[Ep. 397] Taxes, Write-Offs and Running a Small Business with Jami Monte

Welcome to the More Money Podcast, Jami.

I’m so excited to have you on the show.

Thank you for having me.

I’m excited to be here.

Yes.

So we met a little while ago when I found out what you did.

I’m like, oh, I need to have you on the show.

And tell me a little bit about your background, though.

So you’re a CPA.

I know a lot of what you do, what you share online is very focused on, obviously taxes, but specifically for small business owners, solo printers, things like that.

How did you get into that?

Yeah, I first started my career in corporate.

So I was working on the back end in a lot of like marketing and media companies, helping them to kind of keep their numbers together and report on their profitability and stuff like that.

And then eventually I felt like I wanted some more flexibility in my life.

And so that’s when I decided to go off on my own, but I didn’t really have a plan.

So I was like, I’m a CPA, everybody asks me to file their taxes.

So I’m gonna start doing that since that seems to be in demand.

So I started filing taxes and I had a lot of self-employed people coming to me for filing.

And because I had not come from the big four firms and I hadn’t come from even a small firm filing, I was shocked at what people were bringing me come tax time.

I thought, this is not what I learned in school.

What do you mean?

You don’t have a profit and loss statement to share with me.

You don’t have enough.

You don’t know how much money you made last year.

It was very, because I just thought everybody that runs a business knows that they’re supposed to be doing bookkeeping through the year and have financial reporting.

And so that was a moment for me where I was like, there’s something missing here.

And specifically, solopreneurs, small businesses, they’re really getting left out of the mix because they’re not hiring staff to do this for them, but also they don’t have the education they need.

So that’s when I started to focus on educating entrepreneurs on all of the things that they need to be doing year round, whether or not they have an accountant.

And that’s how I started my course, Chill Books, which teaches bookkeeping and the financial foundation for entrepreneurs.

Yeah, no, super helpful.

And I wanna really launch into that.

But before, just cause we are very much approaching kind of the personal income tax deadline, and you do a great job of sharing some really great tips and information on your Instagram that I love to follow now.

Is there anything personal tax wise that people should be aware of?

Any new updates and new things?

I get asked all the time, is there any new credits?

And I’m like, I don’t know.

I’m not an accountant.

And so I do some Googling, but I’m like, I don’t, this isn’t my world.

Well, I have some good news, and that is that the tax brackets have increased.

And yes, so what that means is by nature, when you’re filing your taxes, you might find yourself in a lower tax bracket this year, just because them being increased might push you down into a lower bracket.

So we love that.

We also love that the federal basic personal amount has been increased as well.

And what that means is that that’s kind of like your tax-free amount that you make in the year.

So in Canada, the federal basic personal amount, so this for federal taxes is 15,000.

So again, these are things that you’re gonna naturally see when you file your taxes.

You don’t have to remember to do anything special.

Work from, a lot of the COVID benefits are no more, which we love.

COVID is a distant memory for most, I hope.

I hope, I know some people are…

I know, hope.

Oh my gosh, I don’t want to do that again, but.

I mean, anyways, we just, it doesn’t have the same ring to it anymore.

So the government’s like no more with these tax credits.

So the Ontario Staycation Credit is no more.

The work from home flat rate, I know a lot of people love that flat rate $500 deduction.

Now, if you do want to claim work from home, because I know a lot of people are still working from home, you just need to go through a more detailed method of reporting and getting clear with your employer that you are in fact required to work from home.

So those are some things to keep in mind.

This, I think, because I think some people might have filed already, some people might not, but knowing that for this year, the RRSP cap has been increased as well, and the TFSA limits also.

So that’s some nice stuff just to think about in planning for 2024.

I’m sure you probably chatted about this on here.

Yeah, so we don’t need to go too much into detail, but yeah, those are some of the major changes.

And then something that people might start to see in 2024 is more CPP being deducted off their paychecks.

So we like to think about that as money coming back to us at some point.

Exactly.

