Taxes for Content Creators
When it comes to taxes for content creators, you face several unique challenges not faced by other taxpayers. This article will go through various questions asked by content creators in regards to their Canadian taxes. Answers to these questions are brought to you by a professional accountant.
Income & Filing Questions
Do I have to report income from Onlyfans, YouTube, Twitch, or brand deals on my Canadian tax return?
All income needs to be reported on your Canadian tax return each year, regardless of who it is from or how much you earned. This includes income from brand deals, income from websites such as YouTube, even amounts noted as “donations.” All these items, and many more, are considered income you earned and must be reported on your tax return.
What type of tax return do I file as a content creator in Canada?
As a content creator in Canada, the type of tax return you file depends on whether you are incorporated or not. If you have not incorporated your business, you would be considered self-employed and would file a typical T1 Personal Income Tax and Benefit Return with Canada Revenue Agency (“CRA”).
For content creators who incorporate their business, a separate legal entity has been established, and this new legal entity must file taxes. A corporation files a T2 Corporation income Tax Return with CRA and has different requirements when it comes to when to file and how much tax is paid on your earnings.
Do I need to register a business number with the CRA to start earning as a creator?
Whether you need to register for a business number with the CRA depends on several factors. Typically, self-employed creators would only register for a business number when their Canadian taxable sales exceed $30,000 in four calendar quarters. This is because there is a requirement to collect and remit provincial sales tax, the GST/HST, when revenue exceeds what is known as the small supplier threshold. However, it may be beneficial to register for a business number earlier to get back the tax you paid on your business expenses. This should be discussed with your accountant.
If your business is incorporated, you automatically receive a business number from the CRA after you incorporate. This business number is used for everything from corporate taxes, sales taxes, payroll taxes, and more. Sales taxes, being the GST/HST, are discussed later in this article.
Do I need to report income even if I did not receive a T4A or other tax slip?
All income needs to be reported, even if you do not receive a tax slip for it. Some websites may issue a T4A slip to content creators for their taxes, while others simply provide their own custom report of your earnings for the year. It is important to understand that you have tax obligations, even if you do not receive a tax slip or summary with your earnings.
At what income level do I need to start paying taxes as a self-employed content creator in Canada?
As a content creator in Canada, you start paying income taxes on your earnings once you exceed the basic exemption amount of approximately $15,000. It is important to note that this basic exemption amount applies only on your personal tax return, and may not eliminate any CPP, or EI if you opt-in to paying that, on your self-employment earnings.
Corporations have no basic exemption amount and pay taxes on the first dollar of income that they earn. Therefore, it is important to consider whether you are incorporated or not and how that affects your tax situation.
Business Deductions & Expenses
What business expenses can I claim as a Canadian content creator?
Whether or not you are incorporated, there are certain expenses you can claim as a Canadian content creator. In general, you can claim expenses you incur to earn business income if they are reasonable, not personal in nature, represent something which will be used up in the year, and are supported by documentation.
If you are unsure whether something is a business expense, it is best to reach out to your trusted accountant and get advice from them. The rules surrounding expenses can be quite nuanced when it comes to taxes for content creators and therefore it is not recommended to rely on informal advice on the internet.
Can I deduct my camera, lighting, and editing software costs?
Cameras and lighting equipment may be considered capital in nature. This means that what you purchase will last more than a year and as a result, the deduction will be spread out over several years instead of only a single year. Editing software may also be capital, although it depends if you have a monthly subscription, or purchase a software license and can use it for multiple years.
Can I write off gifts or PR products I receive from brands?
As a content creator, you may at time receive gifts or promotional products from brands that you work with. These products you receive, if you get to keep them and they provide you with a lasting benefit, may result in additional income. Since you are not paying for the product or gift, there is no expense that can be deducted or written off. It is important to structure brand deals carefully so that you do not have unnecessary amounts included in your income.
How do I calculate the portion of my rent, phone, or internet that I can deduct for business use?
Many content creators use a space in their home to create content, whether that is a studio, an office, or another space such as a dedicated gym for filming fitness content. If you are dedicating a portion of your home to content creation, you can deduct a portion of your costs for that business use. You would use the square feet of the dedicated workspace compared to the overall area of your home and use the product of that to claim a portion of your rent and other costs on your taxes each year.
Are travel expenses for content creation or collaborations deductible in Canada?
In Canada, travel expenses can be a genuine business expense depending on their nature. As mentioned previously, you can deduct business expenses if they are not personal in nature. Therefore, if you are traveling to a studio, for example, to collaborate with another creator or produce content, you can deduct the cost of this travel on your tax return, provided all other criteria are met.
