The Canadian tax system is a self-assessment system. Individuals are required to determine their own liability for income taxes and file the required returns for any taxation year in which taxes are payable.
A tax return is the form(s) used to report income and file income taxes with the CRA (Canada Revenue Agency). Tax returns allow taxpayers to calculate their tax liability and remit payments or request refunds, as the case may be. Individuals each file their own tax returns; spouses do not file jointly.
The taxation year for an individual is the calendar year. That means the tax year ends on December 31st of each year.
The deadline to file and pay your taxes is April 30th of each year except for individuals reporting self-employment income. If you are self-employed you have until June 15th to file your return, BUT you still have to pay any taxes you owe by April 30 (yes, you can pay the government what you think you owe them and file your actual tax return later).
As an independent artist producer, the CRA views you as a business. If you are not incorporated, you are considered a sole proprietor and any income you have from your producing activities is considered self-employed income. Learn more about the difference between an employee and a contractor here.
It is a good idea to keep track of every dollar you receive, whether it's a $100 gig or $10,000 contract. Get in the habit of properly invoicing for your services. This will help you immensely when you are filing your return. If you are having an accountant or tax expert file it for you, they will be very happy that your records are kept so clearly (and their fee for services will be significantly less!).
Check out this list of 10 invoice templates for freelancers and find the one that works best for you (we recommend #1, #2 or #7), or download our basic invoice template by right-clicking this link, and opening in a new tab.
Also keep in mind that grants you receive are considered income. Don't forget about these at tax time.
When you provide your services to a company or organization, but you are not in an employee-employer relationship with them, they may still file a T4A Statement of Other Income reporting the value of income you earned from them. The deadline for this statement to be delivered to you is February 28 of each year. When they send you your T4A slip, they are required to send an identical one to the CRA, so it is a good idea to cross reference the amounts on these slips with your records, and use them for filing your taxes.
If your self-employment income exceeds $30,000 in a year, the CRA requires you to obtain an HST number and start charging HST for your services. Read more about GST/HST.
Freelancers are often responsible for saving our own taxes. When you are an employee, your employer remits your basic deductions from your paycheque for you and pays it to the CRA. But being self-employed means you have to do this for yourself. Make sure you are setting aside money from each paycheque you receive to go towards Income Tax + CPP (Canada Pension Plan). Your CPP contribution changes most years; in 2020 it was 10.5% for self-employed workers (when you are employed, your employer pays half of this). Head to the CRA website to find out what the CPP contribution rate is for any given tax year.
The percent of money you should set aside for your income tax is dependent on your marginal tax rate (or your "tax bracket"). Rags to Reasonable breaks down marginal tax rates really clearly in this blog post, and also varies from province to province. Rags to Reasonable has put together a very comprehensive article on How Much Tax You Should Save. The gist of it is:
- Use last year as a guide
- Harness the power of your fear to over-save for your taxes
- Think through your upcoming year and play around with a tax calculator (try this great Tax Calculator by SimpleTax)
- Set Milestones and times of year to check in
Deductions are purchases that we make that we are allowed to deduct off our final taxable income. That makes your taxable income a smaller number and you pay less tax. Any cost that you have because of your business could be a deduction, including, but not limited to:
- Training costs: Lessons, coachings, classes
- Studio and Instrument costs
- Travel Costs
- Business meals (which you deduct at 50%)
- Advertising costs
- Accounting fees
- Rent (If you have a home office, or studio in your home, you can write off a portion of the rent)
- Telephone (a percentage can be written off, how much you use it for a business line)
- Internet (same deal as phone)
- Union dues
- Agent Commissions
- Supplies and equipment
This is just a starter list. Every artistic practice is a little different, which means the things that you can deduct are just as personalized. To get a more complete list that applies to your situation, we recommend talking to an accountant who is well-versed in artist taxes (like Artbooks), and reference this flowchart for assessing what is "deductible" by money-expert Rags to Reasonable:
Filing your taxes after receiving a grant can be complicated. Download our white paper on Government Grants and Their Tax Treatments to help you (and your accountant) navigate accounting for your grants.
View it as a PDF or Download Government Grants and Their Tax Treatments: A Guide to Preparing Your Taxes After Receiving a Grant
You may have a job or contract where you are an employee. Your basic deductions are already made for you and remitted to the CRA. You will receive a T4 Statement around tax time each year that states your total income for the year from that employer, and what was deducted from that and paid to CRA. The balance amount is what you should have received in payment from your employer. Use your T4 slips to file your income tax.
You may be in the situation where you are an employee in conjunction with your self-employment activities. You will need to combine all of your T4, T4a, and other invoice records at tax time to determine your total combined income and taxes owing.
Download our basic invoice template by clicking here.* (preview below)
*If the automatic download does not work, try right-clicking the link and opening it in a new tab.
- The Super Basic Story of Canadian Income Tax from Rags to Reasonable is a really user-friendly introduction of Canada's taxation system, created specifically for artists, breaking down tax brackets (or marginal tax rates), reporting, deductions, and tax credits.
- Get Control of Your Taxes from Rags to Reasonable has advice on what you can do in the next 5 minutes, 24 hours, week and month to get started on your taxes.
- Still have questions? Check out The Balance Small Business list of FAQ's and Answers for Canadian Small Businesses and Canadian Freelancers.