I’ve seen a lot of people talk about it online, and then when I looked into it, I’m like, well, how much extra CPP is like very minimal, but how people are talking about it, it’s thousands and thousands of dollars extra you’re paying for years.

It’s really not, it’s like very minimal.

So relax.

And that’s the thing I hate when people say, oh, the CPP tax, I’m like, it’s not really a tax, you get it back, you know what I mean?

Whereas a tax paid to the government, and we don’t know what they’re going to do with that.

So it’s coming back to you.

Yes, I know.

And I think we have been feeling the increase of CPP since 2019.

The government has been increasing it every year because they’re trying to make sure that we have enough money when we retire.

And this is an amount that’s meant to supplement our income when we do retire.

So you’re probably not going to feel it any more than you have in previous years, especially because the base amount didn’t go up.

It’s that there’s an additional ceiling been added.

But I know that my self-employed friends, which we can talk about this, a lot of times it’s a big surprise for them because they have to pay both the employee and the employer portion.

And if it’s your first year filing, then that can be like a punch in the face.

But yeah, just think of it as this isn’t a bad thing.

Because wasn’t it that with this enhancement, in the end, you’ll end up with a significantly, I’m going to get it wrong, but 50% more, or it was a pretty high percentage more by contributing more.

I don’t know the answer every time I try to look into how much money I’m going to get from CPP down the line.

It’s like this big confusing rigmarole.

So I don’t want to talk about it because I feel it’s off-puted.

But I think if you look it up, there are some stats out there that do show because we’re increasing the CPP amount, you are going to see more when you retired, which is a really good thing.

And the reason they’re doing this is because in general, Canadians are very bad at saving on their own.

So it’s a bit of a force savings a little bit there.

Okay, those are super helpful things for people to keep in mind.

So now let’s kind of talk more about being self-employed.

I, over the past, since I became self-employed, which is now seven years ago, which is crazy, I made a few videos on my YouTube channel about this because I had no guidance either.

I think it took me a good few years to maybe another, maybe after one year of doing it on my own.

I’m like, oh, I can’t do this.

I need to hire, I need an account.

But I was shocked at how little I knew about bookkeeping and all the reports that you need.

And it was very hard to find the information or the information that was out there was very hard to understand.

And so I started kind of creating some pieces of content just based off my experience.

And to this day, I have videos that are super old, like four plus years old.

And I get comments every single day, be like, hey, how does this work?

Da, da, da, da, da.

And I’m like, if this many people are asking, that just means how confusing it is.

And I think part of it is, we’ve definitely seen an influx of people start a side hustle, start a small business, become self-employed because they’re unhappy with their career and they want to try something new, which is great.

There’s so many people, I feel like especially on social media talking about, like work for yourself.

And then the information stops it.

But how do I actually do that in terms of making sure my business financials are set up properly?

These people do not talk about that.

And maybe it’s because it’s a bit intimidating or confusing or these people talking about how to make money from home, certainly are not accountants.

So if someone is thinking about becoming a sole proprietor, whether that’s on the side of their day job or quitting their day job and doing this full time, what is one of the first things that they should know to make sure they set up that foundation like you mentioned?

So the first thing that I would say is, I think that, and I’ve made this mistake myself, and it’s to take your business finances seriously from day one, even when you feel like it’s just a little thing I’m doing, it’s not a big deal, I don’t know how it’s, the thing is, is these things compound.

So I’ll tell you that in my first year of business as a CPA, I didn’t have much direction, and actually my first year was a partial year, and I had a consulting role.

So I took on a consulting gig, and I was working like three or four days a week with that for a few months, and so I had one client.

And I thought, I don’t need to worry about bookkeeping and stuff, especially-

Yeah, you’re like, what’s my client?

I’m like, yeah, right?

I’m like, it’s literally one client.

I have like two write-offs, like it’s just, and I’m a CPA, so I can wrap this stuff up quick time at the end of the year.

And so I did what I tell everybody not to do, is I went and I downloaded WAVE, which is like a free bookkeeping software.

And that’s where I did my invoicing for my one client.

And then I totally left the taxes to the last minute.

