Category Archives for "Freelancing"

What is the Gig Economy?

By Randall Orser | Freelancing

The gig economy has been defined as “A way of working that is based on people having temporary jobs or doing separate pieces of work, each paid separately.” 

Essentially the gig economy involves working in a free market system as a freelancer, temporary contractor or doing standalone one-off jobs (or gigs) as opposed to having traditional full-time employment. It can also be a way for anyone to make extra cash in addition to their regular job.  In 2018 the Bureau of Labor Statistics in the U.S. reported that 55 million people were gig workers more than 35% of the U.S. workforce and this number is expected to rise to 43% by 2020.  According to Statistics Canada 2.18 million people were temporary workers in September 2017, including freelancers and contract workers.  One of Canada’s biggest temp agencies reported that 20-30% of their workforce were temporary workers and 1 in 4 were freelancers.

Who Works in the Gig Economy?

Millennials like to work in the gig economy because it promises a greater work-life balance.  For boomers and retirees are it brings in extra income without a major time commitment.  Freelancers are often connected to work by websites and apps such as Handy, Linkedin and Task Rabbit.  

The gig workforce includes highly skilled specialists and consultants from every industry but there are other jobs that will enable workers to make money fast without having specific skills.  These include tutoring and teaching, ridesharing (Uber), delivery (Skip the Dishes) and renting out assets that you own (Airbnb).

Benefits of the Gig Economy

  • Employers benefit from the gig economy by cost savings.  They can access a rich pool of talent and only have to hire people to do one specific task or when they are needed, instead of hiring full time employees that they have to train and provide with benefits.  
  • Workers can choose their own hours and projects and can earn income from multiple sources.  In a BMO survey 60% said that they voluntarily became self-employed, 49% said that they wanted a new challenge or change, 31% said that they wanted a way to supplement their regular income, and 13% said that they had been downsized by their employer.   

Challenges of the Gig Economy

  • The financial downside is the biggest challenge as workers have no benefits and don't get paid when they are sick.  Many in the BMO survey reported that they did not earn enough.  Boomers were more concerned about not having benefits while millennials were concerned about accumulating debt.
  • Canadian Employment Law has not caught up to this new way of working so gig workers have a precarious status and are generally excluded from the protections and benefits that come with traditional work such as CPP and EI.  Workers can enrol in these programs but they have to pay both the employer and employee portions.  As they do not have a traditional paycheck their CPP is calculated when they file their income tax which can mean a hefty bill.

Criticisms of the Gig Economy

  • It can make it harder for workers to find full-time employment and develop their careers.
  • For some the flexibility of work can be detrimental to their work-life balance, sleep patterns and daily activities as they always have to be ready to work when gigs arise.
  • As the security of a full-time lifelong job becomes a thing of the past workers rather than employers are taking on the risks of market ups and downs and changing trends.
  • Traditional business relationships between employer-employee, vendors and clients are eroded along with the benefits of trust and familiarity.  There is no investment in a relationship which will only last the life of a gig.

The Top Mistakes New Freelancers Make

By Randall Orser | Consulting , Freelancing , Home Based Business , Small Business

Once you have made the decision to leave the rat race and set yourself up as a freelancer, there are some things that you must consider before you begin, if you want to be successful. Although there is nothing wrong with giving it up and going back to your office cubicle and 9-5 routine, if you make these mistakes then you might be going back sooner than you think.

