Bookkeeping for Canadian blogs can be a tricky business - especially if you'd rather be cooking up a storm or checking out new restaurants for your readers. But Canadian bloggers also need to keep the Canadian Revenue Agency happy come tax time so it's on you to keep track of your blog income and expenses!
Bookkeeping for Canadian bloggers is rarely a favourite blogging task. But it is the most important one. Nobody wants to face an audit - especially if you're unprepared. Our tips will help you stay on top of your bookkeeping
What Happens At Tax Time When You're a Blogger?
So you’ve monetized your food blog and it's going really well or, you're blogging on the side and you're starting to make a bit of money.
If it isn’t already pinging in the back of your mind, it should be - what happens at tax time?
I know, I know sorry to bring on the bad news but the Canadian Revenue Agency (CRA) wants all Canadians to do their due diligence and report all forms of income, so they can tax you on it. So, what does it mean for your blog, and how do you keep track or your income?
What Is A Sole Proprietorship?
Your blog is now “your” Business and the way it works is this:
As soon as you start to bring in money - be it be in the form of "free" product, $20 in affiliate income, 100s of dollars in sponsored content income or 1000s of dollars in ad revenue - you have started what is called a Sole Proprietorship, which means you are the sole owner of your company.
Even the child on the street corner, with their own lemonade stand, could be considered a sole proprietorship. It is the easiest form of business to start and you get to keep all the profits.
The only time you even need to register is if you go over $30,000 in revenue in one year. As soon as that happens, you now have to register your blog as a business and start collecting sales tax from your clients (find out what sales tax is charged in your province).
Your blog is now your business - whether you like it or not!
As a business, you now have to start claiming all income; even the free stuff you get, unless it’s labeled as a gift or corporate sample, is considered income. You will need to get the company to send you the true market value and use that as the income.
The good part of being your own business is you get to claim expenses against your business income like: office supplies, fuel (as long as you keep a travel log), travel expenses, a percentage of house expenses (hydro, gas, internet, etc.).
This form, the T2125, is the Statement of Business or Professional Activities form which is submitted with your taxes telling you what expenses you can claim and how much and will also be used to calculate the amount to put on your T1 general income form.
How do I keep track of blog income?
So now you know what you have to do, here are a few options you have for keeping track of your blogging income.
Hire A Bookkeeper
First, hire a bookkeeper. This is definitely the easiest but most expensive route but, you can drop off a box of receipts to a bookkeeper and pay them to organize, align and produce a package that will help you file your taxes or even pay them to do your taxes if they are a tax consultant.
Bookkeepers will typically have accountant versions of Sage 50 or Quick books, and both are very powerful and very time intensive to learn accounting programs; they also cost a couple hundreds of dollars! These accounting programs allow your bookkeeper to have complete and up to date records of all your business interactions, produce professional reports and ensure CRA approved books.
I highly recommend you interview your bookkeeper before you hire them, they will need access to your bank records and all of your receipts and that is a lot of trust to put into a complete stranger.
Do Your Own Bookkeeping
The other option is to do it all yourself. This is the cheapest but most time-intensive route. The best thing you can do is start keeping track as soon as possible.
Whichever option you choose here's what I advise you DO NOT do: nothing. If the auditor comes a-knocking and finds out that you have been hiding income from CRA they will charge you fees, late payments and fines. You’ll possibly end up paying a lot of money for something you should have just kept organized.
Here are some best practices I tell anyone I meet, if they don’t want to hire a bookkeeper or an accountant:
Best bookkeeping practices for Canadian bloggers
1. Create a Spreadsheet document
You can use Excel, Numbers or a Google spreadsheet doc. This will help you keep track of your income and expenses. There are a ton of templates online. This will help you to really create a working document that you can continue to grow and use for the future.
It also allows you to keep each year separate. You also need to follow accrual accounting practices and not cash accounting. Which basically means that when the expenses occurs is when you track them not when you pay them.
2. Use an On-Line Accounting Program
Another way to keep track of things is to use an online accounting program; some of my favorites are Wave accounting or Fresh books. These online programs usually have bookkeepers or accountants, as their advisors. These people can help you if you get stuck or have questions or just want advice.
3. Write On Your Receipts
Get into the habit of writing on your receipts, what it was for, who you were with, and what type of expense, and the total amount. You will need to prove to the CRA auditor that it’s an actual business expense and heat sensitive paper is easily erased with time.
Think of it this way: if they are auditing the last couple years, I know I don’t remember that meeting I had three years ago on December 13 or who it was with. Write it down so you don’t have to remember.
Do this even if you take pictures of your receipts or scan them. Then your note is still on the receipts and you won't have to keep a separate file with notes for all your images.
4. Manage Electronic Receipts
We purchase a lot of things on-line and through apps now - be it you monthly Mailchimp bill, booking a flight, taking an Uber, staying at an Air BnB or buying something from Amazon. Most of these apps and websites have tools or options for you to download a proper business receipt. Make sure you do this and that you keep them organized on your computer or in your on-line accounting program.
5. Use Your Smart Phone Or Scanner to Copy Cheques
Use your smart phone or scanner to take a copy of any check you write or deposit into the bank. You will need to produce them for the auditor and it costs a lot of money to get the bank to send them to you. I take a picture or a scanned image of the check with invoice and put them in my business folder on my computer.
6. Organize Your Receipts By Category - Not Date
At the end of the year organize your receipts - not by month but by what type of expense it was. So all the meal receipts go together, all the office supplies receipts go together, all the electronics receipts go together, etc.
7. Keep A Vehicle Mileage Log
If you want to claim fuel as an expense, you must keep track of your starting year odometer reading and the end of the year odometer reading, and have a travel long for all the driving you did for business.
8. Bonus Tip For Audits
Don’t give the CRA auditor a box of loose receipts, keep them organized and they will be so much nicer to you.
Consult With An Accountant
This quick introduction definitely does not compare to meeting with or speaking to a trained bookkeeper or accountant. It is only meant as a quick guide to get you started with keeping your own books. Every business is unique and you should always seek professional advice to ensure you are set up and doing things properly, whether you decide to have a bookkeeper or not.
If you are able to attend a session with a bookkeeper, I highly encourage you to do so. Look for them at conferences or seek out a local bookkeeper, they can be great resources to have. And don’t be afraid to reach out to the CRA - they do have some incredible resources on their website and they do have a phone number for people who are self-employed or own a business 1-800-959-5525. There are also many other phone numbers you can call if you have questions about taxes or other benefits you can apply for.
- Accounting For Bloggers: Tracking Income and Expenses
- Accounting For Bloggers: When and What You Should Expense
- Audit Proof Your Food Blog
Brian Baas is the founder of Baas Tax and Bookkeeping. He has had much success in bookkeeping working with a number of bloggers, as well as owning multiple blogs of his own. He has a diploma in business administration and is a certified bookkeeper. Brian has given presentations at multiple conferences on bookkeeping for the Canadian blogger, and loves combining two of his passions - blogging and bookkeeping.