And because I wasn’t taking it seriously, I’m like, oh, it’s gonna be so easy.

I know what I’m doing.

And until I found myself on vacation, well, actually I was doing yoga teacher training.

So I was in Bali for like a month and a half, and I realized, oh my God, I’m gonna be in Bali for the tax deadline.

And I didn’t do it yet.

So I remember sitting, like facing the jungle in Ubud, and people are like lounging by the pool, and I’m hunched over my laptop, trying to add up all of my numbers for the year for my car, because I used my car for work.

For random subscriptions, like searching for like where did, how did I pay Microsoft for my Microsoft Word subscription, or like my whatever the suite is that it’s called.

And oh yeah, I think I actually bought this in February.

I need to look back.

And so I had to download all of my statements for the year for my bank and credit card, look through them, then go to find the receipts, and then I and then filed last minute, literally like final day while I was on a trip.

And it was a disaster because I didn’t have a system that was holding all the information in one place for me.

And that was one client and a service-based role.

So please do not take, do not push the financial management to the side because also the easiest time to get on top of it is when you start.

So yeah, take it seriously, get the education you need, set up a system or hire a bookkeeper.

Don’t leave it to the end of the year because especially when you’re not a CPA and taxes are a bit of a mystery to you, then you have to go through that learning process while you’re trying to do your bookkeeping for the whole year.

So yes.

Do you think it’s a good idea for people to start doing their own bookkeeping first before hiring someone just so they start to understand how it works?

Because I know even in just personal finance, think about investing.

A lot of people are like, oh, I don’t want to take the time to learn how to do this on my own.

Can I just hand it off to someone?

I’m like, sure you can, but then you’re not going to know if they’re doing it right, and then yours will go by.

And you’re like, why am I returning?

So I’m like, that’s because you didn’t know what they were investing your money in.

Do you think it’s a good thing to get some hands-on experience before hiring someone to help you?

Absolutely.

150%.

I really think that there’s also that piece of, even when you do get to the point of outsourcing it, you’re not gonna know what you’re supposed to be looking at and what you’re asking questions about.

And so take time to understand the foundation yourself, because one, if you get the right education, then it might be actually a lot easier for you than outsourcing, because a lot of the times in the bookkeeping and financial management realm, when you’re just starting out, you’re already doing most of the bookkeeping yourself, because you’re the one invoicing your clients.

You’re the one spending the money on expenses.

You know where your receipts are.

You are managing the bank accounts.

You have all the tools for you to hand that to someone else, and then they have questions, and they come back to you for the questions.

You’re like, why don’t you just interact directly with the system at that point, right?

So yeah, it might actually save you time, too, at the start early on.

And yeah, you’re going to feel a lot more empowered.

You care more about capturing all your write-offs than any bookkeeper is going to care.

Oh, yeah.

It’s the common challenge with being an entrepreneur.

No one cares about your business as much as you do.

And when it comes to your finances, same thing applies.

When you have a bookkeeper, their job, if they’re managing things for you, their job is to get things in order from a compliance standpoint, and just do it in the most efficient way possible so that they’re not bugging you.

And so that can mean a lot of assumptions are made and things are missed.

And yeah, inside one of my workshops last week, somebody came to check on, they had hired a bookkeeper for the year, and they were kind of like, I just want to check the numbers.

And they found thousands of dollars, literally thousands of dollars of missing write-offs because they decided, I don’t want to do this myself.

I just want to hand it off.

But again, no one cares as much as you do about your numbers.

So learn, be empowered, and you might even save yourself some time and money in outsourcing.

I mean, I’ve got to say, I’ve been using a bookkeeper for the past, like I did the majority of my own bookkeeping for maybe five years.

I think it’s only in the past two, maybe three years that I’ve had a bookkeeper.

Number one, it’s not necessarily cheap.

So you’ve got to think about the cost involved, right?

But yeah, I’ve definitely become more passive.

I used to be, I know every single dollar that was accounted for, and now I’m like, oh, I probably should check my QuickBooks and really just see what’s going on there before we file some of those returns, actually.

