies to utilities, house or contents insurance, property taxes.
  • Business bank account; business phone (landline) or cell phone.
  • Memberships in professional organizations (e.g., Editors Canada, Indexing Society of Canada); professional development (EC webinars; conference registrations and meals, although not banquets).
  • Work-related travel, meals (e.g., lunch with a client or potential client), entertainment – can be claimed at 50%. When one member travels for work and stays with a family member rather than in a hotel, any hostess gifts are considered “gifts in lieu” and can be claimed at 100%.
  • Internet expenses (Internet service, paid Zoom calls, email address domain name, creating and maintaining a website, WordPress subscription, etc.).
  • Other marketing and promotion (e.g., having business cards designed and printed, having a head shot taken to put on them).
  • Subscriptions, style guides and dictionaries (print and electronic). One member claims for the Globe and Mail and The Walrus magazine because it keeps her informed of events, opinions, what’s going on in the world. Another member claims for every book she buys (this received an enthusiastic response). Don’t forget that being a member of Editors Canada gives us free access to the Chicago Manual of Style Online.
  • Computer hardware (either claimed as a one-time expense or amortized over a number of years), computer software, office supplies.
  • For homeowners, any cost of home maintenance.

Business taxes

The date to file is June 15, although we have to pay by April 30. One member started to pay in instalments one year, but after realizing that she was being charged interest, paid off the remainder. No one else had that experience.

One recommendation: don’t use your line of credit to pay your business taxes. And remember that not all the income you earn is actually yours.

A potential deduction for 2020, which might affect people who work for an employer, is the expanded allowance for working at home. Ask your tax preparer whether you can claim this.

One member set up a savings account into which she paid 10% of her business income. Then she’d use that money to cover much of her taxes at tax time. If you work for someone else, you can ask to have a higher rate of tax deducted from your pay.

Do I need an accountant?

Most people don’t use one because their business is so small. More important is the person who prepares your business taxes. One member had a good experience with someone who focused on people working in the arts. One member pays $250 for her tax preparation, down from $300 because she’s got organizing her receipts down to a fine art. Another member pays $50 to her tax preparer because he charges her his “family and friends fee.”

COVID-19

No one seems to have their workload affected by the pandemic or the lockdowns, but for two members, it’s taking some clients longer to pay.

Any other considerations?

There can be a lot of administration. Be sure to keep track of the invoices you send out and when they’re paid. One editor makes out her invoice on the day she starts a project: the details are fresh, so she can easily record them on the invoice. This approach is also an incentive to start the work and a reward for doing it.

One member has a client who gives her many small projects and wants to pay right away. This necessitates creating an invoice for each job, which is really time-consuming. She wants to change this approach so that she can invoice for several jobs at once. She could consider working for this client on retainer. (Here’s an interesting article on the benefit of this arrangement for a home-based business.)

Approaching 60?

If you’ve been paying into the Canada Pension Plan (CPP), you can apply to start receiving your pension at age 60 (or anytime up to age 70; the longer you wait, the higher the monthly payout). One member’s financial adviser recommended that she start taking her pension at 60 because her monthly income was unpredictable. It’s proved to be useful advice.

Self-employed people pay CPP; it’s added to our taxes automatically. If you’re still working at age 65, you can opt out of this arrangement; speak to your tax preparer.

Editors Canada members who reach 60 years of age and have been a member for 10 years currently pay an Emeritus Member fee of $146 rather than the regular $292.

Personalized info from CRA

CRA offers free, one-on-one seminars on tax preparation for small businesses and self-employed individuals during business hours.

Editors Canada News

  • The annual conference, “Editors21: Editors Transform,” will be held on June 12–13 (weekend), completely online. Cost not announced yet. A keynote speaker will be Joshua Whitehead – author of poetry and fiction, PhD candidate, lecturer, and Killam scholar at the University of Calgary, where he studies Indigenous literatures and cultures with a focus on gender and sexuality.
  • No new webinars have been announced. Recordings of past webinars are available – and the cost is a business expense.
  • A survey has been sent out by the Equity, Diversity, and Inclusion Task Force. Please take it if you haven’t already; it’s an important piece of this new initiative.
  • The website is going to be upgraded to improve the content management system. This should improve how the content is organized.

Twig News

  • As of end of January, we have 18 members, the highest number in a few years.
  • Let Stephanie or Nancy know if you don’t want to be listed in the twig’s Google Group – the access to Editors Canada’s shared Google Workspace.
  • Emails – Stephanie tries to address the group using Bcc rather than To, but sometimes forgets.

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