  1. Not Having Enough in Your Savings Account  - Experts say that you should have between three and six months of expenses saved as well as your start-up costs.  This can seem like a lot of money.  There are ways that you can raise money, but two things you should not do is withdraw from your RRSP or put everything on your credit card.  If money is tight you should start freelancing while keeping your full-time job.
  2. Not Defining your Goals – Once you decide to go out on your own you need to set your goals.  The first one is to decide what you want to get out of going freelance.  Is it about having a flexible schedule, and the ability to decide on the clients that you want to work with?  Is it about just making enough money to pay your bills or do you want to make more than you did as an employee? Once you set your goals you need to check them at regular intervals to make sure you are achieving them or to revise them.  
  3. Not Having a Business Plan- You need a business plan to use as a guideline for your future.  Your plan needs to include basic information about your business such as the contact information, what you do and what you are hoping to achieve. In the future. You need to describe the products or services you are offering including pricing. Information as how you will market your business is important as is an estimate of your operating expenses and what you will need for future growth.
  4. Jumping in too Soon – It is a good idea to start your freelancing career while still working full time.  You will be able to try out a different jobs and clients and see who you are happiest working with.  It enables you to make mistakes and still have an income and also to build your savings so that you are ready when the time comes to jump.  It also allows you the time to set up your office to suit yourself and have the equipment that you will need to do the work.
  5. Not Having a Contract – Having a verbal contract can be enough but a written one is usually better.  A contract will not always help you to get paid, but it will define expectations on both sides and make sure that there are no surprises when the job is finished.
  6. Not Having a System to Organize your Paperwork and Money– You don’t always need to hire a bookkeeper or accountant, but as your business grows this might be a good idea.  You can use an app such as Quickbooks to make tracking your income, expenses and taxes much easier.
  7. Taking on the Wrong Clients – Good clients are those who give you regular jobs that you can and want to do, and work with you to get the best results.  They are also easy to communicate with and pay your invoices on time. Inevitably you will end up with a client who does not meet those criteria and you spend more time than you should on them for less money.  You need to be able to decide when you have had enough and that they are no longer worth it, as well as how to recognize the signs to avoid this type of client in the future.
  8. Not Setting Realistic Rates for your Work  – There is no fixed formula for setting rates for your freelancing work.  Prices depend on the industry, geographic area, your skillset and expertise and the work you are doing.  You need to decide if you are going to bill hourly or by the project, which can change with each job.  You also need to decide what is your rock bottom dollar amount and keep this in mind when charging clients.  You may start out at a lower price as you are building your clientele and experience, but you must know how low is too low so that you don’t take jobs that don’t pay enough leaving you financially overextended and stressed.  As you gain more experience you should look at your rates and revise them if necessary. 
  9. Not Having the Required Self Discipline– You might start freelancing assuming that the best thing about it will be the flexibility of your work hours.  In reality, you will need to available for your clients during regular office hours which can be difficult if you prefer to sleep late.  Even though clients cannot demand that you are available specific hours they still need you to be available to answer their questions or they will move on to someone more accommodating.  On the other hand, you need to establish what hours you will be available to your clients, such as 8am to 6pm.  Make it clear that unless you say so, calls from them at 10pm or on weekends and holidays will not be welcome. 

Starting out as a freelancer can be difficult but you should not get discouraged if you make a mistake.  You will soon discover whether working freelance is a fit for you. 

Five Ways That you can Work from Home

By Randall Orser | Consulting , Freelancing , Home Based Business

A survey by Benefits Canada concluded that in 2017 47% of Canadians worked remotely or at home for at least part of the work week.  39% of these surveyed said that they mostly worked from home and 11% said they worked exclusively from home.  These numbers are bound to rise as more and more people want to avoid the daily commute and find ways to work at home.

There are many ways that you can work either fully or partly from home – here are five examples that offer the chance to avoid the commute, but they all have some pros and cons.

Telecommuting 

This is a home-based job where you work for an employer rather than in your own business. The advantages include receiving employee benefits and not having to worry about irregular income and little to no start-up costs.  The disadvantages can include lack of flexibility in hours of work, possible lower pay compared to on-site jobs. 

To get a work-at-home job you still have to demonstrate in your resume that you have the necessary skills and experience to do the job.  Your present employer may be open to telecommuting if you give them a good work-at-home proposal otherwise look for companies who are hiring work-from-home workers.  Jobs suitable for telecommuting include bookkeeping, writing and virtual office support.