Actually, I’m like, did we already file my corporate tax?

Maybe not, I’m gonna have to tag.

I do have an accountant and a bookkeeper, but yeah, that is one of those things where it’s like, I kind of missed being as involved as I used to because I really knew what was going on, and now I still keep track of things.

For instance, even though I have QuickBooks and Things Connected and The System, I do also have a little spreadsheet for some of the campaigns that I work on and stuff, so I’ve got all that.

But yeah, I have become a little bit passive, and I wonder whether there’s something missing, and that’s the thing.

It’s like, you still need to always be involved in your business finances, no matter if you’re outsourcing or not.

Talking about systems a little bit more, that is, I think, one of the hardest things for people to figure out.

And for me, again, it was a lot of trial and error.

I think I didn’t use bookkeeping software for a year or two.

I used a spreadsheet, and it worked for me at the time, and then it became really cumbersome.

And so I think the first software I used was FreshBooks, which served me well as a sole proprietor, and then I switched to QuickBooks once I incorporated, just because I needed something a little bit more comprehensive.

Now, in your mind, when someone is, again, starting their business, or maybe they’ve been doing business for a while, and they’re like, the system is not working because I have no system.

What are some things that people should put in place to keep things organized?

One thing that’s really helped me is, have a separate bank account, have a separate credit card, because when you co-mingle it with your personal stuff, it gets complicated.

Yes, absolutely.

And this is one of the not taking things seriously, is like, I’m just starting out, I don’t need a separate account.

If you do nothing else, Yeah, do that.

Do that.

Because then at least you have everything in one account, and you won’t have to sort through e-transfers and think, oh, is this me e-transferring my friend, or was this me paying for a random expense that I forgot about?

So have all of those business transactions in a separate business bank account, and ideally a separate credit card.

It doesn’t have to be your business credit card, because maybe you can’t get credit with your business yet.

You can just use a personal credit card and designate that as your business credit card.

That’s still going to help you a ton in terms of keeping things organized from a bookkeeping standpoint.

And also on that note is, remember that your bank accounts and your credit card statements don’t count as documentation for writing off your business expenses.

You need to keep receipts or some sort of documentation for anything that you’re spending money on in order to run your business.

And yeah, that’s going to make sure you’re not getting yourself into trouble come tax time.

Which is why bookkeeping, that’s what part of what bookkeeping systems do.

I think people don’t realize it’s like, we’ll house those receipts for you.

So that if you’re audited six years from now, you can just click a few buttons in your QuickBooks and then go back to see.

But no matter what, get those separate bank accounts and keep receipts for everything that you are spending money on.

And remember, some of those receipts are digital and some are paper-based.

And for the paper-based ones, believe me, I’ve had receipts where I’m like, this is great.

And then it’s like, illegible, you cannot read it.

Take a photo, take a photo, because the CRA does not care that the ink has faded.

Yes, exactly.

So get that, do that.

And then a tip for the, on the receipts front, I see this mistake a lot is meals and entertainment.

Yeah.

So make sure that when you’re going out to eat, maybe you’re taking a potential client out, that you’re keeping both the itemized receipt, which shows what you ordered and the tax that you paid and the credit card or debit receipt that shows the tip.

Because those two together document the full cost of what you’re claiming.

So if you just get the debit or credit receipt, that is not actually going to hold up in an audit because it doesn’t have the information of what you purchased.

Exactly.

And I guess speaking to that, because I get a lot of questions about this, if you are doing a meal with a client, is there anything that cannot be included?

Is alcohol, that’s one of those things that you’re not allowed to include?

Is that correct or no?

You’re absolutely allowed to include alcohol.

Oh, are you?

Good to know.

I think a lot of us that come from the corporate world might be mistaking rules about what you can write off for company rules.

Yeah, maybe that’s what I’m thinking.

When I used to work at one of the media agencies, I remember we had specific clients who we would bill back our meals to, like if we were traveling on behalf of that client, and they had a policy, oh, you can’t write off drinks.

So then we’d be like, okay, whenever you’re dining out under this client, we can’t bill back the drinks, so don’t do it.

