Eva van Emden, Freelance Editor

Certified Copy Editor and Proofreader

eva@vancouvereditor.com

October 31, 2011

Paris Review interview with William Gibson

Paris Review’s “The Art of Fiction No. 211” is a lovely long interview with William Gibson.
“. . . and something I’d heard about from these hobbyist characters from Seattle called the Internet. It was more tedious and more technical than anything I’d ever heard anybody talk about. It made ham ­radio sound really exciting.”

October 27, 2011

Income tax for Canadian freelancers: Track your deductions

Updated for the 2020 tax year
Maybe you started a full-fledged business, maybe you just did your first freelance assignment; either way you need to know how to declare your self-employment income. Even if you plan to get an accountant to do your taxes, knowing what you can deduct and keeping your information organized will make the process faster and easier. In part 2, I talk about filling out your Form T2125: Statement of Business or Professional Activities.

Preparing for tax time

Even if you plan to dump the whole job on an accountant, keeping organized records throughout the year will make a huge difference at tax (or audit) time. From the simplest to the most sophisticated, here are four methods you can use:
  1. Get an accordion file. File expenses according to category (not date).
  2. Buy a notebook or accounts book and write down expenses and income according to category.
  3. Set up a spreadsheet to track income and expenditures.
  4. Use accounting software.

What records should you keep?

  • The CRA suggests that in addition to tracking your income and expenditures you back up your records with source documents: sales invoices, receipts, contracts, bank deposit slips, etc.
  • Make a note on your bank statement to explain any large deposits that are not business income. Seven years later you may be asked why you didn’t declare that money as income.
  • If your bank doesn’t guarantee it will maintain your electronic records for six years from the end of the last tax year to which they relate, then you need to print or save your bank records yourself.
  • Credit card bills aren’t considered equivalent to receipts (but by all means, save them as extra documentation).
  • Print e-receipts or save them as clearly labelled PDF files.
  • Consider photocopying or photographing paper receipts, because some of them are printed with ink that fades quickly.

Allowable deductions

Business use of home

  • Proportion of home used for business: This can be calculated as either the number of rooms used for business out of the total number of rooms in the house, or as a percentage of the floor space. If you use a room for both business and personal use, estimate the percentage of the time that the room is used for business purposes, but if it’s used for business only, you can consider it to be used for business 24 hours a day.
  • Allowable expenses: Rent, insurance, utilities, strata fees, maintenance, interest on the mortgage.
Taxes for corporations are way beyond the scope of this article, but one quick warning: if you have an incorporated company and you rent part of your house to the corporation, the capital gains on your house become taxable.

Phone

  • Cell phone fees are deductible, but you are required to calculate the percentage of phone use for business.
  • I’m told (but haven’t checked with the CRA) that with land lines, the monthly fee is only deductible if you have a separate line registered under the name of the business. If the phone is registered to you personally, you can only deduct long-distance business calls. (I imagine this is because local calls are not itemized on the bill, so there is no record of personal versus business use.)
  • Phone hardware is deductible.

Internet

You can claim a portion of your internet expenses. Again, calculate what proportion of your internet use is for work. If you claim internet or a computer as business expenses, your internet traffic and computer contents become examinable in an audit.

Business use of car

  • Tracking: Keep a mileage log. The easiest thing to do is to take an odometer reading at the beginning and end of the year and record either all business trips or all pleasure trips (whichever you do fewer of).
  • Allowable expenses: gas, repairs, maintenance, depreciation, interest on a loan, lease payments.
  • Note that the car has to be insured for business use.

Entertainment

This is one is tricky and often disallowed. Here’s what I’ve been told.
  • The expense has to be for the purpose of getting or keeping business.
  • The expense is generally incurred by taking a client out for entertainment.
  • Only clients are eligible, not partners.
  • Only 50% of the expense is deductible.
  • Keep a record of the names of the clients and why you took them out.
Staff meals are a different situation. If you hire someone and part of the contract is that you will provide food, that expense is 100% deductible.

Travel

You can claim travel you need to do for work, or to get to professional development events. Your travel expenses will be deducted all together, but keep detailed records of how the expenses break down.
  • Allowable: getting there, travel while there, accommodation, meals.
  • If the trip is part pleasure and part business, prorate the claim accordingly.
  • Travel meals: probably have to be outside the city and are only 50% deductible.

Research and professional development

  • Professional development covers things like courses, books, and magazines.
  • For research, keep records and make sure you can show a clear connection between what you bought and how it contributed to your business.

Capital cost allowance

This applies to anything that you buy—used or new—that has a useful life at the end of the year. Usually this will apply to items that you spend more than about $300–$400 on.
  • For capital costs, you don’t deduct what you paid for the item; you deduct the amount that it depreciated during the year. Look up the percentage to write off in the classes of depreciable property list.
  • If the business buys something that gains value (antique furniture or real estate, for instance) you will have to declare a capital gain when you sell it.

Bad debt

Since you are using the accrual method of accounting, you report your income in the year you earned it, regardless of when you actually get paid. So it might happen that you report income that you never actually receive. Say you did a contract in late 2019, reported the income in that year, and never got paid. You can deduct that income the next year as a bad debt. You could also file a correction for the 2019 taxes, deducting that income, but it probably looks better to claim the amount as a bad debt the following year; at least that way there’s an explanation.

Back expenses

If you forget to claim an expense, you can amend your tax return for that year to include the expense, and you will be credited with the corresponding saved tax (without interest). You can do this going back a maximum of six years.

Deductions not related to your business

CRA links

The CRA help number for businesses and self-employed people is 1-800-959-5525. See the CRA phone numbers page for their hours.