Contract Work

Contract and freelance work are pretty much the same thing with only a few slight differences. Many of the jobs you see advertised hire workers as contractors instead of employees.  Contract jobs can be full or part-time, with regular hours and a steady income the same as a regular job.  However, contractors are considered to be independent from the company and are responsible for paying their own taxes.   

Pros of contract work include being able to negotiate fees, greater flexibility in hours and location of work.  The cons include the hours of work may be less than you would like, companies can easily let you go, you have to pay your own taxes, you rarely get benefits.

Freelancing

Freelancing is similar to contact work in that you are hired by a company to provide a service.  However, when you work freelance you normally have more control of the work that you take, how you do it, and how much you are paid.  Freelances often work under their own company name as a sole proprietor but they can become a limited liability company if they wish to. Freelancers market their services on social media, by networking, or on job sites.  Common freelance jobs include writing, marketing, accounting, web design and graphic design.  

Pros of freelancing include greater flexibility in your schedule, greater control over the work that you do, and the ability to set your own fees and rates.  The cons are the irregularity of work and the difficulties of finding clients, paying your own taxes and no employee benefits.

Starting your own Business

Many people are scared off of starting their own business believing it to be difficult and complicated, but with the right help and advice, it can be easier than you think.  Businesses are usually product based where you sell a tangible product, or service based such as home cleaning or graphic design.   

The pros of starting your own business include the flexibility in your working hours and pricing, the ability to turn something that you love into a business, and for service-based businesses easy and affordable to start.  The cons may be that your income is irregular as it takes time to get started, you may have start-up costs, you may have to work longer hours during your start-up, and you will have to pay for your own benefits.

Buying a Home Business

You can buy an existing business from an owner, buy a franchise, or buy a direct sales business.  The pros of buying an existing business or a franchise are that you are not starting from scratch, the business already has clients or people are familiar with the franchise, so it is easier to get customers.  For direct sales you need to pick a product that you believe in so that prospective customers are influenced by your enthusiasm.  In all cases marketing plans and materials are usually provided for you. 

The cons of buying a home based business are that it can be expensive to start out, there might be limitations on how and where you can market to build your business and it can be difficult to build a successful reputation when competing against competition in the same industry.

Tried and True Ways to get your Small Business Organized

By Randall Orser | Freelancing , Home Based Business

Summer vacation is over, kids are back at school, isn’t this a good time to reorganize your office?  Reorganizing your office doesn’t just mean tidying up your clutter and dusting your filing cabinets, it involves creating new systems and procedures for your small business which can make you more productive and profitable.

Taking Control of Papers and Documents

Is that pile of paperwork getting out of hand? Then it is time to set up a filing system and/or a digital archiving system. Start by going through the papers that you have laying around.  Make a keep pile and a discard pile.  Shred or recycle all the items in the discard pile.  Here is a guide from Susan Ward to help you create and organize your paperwork process.                https://www.thebalancesmb.com/creating-a-document-management-system-2948084

Thinking about going paperless? Here are some of the pros and cons. https://www.thebalancesmb.com/should-your-small-business-go-paperless-2951764 

You can scan all your receipts and documents into your computer, use on-line invoicing and payment services and use the cloud for data backup and archiving.  

Using the Right Productivity Tools

We all use apps and tools, but some are more useful than others.  It’s a good idea to at least once a year decide if these apps and tools are still meeting your needs.  Productivity tools can be useful to your small business.  Productivity is a personal process so you should take time to decide what your needs actually are before incorporating a new tool into your process.   Here are the main areas where you might consider using productivity tools.   

