Tax tips for freelancers
Tax time can be dizzying for journalists: What can be deducted? What is a legitimate expense? If you're self-employed, how do you manage numerous revenue sources? Miles Kenyon helps to make sense of all of this, with advice from journalists and an accountant.
It’s been quite a year for Lily Ames. Since graduating from the one-year journalism program at King’s College, she’s been working as a freelance journalist in Toronto.
“The fiscal year of 2011 was all over the place,” she says. “For the first time ever I had a student loan because I was doing my second degree; I was in school; I was living in another city so I didn’t have a part-time job; I did an internship; I moved back home and I started freelancing.”
Like many journalists who are self-employed, Ames is unsure about how to go about filing her taxes.
“As a freelancer, all I know is the rumours of what to do but I don’t know if I’m going to pay taxes or get money back.”
She admits that she’d benefit from seeking professional help but is no position to do so.
“As somebody who’s so early in their career…I don’t have the money right now to go see an accountant,” she says.
Joan Purcell is an accountant in Halifax and has been doing taxes for journalists for 25 years.
She says the first step to filing taxes it to stay organized.
“You want to keep a good track of your income—how much you’ve received—and you want to keep receipts,” she says.
“On the expense side, you want to keep receipts that you think are related to earning income.”
And some deductible expenses may be surprising.
“So, perhaps you may have taken a trip…to Kenya (because) you had an idea for a piece that you were going to sell,” Purcell says. “You might get back and never sell the idea to anybody but you still had an expense. So that expense would be a real expense even if it didn’t generate income right away.”
This leads into what Purcell says is another problem most self-employed journalists have with their taxes—they don’t know what’s considered a deductible expense.
“You can call somebody that you think might lead to income and treat them to dinner. It may not lead to a job, but it might, so hang on to that receipt. And you want to write on it who you took and what your pitch was,” she says.
Purcell says Revenue Canada is the best resource for figuring this out, with lists of reasonable business expenses.
And being reasonable, Purcell says, is the key to avoiding any negative repercussions.
“You don’t want to be waving red flags in front of Revenue Canada,” she says.
It may seem counter-intuitive, but Purcell agrees that many chartered accountants charge unreasonable rates. Instead, she recommends going to regular—or non-chartered—accountants.
“The more organized you are, the more reasonable your fee will be,” she says, noting that having your receipts sorted and labelled will save you money and stress.
She estimates that $100-$150 is a reasonable expense to hire someone to do your taxes.
But you don’t even necessarily have to go to an accountant.
Doing it for themselves
Valerie Mansour is a seasoned freelance journalist in Halifax and actually takes pleasure in doing her own taxes.
“It’s like a game,” she says.
Mansour’s an advocate of tax software, like TurboTax.
“It’s fun because it does the math for you.”
And she knows firsthand the benefits of staying well informed about write-offs.
“When I had my own apartment and my own office in my apartment, I could claim a fifth of everything—a fifth of my electricity, a fifth of my heat, a fifth of my rent—because I used up a fifth of my apartment as my office.”
She also echoes the virtues of organization.
“The better organized you are as the year goes by, the less complicated it’ll be when you sit done to do your income tax.”
Purcell warns about the dangers of putting off taxes. She has clients who have had their wages garnished or, worse yet, their bank accounts frozen for not paying their taxes. These are extremes and are last resort measures for Revenue Canada to take.
She says the worst thing you can do is ignore your taxes forever. Still, she recognizes that no one is perfect.
“But if you do ignore it forever, don’t feel bad about that because lots of people do and you can always get it done and cleared up.”