So maybe it’s something I think some people…

Yeah, I was always resistant to ordering a drink when I was out with some sort of business purpose because I was afraid I couldn’t write it off, but that’s probably where I got it confused.

Yeah, but speaking of write-offs, it’s another big question I get.

Obviously, there’s a huge list that is available publicly on the Serio website that anyone could look at to get a sense of what you can and cannot write off.

But I think, again, people get very…

It’s an overwhelmingly long list.

So is there anything that people should really just always remember in the back of their mind?

You can write this off.

Maybe make sure to keep that receipt.

Yes.

Okay, first of all, little plug.

I do have a solopreneur write-off guide for…

Oh, great…

.

that goes into…

A little bit more digestible than the CIA website.

Yeah, yeah, yeah.

It’s a ridiculous long list, yeah.

So you can make that if you want to grab that.

And first one that I see people miss a lot is…

And just because of random organization issues, is their cell phone bill.

Oh, yeah.

Exactly.

It’s like you were most likely using that for your business.

Yeah.

I actually almost forgot this year about that, because it’s not connected to my QuickBooks, but then I’m using my account for my personal and corporate taxes, and I almost forgot about my cell phone bill.

And I’m like, how could I have done that?

I use it all the time, and it’s mainly for business.

It’s the mixed business personal things that even when you have a solid system, it’s like you need to make sure that you know what’s living outside of that system.

So yeah, that’s why cell phone gets missed a lot.

And then in terms of home office, that’s another one that’s mixed personal business.

You’re not going to be putting…

Well, at least I don’t teach my students to put their home office expenses into their QuickBooks because I’m like, it’s going to throw off your numbers.

You’re not going to see if you’re actually profitable, and it’s confusing to put in the percentage.

So just keep it outside.

And so when it comes to home office expenses, I think ones that people sometimes miss are claiming a portion of their mortgage interest.

Yes.

And not to be confused with the full mortgage payment, but…

I wish we could write that off.

It’s ridiculous the cost of living these days.

But get that statement at the end of the year from your bank.

Maybe it’s sitting on your banking site right now in your PDF documents, and it will outline how much interest.

And then another one is either cleaning staff or cleaning supplies.

You’ve got to clean your office.

I never thought of that.

If you have a cleaning service coming in to clean your home once every two weeks, or however often, I’m not judging, then get the receipts for that, because you can claim the percentage that relates to your home office.

Me and my husband both work at home.

I’ve never even thought, because I’m like, oh man, wouldn’t it be great if we could hire someone just a few times per year to do a little deep clean, and that we could potentially write off some of that.

Oh my God, I’m going to tell them right now.

That’s exciting.

Yeah, it’s like, oh great, now there’s a little, I love a little tax credit or deduction that I can utilize for anything.

That makes me so excited.

Yeah, absolutely.

Why not?

Maybe we just need that little extra knowing that it’s a write-off to be able to put it in the budget.

Yeah, and even just the mortgage interest.

I’m literally in the moment of the taxes right now with my account, and I’m like, I can’t remember if I sent him that document.

I’m going to have to triple check because that is a good chance to change that mortgage interest, let me tell you.

It’s pretty much all interest right now.

Mine, too.

That’s exactly it.

You see it, you’re like, Ick, but at least I’m getting a nice credit card.

I’m going to be paying this till I’m dead.

But that’s great.

So yeah, that’s super helpful.

And yeah, definitely, I think people should grab a copy of that guide.

That’s super very, very helpful.

One other question I get, so sort of related to taxes, but not income taxes, but this is where I feel like there’s so much confusion, is sales tax.

Sales tax, it trips people up, and it’s like, even for me, I’ve been sharing this info for years.

Even for me, I get a question, I’m like, let me Google that first, just to make sure.

But for example, I got a question from somebody being like, hey, I have a YouTube channel, I’m earning adsense, do I have to charge sales tax?

I’m like, well, number one, there’s no way to do that because they just pay you automatically.