  • Contact Management – keeping track of customers and remembering useful contacts is crucial to your business.  There are various customer relationship management (CRM) systems available, or just make sure your existing Contacts list is up to date.
  • Accounting and Bookkeeping - Organize and streamline the way you invoice, take payments and manage your cash flow with tools like Quickbooks Online.
  • Travel and expense tracking – use apps like Expedia and TripAdvisor to make your travel plans easier and while travelling an app like Expensify to track your expenses and do reporting when you return.
  • Email management – if you use Gmail or Outlook you have access to a number of extensions to organize your inbox.
  • Project Management – A good project management app will help you track tasks, share files and collaborate with your team all in one place and can be one of the best tools that you can have to organize your work.

Getting Your Computer Organized

If you do the bulk of your work on your computer you will know that it does not take long for your desktop to become cluttered with icons, your downloads folder to be full of files that you do not recognize and you have a hard time finding anything.  This is both bad for your productivity but also will slow down the performance of your computer.  So, what can you do to clean things up?

  • Clean up your desktop, get rid of the icons that you no longer use.
  • Set up a digital filing system – create a system that makes sense to you and where you can find your documents when you need them.
  • Makes sure your computer is set up to automatically install updates, or if you have to do it manually make sure do it at least twice a month, as updates can include security patches.
  • Review your current versions of the software that you are using to see if you need to update.
  • Scan your computer for viruses and performance issues to keep it running smoothly.
  • Verify the integrity of your data back-up, if you are not backing up you should be.  You can use a cloud-based back up service or use an external hard drive but either way you should set it to conduct continuous automatic backups so that you don’t have to worry about doing anything manually.
  • Getting on top of your email – although it is an efficient communication tool, your inbox can quickly get out of control causing you stress if you don’t take steps to streamline it.   Here is an article that will help you to do that.                                          https://www.thebalancesmb.com/email-management-tips-2951532.   
  •  From an article by Alyssa Gregory  

Summers Coming! Self-employment Ideas you can do in the Sun

By Randall Orser | Consulting , Freelancing , Home Based Business , Small Business

The warm weather is almost here and maybe you are considering earning some extra cash over the summer.  If you are looking for a small business idea that does not require a year-round commitment here are some ideas:

Food Truck:  Once you have acquired a vehicle and got all your permits you can work whenever you want to.  Summer presents the greatest opportunities to provide tasty meals and snacks to people in various public venues such as concerts and shows, outdoor markets, sports events and college campuses.

Outdoor Adventures:  If you are an outdoor enthusiast, you can offer guided hikes and arrange white water rafting and other water excursions for your clients.

Personal Training:  Offer your services as a weight-loss or fitness personal trainer to motivate people into a healthier lifestyle.  Teach outdoor yoga or tai chi classes, and when the weather gets colder you can take your business indoors.

Gardening and Lawn Care:  If you are a gardening enthusiast direct your talents into a business offering mowing, weeding, mulching and raking. You could switch into snow removal in the winter.

Tour Guide:  Take people on guided tours of places of interest or historical significance in your area.  People particularly love “haunted” locations!

Pet Sitter/Dog Walker:  This can be a year-round business as people are often looking for someone to be a sitter for their pets while they are on vacation or out of town.  Dog walkers are needed all year round.  This business idea has little or no start-up costs but clients who don’t know you may need references or a background check before you go into their home.

Pool Maintenance:  If you know about pool chemistry and don’t mind hard work, then a pool maintenance business for the summer months could be ideal for you.

Growing and Selling Fruit, Flowers, Plants or Vegetables:   Advertise on the roadside and sell out of your home or set up a roadside stand to offer your home grown produce. Alternatively, you can take a stall at one or more Farmer’s Markets in your area.

Garbage and Re-cycling Collection Service:   For a fee, pick up unwanted household items such as furniture and appliances, and either donate, sell or recycle them.  Many people would rather pay you to take their junk than have to dispose of it themselves.  As well as earning money you are doing your bit for the environment.

Short-term Retail:  Take a short-term lease on a small retail space and create a pop-up store renting or selling summer items such as bicycles.  Later in the year you could sell or rent Halloween costumes, and selling Christmas gift items and treats could be a big seasonal money-maker.