Other tax information

See also:

Income tax for Canadian freelancers: T2125 Declaration of business or professional activities

Updated for the 2020 tax year

How do you declare freelance income?

I covered allowable deductions for freelancers and small business owners in part 1. Here’s some help with filling in the T2125: Statement of business or professional activities.

Do you run a business? Are you self-employed?

If you are carrying on an activity that you intend to make a profit with, then you have a business. The simplest form of business is a sole proprietorship. This means you are not incorporated or in a partnership with anyone. You can run a sole proprietorship business without registering the business, registering a business name, or getting a business license.

The T2125 form: Statement of business or professional activities

If you’re earning money as a sole proprietorship, you simply fill in the T2125 form in addition to your basic personal income tax form. Whatever electronic income tax filing system you use can probably handle this just fine. The T2125 is available electronically; if you do your taxes on paper, you can print out a copy and deliver it along with your general income tax package.
  • Where to get it: the General income tax and benefit package for 2020 doesn’t seem to be available yet (January 7, 2021), but should be soon.
  • The 2020 version of the T2125 is available, but the last update is from January of last year. It doesn’t seem to be specific to the year.
  • How many do you need? Similar business activities can go on the same form, but very different activities (writing and pottery) would have to go on two separate forms. I recommend phoning the CRA if you’re not sure whether two activities can go on the same form.

Sections of the form

Part 1: Identification

  • Was this your last year of business? If you closed down the business during this tax year, say “yes” here. This lets the CRA know that they shouldn’t expect any more tax reports for this business.
  • Main product or service and Industry code: The industry code lets the CRA know what kinds of deductions they can expect to see on the rest of the form. Editors should use the NAICS code or industry code 561410: Document Preparation Services. This code includes “editing service,” “proofreading service,” and “desktop publishing service.”

Part 2: Internet business activities

If you use your website to promoting your business, I wouldn’t consider this to apply.

Part 3: Business Income or Professional Income?

Freelance editors should choose “professional income.” (In general, “business income” applies to selling physical goods and “professional income” applies to selling your expertise.) Fill out 3B and C and ignore 3A and D.

Part 4

This is where you fill in the deductions that you’ve been tracking throughout the year.
  • Rent: this refers to the rent on a purely commercial property. The rent for your living space should go into the “Calculation of business-use-of-home expenses” section in Part 7.
  • Property taxes: same thing here. Put your home property taxes under business use of home.
  • Other expenses: this is where many of your deductions will go: professional development, subcontractors, etc.

Other tax information

See also:

October 24, 2011

How to cite a Wikipedia page

Citations

To cite a Wikipedia page, look for “Tools” on the left side of the page and click on “Cite this page.” You will get a list of citations in different citation formats. The article author is given as “Wikipedia contributors.” Example: citing their “Cat” entry.

Copyright and reproducing Wikipedia content

A quick note about reproducing Wikipedia content: Wikipedia content is under copyright, but most of it is licensed under terms that allow at least some reuse. The terms usually allow you to reproduce the text unchanged if you credit the authors, but make sure you check the terms of use for the specific page you’re interested in. You may also have the right to change the text, although you may or may not be required to allow your changed version to be reproduced in turn.

October 2, 2011

Red Pencil in the Woods highlights

Red Pencil in the Woods
Last week I was at Red Pencil in the Woods in Seattle (Kenmore), put on by the Northwest Independent Editors Guild. It was a great event: the cost was very reasonable, the Bastyr University campus was beautiful, and the program was well choosen and presented. I will definitely look out for the next one.

Conference highlights

Carol Saller: “Finding Our Way: Writing and Editing in the New Publishing Landscape”

This was the keynote speech by Carol Saller, the Subversive Copy Editor and senior manuscript editor at the University of Chicago Press. She referred to a report from the Association of American Publishers using BookStats that seemed to show that revenues for print overall were increasing. She also went through an overview of the different kinds of publishing available:
  • Conventional: publisher pays production costs, writer gets percentage of the net revenue. A large number of copies of the book are printed together.
  • Print on demand (POD): a printing technique that makes it practical to print small batches of books.
  • Self-publishing: the author handles the whole production process. See CreateSpace, which provides a collection of online tools, both free and paid, to set up a book.
  • Subsidy publishing: the author and publisher split the cost of production and the author gets a higher percentage of the royalties than in a conventional publishing system.

E-book panel

A panel on e-books that discussed some of the advantages of e-books (authors can continue to sell books that would otherwise not be kept in print) and some of the technical challenges of the formats. Not all e-book publishers eat their own dog food.

How to write an effective book proposal by Jennifer Worick and Kerry Colburn

See how to write an effective book proposal for a summary of this presentation.

Carol Saller on subversive copy editing

The last session of the day was Carol Saller again, talking about her philosophy for harmonious copy editing: carefulness, transparency, flexibility.
  • Carefulness: Before you change something, make sure that it should be changed. An example of lack of carefulness would be meticulously changing every single instance of a misspelling that turns out to be a special term commonly used in the field. To make sure you do no harm, use Google to search for terms that look odd, and if you see an error repeated consistently, query it.
  • Transparency: Show your changes. Explain to the author ahead of time what changes they can expect, and if you’re using a word processor, track your changes. Explaining your changes, showing them, and making it easy to roll them back builds trust with the author.
  • Flexibility: This is the subversive part. Some styles are really pretty arbitrary (for instance, whether you put a comma between the author and date in a citation). If an author wants to do something that is against the house style but isn’t actually going to hurt readability, maybe it’s OK.

Other notes about the conference

  • Kyra Freestar’s conference notes at The Editor’s POV. Includes some follow-up and notes on the keynote speech about the future of publishing and the panel on e-books.