Theatre For Thought, March 2, 2013

THE ART OF FILING YOUR TAXES
joel fishbane
@joelfishbane

In case you missed it, Wiarton Willie, Canada’s resident weather-hog, did not see his shadow on February 2. Spring is coming early and with it that annual rite of passage that so many artists have perfected: the art of avoiding their taxes. In addition to my journalistic and creative efforts, I’ve been helping folks cope with this burden for years and it's become all too common to come across an artist clutching some dreaded letter from the CRA (or its sister, Revenue Quebec). The artists invariably look terrified and no wonder; those registered letters always come complete with heavy handed words like “penalties”, “interest” and “fines of up to $100 a day.” 

As contractual employees, artists are often paid in lump sums and must pay their income tax and pension plan contributions at the end of the year. This includes all income derived from grants. And if an artist has produced a show and their production company is not a separate entity, then they must claim the company’s revenue, including box office. Because of this, many artists end up owing money and for this reason they fear their tax return; their tax burden can often seem like something akin to a hefty fine.

Tax laws will always be controversial and they aren’t exactly designed with artists in mind.

There’s not many ways one can argue this point. Tax laws will always be controversial and they aren’t exactly designed with artists in mind. To be fair, both the CRA and Revenue Quebec offer a few artist-friendly rules but for the most part artists are generally working within a non-artistic system. But for now the tax laws are what they are and while there are some working to change the system, for now we all have no choice but to work within it.

This is why it’s essential that artists become familiar with all the expenses they are allowed to claim, such as those related to advertising, supplies or acting classes. These expenses always reduce the tax burden and often reduce a person’s taxable income to a negligible amount. I encourage all artists to keep track of their expenses, including their costs of living. It’s also important to remember that those who don’t file their taxes become ineligible for GST refunds, welfare and child-care benefits. 

Another issue I’m often confronted with is that question which seems to plague all artists: should I file for a GST number? If you make more then $30,000 a year, then you are legally required to collect GST (and corresponding provincial sales) and remit it to the government. If you make less, then the choice is yours. However, once you have a GST number, you are obligated to collect taxes whether you make $30,000 that year or not. 

You are also able to deduct all the sales tax you paid on business expenses from the amount of tax you owe the government. Suppose you collected $2000 in taxes, but paid $2500 in taxes of eligible expenses. You are now entitled to a refund of the difference. 

So in answer to the eternal GST question, I can only respond with another question: 1) How optimistic are you about your career? and 2) How much do you enjoy filling out paperwork?

Finding an artist-friendly accountant isn’t always the easiest of tasks which is why it’s essential for artists to be as familiar as possible with the laws. Using the various softwares that are out there are equally risky, since most softwares are designed for tax-payers who need a “simple” return (ie. they have only one T4 slip and a few other deductions). Most artists have much more complicated returns and to use the software, they must have some sort of understanding of tax law. 

In the end, mind-numbing as it can be, no artist can afford to not have some rudimentary understanding of their place in the great web of taxation. Follow this link, exclusive to readers of The Charlebois Post, and you can read my handy tips for the desperate taxpayer. And remember - if all your income for 2012 comes from being self-employed, you don’t have to file until June 15.

Readers in Toronto or the surrounding area might want to investigate Artbooks, an organization devoted exclusively to financial management in the arts. Know of any other artist-friendly accountants or organizations? Post them below!