These ideas give you the opportunity to run a profitable business during peak seasons and to work as little or as often as you like.

 

Home-based Business? How to Make Your Home Client Friendly

By Randall Orser | Consulting , Freelancing , Home Based Business , Small Business

Many people are embracing the “working from home” option.  There are over 38 million home businesses in the US alone meaning that 50% of all small businesses are being run from the owner’s residence.  If your home business includes meeting with clients however, it is important that your home has a client friendly and professional environment.  Here are some tips on how to have successful meetings with clients in your home.

1.  Parking   

Make sure that there is parking easily available for your client.  Give them instructions on where to park.  If you have a driveway in front of your property, make sure that you move your own car to create a client parking space.  If you live in an apartment try to secure an additional parking space for your visitors.  If your clients continually use the visitor parking space it can cause problems with the other building occupants and management.

2.  Street appeal

Make sure that your home appears well maintained.  This includes regularly mowing the lawn as well as weeding and pruning. Make sure the exterior of your home is in good condition and not requiring cleaning or a coat of paint.

3.  Dedicate a space in your home for your office

Your home office should be a separate space in your home, not the kitchen counter.  Your office should be appropriately decorated and include comfy seating and all the technology that you need to do your job. 

4.  Make the way to your office easy to navigate

If your home office has its own outside entrance, make sure that there is signage explaining where it is.  Signs should be discreet and not visible enough to annoy your neighbours.  The path to your office should be unobstructed and safe.  You need to move any obstructions, prune shrubbery as well as ice and snow. Outside steps should be kept clean and have a railing.   You should also carry adequate business insurance to cover any accidents in your home. 

5.  Make sure that your home office décor is suitable for a business 

You need to make sure that your office décor projects your business image. It should be tasteful, inoffensive and not distracting.  The furniture should be in good condition and should give an impression that you are successful in your business.

6.  Your office should always be clean and uncluttered

This goes without saying, but make sure that you get rid of all those dirty coffee cups and dust bunnies.

7.  Try to make your office as quietest as possible 

If you have small children try to schedule meeting during their nap time or hire a babysitter to take care of them while you are working so that they do not interrupt you.  A “Do Not Disturb” sign on the door will let family members know that you are busy with a client.  If children have access to your business phone, make sure that they know how to answer it correctly.  

If you have pets keep them out of the way so that they do make a noise when someone comes to the door.  Make sure that you regularly vacuum and clean the spaces where your clients will be walking and sitting to eliminate the risk of allergies to pet hair.

It is important to create a good impression with clients so that they remember the business that you discussed rather than that your house was cluttered and that your children or pets were running around.

 From an article by Susan Ward

Home-based Business? Some Ideas for Places to Meet Clients Outside Your Home

By Randall Orser | Freelancing , Home Based Business , Small Business

Using your home as a base for your small business may work great for you, but what happens when you want to meet clients. For a variety of reasons, you may not want to bring them into your living space, so here are some ideas for alternative places to meet.

1.  Coffee ShopThis is always a popular choice all you need to do is buy a beverage for your client and use the space to get your business done.  It’s a good idea to find somewhere different to a big chain coffee shop as they can be noisy and busy.  Pick somewhere that is charming and interesting and usually much quieter.

2.  RestaurantIt’s always a great idea to offer to meet your client for a business breakfast or lunch. It will usually lighten up the conversation and may persuade your client to agree to terms or buy products from you. To make the meeting more friendly offer to let your client choose the location (within limits).  It is a good idea to give them three restaurant ideas to choose from.  Keep in mind that formal restaurants can be uncomfortable not to mention damaging to your budget and may not provide the best atmosphere for a successful business meeting.

