S. J. Kelley

Tag Archive: Taxes

More delays

I can’t believe my last post was four months ago… sigh. I didn’t mention it then, but so much happened to delay progress. Feels so hard to make any headway. And I’ve been at this for 3 years now!

So what happened? After a 3 week vacation in August 2016, we discovered that my husband, a very fit and athletic young man, had to have heart surgery. I was out of my day job for another 3 weeks to be primary caregiver to the kids, as he had to limit his movement during recovery. It took 2 and a half more months before he could get back to his normal routine, and I tried to help out more around the house during this time while catching up with the 6-week day job backlog. Him being a very active and independent person, he hated not being able to continue doing things like renovate our basement, heh. But during this time I shoveled several meters of snow, changed tires, lifted tires (on rims!) into the shed, and took down a trampoline all by myself. It was kind of nice doing the physically demanding tasks that I normally wouldn’t, but it took time. Then, just as we thought life could go back to normal, he had a complication and had to limit movement again for three months, although not nearly as much as the first time. We just got in the clear last week.

I’ve managed to negotiate Tuesdays and Thursdays off again this year (for March-June), which was supposed to follow a 3-week vacation in February. We had big plans for that vacation – clear out the basement, finish renovations, make the home office more inviting – but I came down with a nasty cold with incessant coughing, and was just fried. Then just as I was on the tail end of that, I fell while hiking and fractured the iliac crest of my pelvis, making things like bending and lifting impossible. Today I’m just starting to be able to do up my own shoes using some creative (and non-standard) maneuvers involving long laces. So here we are, renovations still outstanding, and already nearing the end of March. And I’m still doing a teaching job on the side to pay for it all, which is, of course, sucking all of my time. Sigh.

Usually I try to be positive in my posts, but it’s been a long, hard slog just to get through life these past few months, and business progress hasn’t been a crawl, it’s been 0 km/h. I just finished my taxes and this is the second year of claming expenses but no income, and I don’t want the CRA to think I’m not trying to make this profitable… after three years of taking time off from the day job to get this launched! I’ve told myself that I have to put a product out this year to make this a viable business. As a family, we’ve invested a lot into it, not only in terms of time off from work to develop it, but also in resources, courses, software, web hosting, domain registration, market research, etc. We have to make it work this year.

This means I have to treat my writing time as non-negotiable time, just like my day job; it simply has to get done.

My hope if that a year from now, I’ll look back at this time, which I think has been the most difficult time in this 3-year journey, and I’ll think to myself: that was when I finally decided to take this side business into full gear.

Tax withholding and owning a company

When I initially looked into self-publishing, I came to the conclusion that I would have to register a business so I could get an EIN (Employer Identification Number) from the IRS in the United States so that 30% of my earnings wouldn’t be withheld. Apparently it took a long time to get a ITIN (Individual Tax Payer Identification Number), but registering as a business made it much faster. However, upon reading several threads on KBoards, it appears that the policies have changed and now all that is needed to reduce tax withholding to 0% is an international tax identification number (if your country has a tax treaty with the US). For Canadians, this is your SIN number.

It may seem odd that I’m looking into this so early in the process, but I’m very judicious in spending my personal time and if something won’t advance my life goals, I generally shy away from it. So while I enjoy writing, I’m in large part motivated by trying to become self-employed, and taking a 30% cut or an unfair exchange would significantly impede that. Also, I have a very strong desire to stay anonymous because I prefer to just blend into the crowd; not having to set up a company means my name isn’t attached to it in public record, which is awesome. (I had looked into setting up a company anonymously, but apparently this is very shady, even though Canada ranks in the top for these ‘shell companies’).

Aside from the ease of obliterating withholding tax, I also wanted to register a company so that I could have an official-looking publisher name in the publisher field. I have yet to determine how to do this, as once again the owner of the company would have to be public record. Maybe I’ll just have to skip that part in the interest of staying a recluse 🙂 I think I’ve figured it out! Nothing strange needed to keep your privacy after all, if you’re in the right province. Thankfully, I am! But being hermit-like, I won’t go into the details 🙂 Suffice to say that hubby and I are now the proud owners of Suspension Publishing.

When our books are finally written and we have to set up a mailing list, we’ll have to rent a P.O. Box, as to be in line with spam laws we’ll have to list a mailing address. I haven’t decided yet if we’ll do a physical box, or use a virtual mail service. We’ll see.

Registering a business, deducting expenses

As I contemplate purchasing some more software for my novel pursuits, I’m starting to seriously consider officially setting up a business so I can claim all these expenses. Altogether it will cost $175 to have an official home based business in my city. Ouch. But I do have to do it at some point, and it’s a one-time fee, so better to pay it now than when my dollars aren’t worth as much due to inflation. Also, going by the CRA’s definition, my business is already technically started because I know what I’m going to do and have been making steps toward it on a regular basis, so I guess I already have a home office? Of course, still making product so no sales yet. Not sure what my city defines a “start” as, but I’ll register soon regardless.

I’m kind of sad that I didn’t read through the CRA stuff before I filed my taxes. Last year I purchased a lot of writing books and software to do outlining and that all would have been tax deductible. I could go back and modify my return, but that’s a really big undertaking. Plus I think my big push in January is a good way to define the start of the business (seems to match the following from the CRA: “In order that there be a finding that a business has commenced, it is necessary that there be a fairly specific concept of the type of activity to be carried on and a sufficient organizational structure assembled to undertake at least the essential preliminaries.”). Anything in this tax year is game now that I have my head on straight! So far I have some writing craft books, a marketing course, and hopefully software if I can convince my husband of the expense, which looks dismal at the moment, heh.

The good news is I won’t have to register for any tax account, since I’m not earning more than $30k a year on this… ha! Hopefully I’ll have that problem at some point. But even so, I don’t sell the books directly, so not sure how this would work (the retailers would collect the tax so don’t see why I would need an account). I’m sure there’s some process for commissioned pieces in there, but I’ll open that can of worms if I ever get there.

Coming back to the topic of business registration: It appears that Canada does not have the LLC option of our American counterparts to protect our personal belongings should anything terrible happen in this process. The only choice I can go for for liability protection is a corporation, and the thought of corporate taxes is, quite frankly, terrifying. It appears the corporation would pay tax at about 11% for a Canadian-controlled private corporation (CCPC) claiming the small business deduction, and I think I would get paid as an employee and that would be taxed for income taxes. So double taxes? Confusing. In any case, the CCPC would function as it’s own “person” so I wouldn’t be able to deduct my expenses off my personal taxes. I think I’ll stick with sole proprietor (or partnership if my husband decides to get on board) for now, and if I become immensely successful I’ll look into this further.