Income Tax for Freelance Artists: Q&A with Jeannie French of KPMG

Tax season is here yet again. And whether you’re a spreadsheet wizard who has been carefully preparing throughout the year, or quite the opposite, the next offering in our Business Workshops for Artists series is here to help.

On Wednesday, March 8, join us for one of our most popular offerings as KPMG’s Jeannie French (Senior Manager of Enterprise Tax) shares income tax tips and tools you need to know as a freelance artist (click here to register).

As a professional artist, you likely have things to consider when filing your taxes that others do not (like income from commissions, grants, pandemic-related relief programs, etc.). This workshop aims to shine a light on those considerations, and ultimately, help participants calculate income and file their own taxes.

We conducted a Q&A with Jeannie (along with Lexton Lee, then a Senior Manager with KPMG) in 2021 ahead of a previous income tax workshop they facilitated for us. We’re sharing that Q&A with you here again in the hopes that it might provide some food for thought as you begin filing your taxes this year (please keep in mind, this interview was conducted in 2021 and some parts of the answers pertain to the corresponding tax year).

Business & Arts NL: If you work in the arts, filing your taxes might not be quite as straightforward as it is for others. And this year, the pandemic, and the resulting support programs, has added another layer of complexity. Can you give a bit of an idea of what special considerations people may need to take into account this year?

Lexton Lee: For many individuals, one of the biggest items to keep in mind is that most individual benefits received are fully taxable as income. Though the new Canada Recovery Benefits (of which there are a few categories) had some taxes withheld by the government when paid, the original Canada Emergency Response Benefit (or CERB) payments were sent with no taxes withheld. All of these benefits must be included on your 2020 tax return as income, and will be subject to tax. One thing to keep in mind though, is that individuals that made less than $75,000 in the year and received one of the CRA’s five pandemic relief benefits will have until April 30, 2022 to pay this amount without being subject to interest or clawbacks on other benefits (Canada Child Benefit, for example).

Business & Arts NL: More people than ever have been working from home this past year. What is and isn’t reasonable in terms of what one can claim as a home office expense?

Jeannie French

Jeannie French: It’s entirely dependent on your situation. Most individuals who have worked from home in the past will have the same deductions available to them as they did in prior years, and these can vary based on whether you are self-employed or an employee, and if an employee whether or not you earn commission income. For individuals that worked from home in prior years, there should be no change to the deduction for home office expenses you claimed in prior years.

For salaried individuals that suddenly found themselves working from home and are completely unfamiliar, you have a couple of options. First, you can claim a flat rate deduction of $2/day for up to 200 days in 2020 with no documentation from your employer required. Second, you can claim a percentage of your home costs (electricity, heat, water, etc.) based on the size of your home office compared to the overall size of your home for the period of time it was used as an office. This second option will require a form (T2200 or T2200S) signed by your employer indicating that you were required to maintain a home office. The CRA provides a great breakdown of how to calculate home office expenses, and what items can be claimed based on your situation, here.

One additional item of note is that employer reimbursements for home office equipment of up to $500 total due to the pandemic should not result in a taxable benefit to an employee.

Business & Arts NL: From your experience, what do you see as being one of the major issues that artists, or people in general, come up against when filing their own taxes, and how can they overcome this?

LL: From my own personal experience, the biggest issue is often record keeping. The beauty of being self-employed is that you have the freedom to make your own rules and set your own schedule. But that can come with a cost. Artists and self-employed individuals often find themselves with a giant stack of receipts from the prior year that they haven’t organized or tracked, and decide to start sifting through them during the Easter holidays (which can fall very close to the personal tax deadline depending on the year). My recommendation would be to set out a day every month (or every week if your business requires it) and organize your documents, track your income and expenses, and scan in copies of those receipts into a digital format for backup. This front loading of work saves both you and your accountant/bookkeeper (if you have one) from a great deal of headache at year end.

Business & Arts NL: What recommendations or tips can you offer to artists to help make filing their own taxes a bit of a smoother process?

JF: For individuals filing their own taxes, the best recommendation I can give is to start early. You should have most of your documents (other than a couple of notable exceptions) by the end of February. Unless you’ve made RRSP contributions in early 2021, have income being reported on a T3 (trust income) or have income reported on a T5013 (partnership income), start organizing your info in early March and start preparing your return by mid-March. Most people find one or two things they have completely missed and can’t substantiate (a missing donation receipt, a missing business expense they can claim, etc.) on their first run through. If you give yourself enough lead-time, you can often re-request a copy of these documents. This becomes very difficult to do if you start three days prior to the deadline, and will cause you (and everyone you contact) unnecessary stress.

Please attend our presentation where we will have more time to go into depth on some of the items discussed above!

Workshop: Income Tax for Freelance Artists

Date/Time: Wednesday, March 8 from 1-2:30pm

Location: Online via Zoom

Price: Free

Registration:Click here

Check out our next workshop, "Build a Better Board: Tools and Templates” with Donna Ball, coming up on March 21 (click here to learn more). Stay tuned to our website and social media for more exciting workshop announcements to come!