3.  Business Centre This is a rapidly growing trend where a small office space with a desk and chairs can be rented out inexpensively by the hour, day or for a longer time.  This provides you with an office atmosphere to meet your clients from time to time without having the expenditure of renting an office full-time.

4.  Hotel Conference Rooms Meeting in a hotel room can be a safety issue, and meeting in a hotel lobby can be too busy and noisy.  A better choice can be renting a hotel meeting or conference room.  Hotels usually have a few different size rooms to rent which include Wi-Fi connections, audio visual equipment, office supplies and can include catered refreshments.  This is a good choice if you are planning a presentation to a number of potential new clients.

5.  City Hall - Some city halls have conference rooms that are open to the public for events and your local Chamber of Commerce may also be able to rent out space to you.

6.  Your BankSome banks have a community meeting room that you can use sometimes for free.  It is a good idea to reserve it well in advance. 

7.  Public LibraryNot always a good idea as you have to keep your voice low which can be difficult. However, some libraries do have a meeting space that they will let you use if booked ahead.

8.  Club House Some home owner associations and apartments have a clubhouse that can be reserved for a small fee.  A great place to hold a business meeting especially if there is no charge to use the space.

9.  Video-conferencing in Your HomeIf you decide to hold a video-conferencing meeting you can do it in your home.  You should choose a room with the best lighting and that looks the most presentable.  Be prepared for dropped calls and have a back-up plan such as back to the coffee shop.

These are some great ideas for places to meet your clients and potential clients until you are more established and have your own office.  Don’t forget to save your receipts for these meetings as they are tax deductible.

From an article by Lauren Bailey – Work at Home Woman

 

 

Self Employed? Do You Know What Your Tax Obligations Are?

By Randall Orser | Business Income Taxes , Freelancing , Home Based Business , Sales Taxes , Small Business

While self-employment comes with some great benefits, such as a flexible work schedule and freedom to select your work projects, you also have big responsibilities, when it comes to tax time. You are totally responsible for reporting your income and filing and paying your taxes.

It’s a good idea to get familiar with the CRA required self-employment tax forms. When you understand what you have to do, you can organize your finances, keep great records, and make tax filing much easier.

Do you need to file self-employment taxes? You are considered by the CRA to be self-employed if your business is one of the following: 

  • A sole proprietorship
  • An unincorporated partnership
  • An unincorporated limited liability partnership
  • An unincorporated general partnership

Your business income is then part of your personal tax return which means that you will pay the personal income tax rate rather than the corporate rate if your business was incorporated.  

Do you need a T4A?  Unlike when you are employed and receive a T4 from your employer, if you are self-employed as an independent contractor then your clients should send you a T4A slip which will include the dollar amount for each job you do for them.  To figure out your income you need to add the amounts from each slip.

However, you will not always get a T4A especially if you are selling goods direct to customers, they will not give you one. You will then be responsible for keeping accurate records of all of your income from receipts, invoices and any other proof of income.  It is a good idea to use a program such as Quickbooks to keep track and you can run a report to find out your total income for the year.

What is a form T2125 for?  This a Statement of Business or Professional activities which helps you to calculate your gross income as well as your business expenses which you deduct from your income to lower your taxable income.  On the T2125 you will have to provide the following information:

  • Information about your business including a description of your products and services.
  • Income from internet activities such as affiliate sales or ad traffic revenue.
  • Business or professional income.
  • The amount of GST you paid 
  • Costs incurred while making and selling your goods
  • Business expenses
  • Expenses paid for while running your business from home
  • Information about your business partners if you are in a partnership

Once you have completed form T2125 you will know your gross and net income for the year which you will enter on your T1 form. If you run a few businesses, then you will need to fill out a T2125 for each of them.

When Do You Need to Pay GST?  If your business makes more than $30,000 per year then you are required to register for a GST number and collect GST from your customers.  You will submit a GST return either monthly, quarterly, or annually.  