It is important to consider that some travel can be a mix of personal and business use, we call this a mixed-use expense. For mixed-use expenses, only the portion relating to the business is deductible. This can be quite complex and requires careful documentation, so it is important to work closely with your accountant to ensure you are maximizing your available expenses.
Recordkeeping & Receipts
Do I need to keep receipts for every business-related purchase?
As a Canadian taxpayer, you need to keep receipts, and other documentation, for every business-related purchase. You can organize your receipts using several different methods, such as by maintaining a folding file folder with tabs for each different months, or by scanning the receipts and saving them digitally on your computer.
How long do I need to keep tax and expense records in Canada?
Tax and expense records need to be kept for a minimum of 6 years from the end of the tax year to which they relate, which is a fancy way of saying at least 7 years. You may need to keep records longer if, for example, they relate to a capital asset purchase which is deducted over several years, or you still own the asset.
What bookkeeping or accounting tools should I use as a Canadian creator?
There are many different bookkeeping and accounting tools out there which can be personalized to your needs as a Canadian content creator. One of the most popular bookkeeping tools is QuickBooks Online which you can use to keep track of your business transactions, record travel milage for your vehicle, and organize your receipts. Several other options exist, such as Xero, Wave, and FreshBooks. I highly recommend using QuickBooks as it is the most common software used by bookkeepers and accountants and will be sufficient for your needs as a content creator.
Do I need to issue invoices or collect any documentation when working with Canadian or international brands?
When working with Canadian and international brands, you must keep proper documentation when it comes to revenue you generate. Proper documentation can include invoices, contracts, emails, and other documents. It is important to keep documents for at least 7 years to support your tax filings, as mentioned earlier.
GST/HST, Quarterly Payments, and Self-Employment Tax
Do I need to charge and collect GST/HST as a content creator?
As a content creator, you may need to charge and collect GST/HST on your revenue. Whether you need to charge and collect depends on what product or service you are providing to your customers and where they are located. For many content creators, the website you host your content on collects and remits GST/HST on your behalf which can complicate your tax filings but relieve some administrative burden from your work. To get specific answers to your tax questions, contact a tax professional who specializes in digital content creators.
When should I register for a GST/HST number in Canada?
Registering for a GST/HST number may be required of you if you have revenue subject to GST/HST exceeding $30,000 in four calendar quarters. However, if a platform collects and remits sales tax on your behalf and you receive revenue from that platform, you may be able to voluntarily register for GST/HST. Voluntary registration can prove valuable for you in certain circumstances as you may be able to recover tax paid on business expenses while not remitting GST/HST to CRA. There are many technical considerations involved when it comes to this, so it is best to consult with a qualified professional who has your best interests in mind.
Do I have to pay income tax in installments (quarterly payments) in Canada?
Depending on your income, and corresponding taxes owing, you may have to pay tax in quarterly instalments in Canada as a content creator. Taxpayers may be required to pay their taxes in quarterly instalments when their tax owing exceeds $3,000. In Canada, these quarterly instalments are typically due on March 15, June 15, September 15, and December 15.
What taxes do I pay as a self-employed content creator (CPP, income tax, etc.)?
As a self-employed content creator, you may have to pay income taxes, make contributions to the Canada Pension Plan (“CPP”), and Employment Insurance (“EI”). Income taxes are paid on your net income as are contributions to the CPP. The payment of EI premiums is optional and may or may not be beneficial depending on your unique circumstances. If you opt-in to paying EI premiums, you must continue to do for as long as you have self-employment income. Therefore, it may not always be wise to make these optional payments.
How do I calculate my net income for tax purposes in Canada?
On your personal tax return, as a self-employed content creator, your net income for tax purposes is calculated according to the Income Tax Act. Simplified, your net income is your gross revenue less allowable expenses.
Gross revenue includes your earnings from all sources and includes subscriptions, donations and tips from followers, brand deals, and sponsored trips and merchandise from businesses, among others. Allowable expenses can include those such as marketing costs, travel expense, professional services such as your lawyer and accounting fees, and home office expenses.
Business Structure & Legal
Should I incorporate my content creation business in Canada?
Incorporation can provide many benefits to a content creator, but you must also consider the cost associated with doing so. Benefits of incorporating include corporations being subject to a lower tax rate than individuals, offering protection from certain liability, and ease of access to capital. The costs associated with incorporating include both the monetary cost of annual compliance such as filing the corporate tax return and annual minutes, the additional complexity of having another entity to manage, and costs associated with opening and closing the corporation.
What are the pros and cons of being a sole proprietor vs. a corporation for content creators in Canada?
