When a hobby is no longer a hobby but your third job…
If you have been following along you would know that from time to time I reference my Etsy shop and how well it is doing. Also if you want to know more about it, just scoot over to my Twitter account: @Single2thepenny where I regularly update on all the aspects of my life.
I started it years ago when I was still in university; it was a little creative outlet for me. During my last year of school I was really happy that almost every month I earned enough to pay for the interest on my student credit line. And for the last few years it pretty much paid for supplies. Which by definition of Revenue Canada is a hobby and no profit is made, thus it does not need to be declared for tax purposes.
Last year I decided to start playing with metal stamping and boom in August wedding season hit and my shop became a prime destination for bridal orders. At that point someone from Chatelaine magazine found my shop and asked me to send samples for their 2012 Holiday guide. My little monogrammed cufflinks were both in print (I must frame that!) and online. And to my surprise November and early December were insane with orders. To my surprise so far January sales are the highest over, only second to November. And this, my friends, now means this girl must declare her income for tax purposes.
Yep I have to do my own accounting…. Lucky I am a certified accountant!
Here is what I have learned:
- I must file a T2125 form on my taxes.
- I found out I don’t have to register my business since I am the sole proprietor and as long as I file under my name I will be fine.
- HST must be charged if you earn over $30K in gross income from any for profit venture. It must be over one year or four consecutive quarters. Between my 2 part time jobs, I am floating right under that mark for 2012. I am considering it since it will be nice to get the HST back on supplies. Because my full time job and one part time job are linked, they will now start putting my side hustle on my pay stub and thus I will directly pay taxes on it and it will no longer qualify for HST.
Here are some reasons why I am opting out of registering for an HST number for now:
- I don’t anticipate to have gross sales exceed $30K this year (I hope I am wrong).
- Most of my sales are outside of Canada and don’t qualify for tax.
- Most of my supplies come from foreign sources and I don’t pay tax on them.
- It’s a lot of paper work
- If I do exceed the $30k HST will be due retroactively. Lucky for me my sales are outside of Canada and I can charge back taxes on my side hustle if I need to.
Here are some reasons why I may want to register for HST:
- Get the taxes back on shipping expenses, my largest expense.
- There is a chance, may be slim, I will exceed the threshold and need to pay retroactive tax
But that’s really it.
From now on I am going to add the income I take out of the business every month to my total side hustle and would like to see how it adds up.