Tax Deadlines  If you are self-employed you will have until June 15th to file your tax return instead of the April 30th deadline.  However, you should still pay any taxes you owe by April 30th.  If you are employed in addition to running your own business, then you will have to file your T1 return by April 30th. Your clients have until the last day of February to send you any T4A slips.

 

Best Business Opportunities for Retirees

By Randall Orser | Freelancing , Home Based Business , Personal Finances , Retirement , Small Business

Are you getting ready to retire but don’t see yourself filling your days with tv reruns, golf or playing cards?  Already retired but you could use some extra income? These are good reasons to start your own business when you retire.  Here some businesses to consider that can offer you part-time work and can be operated from home.

  1.  Chauffeur – If you are still fit and have an outgoing personality then working as a chauffeur helping other seniors with transportation to medical appointments, shopping and more can be a good option.  You will need to check Provincial licensing requirements, upgrade your driver’s license and maybe do CPR training and have a criminal record check done.
  2. Travel Tour Guide – If you love to travel, being a tour guide and getting paid to travel can be a dream job for you.  All your travel expenses will be paid for and in addition to wages you will also get tips. Contact the International Tour Management Institute for more information.
  3. Hauling – If you have a truck or a van hauling can be a good business for you.  There is always a demand for people to take away garden waste, trash and discarded household items.
  4. Painting and Interior Decorating – If you have a good eye for colour and are creative, why not share your skills?
  5. Translation Services – Good at languages? then being a translator could be ideal for you. You will need excellent writing skills, and knowledge of a particular industry can allow you to specialize.
  6. Arts and Crafts – If you are skilled at making pots, painting or creating wooden items you can sell your creations at local craft fairs or create an on-line store to sell your products.
  7. Tutoring – If you have teaching skills then becoming a tutor could be ideal for you. In addition to in-home tutoring, on-line tutoring is now becoming very popular.  One area particularly in demand is teaching second languages, or teaching English as a second language at home or even as a teacher in another country.
  8. Pet Services – There is always a demand for reliable people for dog walking and pet sitting.  Many people prefer to keep their pets at home rather than put them in a kennel and are willing to pay for a pet sitter who will also keep an eye on their home while they are away.
  9. Security services – Trained security personnel are always in high demand especially those who are retired police officers or members of the armed forces. 

These ideas are not likely to make you lots of money but they are inexpensive to start and will keep you active and give you purpose in your retirement.

From an article by Susan Ward

Do you Have to Declare Hobby Income?

By Randall Orser | Consulting , Freelancing , Home Based Business , Personal Income Tax , Small Business

Did you know that what you think is a hobby the CRA may see as a business?  If you are making a profit from your hobby, then it is a defined as a business by Canada Revenue.  It does not matter if your hobby is small, you still have to declare any income from it on your tax return.

However, it may not always obvious to you whether your hobby is taxable or not.  For example:  

  • Producing crafts to sell at a Christmas sale might be seen by the CRA as a business, but if you are actually spending more on the materials to make the crafts then you ARE NOT making a profit, so you don’t have to declare any business income.  
  • However, in a second example you may be buying items at clearance or garage sales, marking them up and reselling them on-line.  In this example you ARE making a profit, so you need to declare this as income.

The income you make must be reported on Form T2125 Statement of Business or Professional Activities, which is included with the T1 income tax return package.

Doing this extra paperwork does have some major advantages.  You can write off your business expenses against income, including business-use-of-home expenses, meals and entertainment expenses, motor vehicle expensesetc.  You can also use the Capital Cost Allowanceto annually write off a portion of assets.  To claim these expenses, you must keep track of all your sales and expenses and all of your receipts.

If you have income from a regular job, the net loss from your hobby gets deducted against your total income which may result in a lower tax bill.   However, there are limits: you cannot continue to write off losses from your hobby year after year without the CRA using the profit test to see whether or not your activities are conducted with a “reasonable expectation of profit”.

 From an article by Susan Ward

 

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