Here are three pros and cons of being a sole proprietor, i.e., self-employed, vs. incorporated as a content creator in Canada. As content creator, who is self-employed, your taxes are less complicated than corporate taxes, it is cheaper to file your taxes, and you do not the compliance headaches of maintaining a separate entity. However, you will pay taxes at a higher rate than if you were incorporated, there is no opportunity to defer your taxes to another year, and there’s truly little protection when it comes to personal liability.
If you incorporate your content creation business, you will have the benefit of paying taxes at a lower corporate tax rate, being able to defer income personally until its needed, and liability protection when it comes to your personal assets. However, for a corporation, it will be more expensive to file the corporate tax return, you have additional responsibilities when it comes to maintaining the corporate entity, and your tax situation will be more complicated.
Can I pay my spouse or close friends to help with my content, and is it tax-deductible?
You can pay anyone to help with creating your content, however there is additional scrutiny when paying someone close to you. When paying family members, such as your spouse, CRA would be concerned as to whether work was done to assist in your business and if the amount paid was reasonable based on what was done. This is because there is enhanced scrutiny when it comes to income-splitting opportunities, and the government does not want anyone to achieve an unfair advantage when it comes to their taxes.
What kinds of insurance or legal protections do Canadian creators need?
Canadian content creators are primarily concerned with privacy and finding a trusted advisor, however it is also important to consider insurance and legal protections. While there may be some protections available to you from the platform that you share content on, it does not make you immune to legal issues.
Therefore, it is important to consider whether you should have general liability insurance for your business. As a best practice, it is important to reach out to a trusted insurance advisor or broker to obtain personalized advice for your unique situation. The same can be said with regards to legal protections, it is best to reach out to a lawyer you trust and work with them to determine what you need to protect yourself.
Other Common Questions
Can I get audited as a content creator in Canada?
Every taxpayer in Canada can be audited by CRA, whether self-employed and filing taxes as an individual or incorporated and filing corporation income taxes, among others. The exact audit techniques and procedures that CRA uses to identify taxpayers for an audit are not publicly available, however there is some general information available when it comes to audit risk. If taxes for a content creator aren’t completed accurately, you may be at higher risk for an audit.
What are red flags that might trigger a CRA audit for influencers or online creators?
Online creators or influencers may face a CRA audit for several reasons. Sometimes a tax filing may produce a so-called red flag in CRA’s risk assessment model, such as if your expenses are outside the norm for your industry or if you claim a particularly large expenditure.
CRA also has programs in which they verify specific expenses each year, this can include items such as vehicle expenses, home office expenses, medical expenses, foreign tax paid, and others. Being selected for an audit or review by one of these programs does not necessarily mean something was done incorrectly, but rather that there is something present which CRA wishes to verify.
Finally, you may face a CRA audit as a content creator if you are randomly chosen by CRA. As it’s not entirely known how CRA chooses taxpayers to audit, there is believed to be an element of randomness in their selection process to keep taxpayers honest in our self-assessment tax system.
What happens if I do not report some of my content income to the CRA?
It is important to report all your income from content creation to CRA each year. If, for some reason, you do not report your income to CRA there are ways to correct your tax filing. You may be able to file a request to adjust your tax return to include the income but be sure to include the related expenses as well. Depending on the situation, you may also be able to file what is known as a Voluntary Disclosure under CRA’s Voluntary Disclosure Program (“VDP”). Filing under the VDP requires several conditions to be met and may not be available to everyone.
If you are dealing with a situation where not all your income from content creation was reported to CRA, it is best to reach out to a trusted accountant who can work with you to determine the best path forward. What is best for one taxpayer may not be best for another taxpayer, and an accountant can best advise you when it comes to what action should be taken to correct your tax filings.
Do I need to file a tax return if I only earned a small amount from content creation?
Even with a small amount of earnings from content creation, you may need to file a Canadian tax return. As a self-employed content creator, you must contribute to the Canada Pension Plan even if your income is below taxable levels. Earnings exceeding $3,500 can be subject to CPP contributions while you would not normally be paying personal taxes until you exceed approximately $15,000. Even with a lower amount of earnings from content creation, it may be beneficial to file a return because you can receive certain benefits that you would not receive if you do not file.
Should I hire an accountant or tax professional who specializes in self-employed or digital creators in Canada?
Digital content creators face unique challenges when it comes to their accounting and tax obligations in Canada. Often, traditional accountants may not be up to date with the challenges you face and could end up missing something on your return. That is why it is important to find a tax professional who specializes in digital content creators, as they will have experience with your industry and be aware of the challenges you face. With that unique experience, the specialized tax professional will be better able to provide advice to you when it comes to how to deal with taxes on your earnings from content creation.