But I had to do, a few years back, did a deep dive and found out that you need to find out which branch or whatever is paying you.

If it’s US-based, then you don’t.

But I looked recently because I got a comment, and then I had to look through my comments from years ago to find that reference, but otherwise I went on Google.

I couldn’t find anything.

So I’m like, geez, how many YouTubers are out there?

A lot.

So they’re like, do I have to charge sales tax?

I don’t want to get in trouble.

But I find sales tax specifically is very complicated for most people.

And the information out there is not easy to understand.

So anything you can share about how to get started, like when should you register?

And then there’s all the provincial ones.

And you’re like, which one do I do?

Am I doing this right?

I’m so happy you brought this up.

This is an area that exactly like you said, there’s so much confusion and so many mistakes being made.

And first off, I just want to validate it is complex.

Yeah, because like you said, there are so many rules that are dependent on where you are, where your client is, where the product is, where in the product exchanges hands.

It’s a bit of a thing.

So but we’re going to simplify it for some basic things to keep in mind is first and foremost is when to register.

And you register when you’ve made $30,000 or more.

Well, you want to register when you break that $30,000 mark over four consecutive quarters.

So that could be like a typical calendar year, but also it’s a ruling four quarters.

So if you have a really great Q1 and really great Q2, and then it’s like, okay, I hit the 30,000 mark.

I need to start collecting now.

So that’s first thing.

Keep an eye on your sales.

And that is worldwide sales.

So that’s something that I think is not clear to some people.

Like, what if I’m selling part in the US and they’re not paying tax?

Yeah, and they’re exempt.

It doesn’t count.

And yeah, I find that’s really confusing for people.

Yes.

So when in doubt, just make sure you register, because even if you register, then you don’t have to charge to certain clients.

You’re still going to have your bases covered.

To make sure you don’t want to register late and then have to go back in time and charge to the people that you were supposed to charge or take a cut of your sales by just giving that money to the CRA.

So check for that $30,000 mark.

The other thing to keep in mind is once you’re registered, it’s your responsibility to check with every sale what you’re supposed to be charging.

That’s what you’re talking about with the YouTube, I think you were talking about, right?

Yeah.

Is it’s like sometimes we might think, oh, we’re dealing with these big companies, they’re going to know what to do.

It’s our responsibility to know what we’re supposed to be charging to who and when.

And the basic thing I want you to keep in mind is if you don’t know what you should be charging, charge your local rate.

So if you’re in Ontario, that’s HST.

If you’re in BC, that would be GST.

Default to the rate that is based in where you are, because that’s the right, that’s the rule when you don’t know.

Great rule.

So if you’re like, I don’t know, I don’t have time to figure this stuff out, Jami, then default to your local rate, because you’re not going to get in trouble for doing that.

And because the CRA just wants you to collect tax on their behalf.

They are happy if you do your local rate.

That’s the rule, too.

If you don’t know where your client is based, you default to the local rate.

Now in Canada, GST and HST, so HST stands for Harmonized Sales Tax, and GST stands for, oh my God, now I’m going…

You were saying that, I’m like, I don’t remember.

Yeah, now I’m like, what is this?

I’m going to Google it.

We’re going to cut this out.

Hold on.

What does GST stand for?

It’s been too long.

Goods and Services Tax.

Yes, how did I…

Okay, let’s start that one again.

I couldn’t remember.

I’m like, I don’t know.

I couldn’t tell you.

I failed that exam.

So HST stands for Harmonized Sales Tax, and GST is Goods and Service Tax.

So Harmonized Sales Tax means that if your province has HST, it means that your provincial sales tax and the goods and service tax, GST, are combined.

They’re harmonized together.

So in Ontario, that looks like 13%.

But then in some provinces, like I mentioned in BC, the goods and service tax is separate from the provincial sales tax.

And why I’m bringing this up is that, depending on where you’re registered, you can think about GST or HST as kind of the same thing.

Even though they seem different, they’ll go on the same return.

And once you’re registered in your province for either GST or HST, then you’re able to collect GST or HST in the other provinces, depending on what their rates are.

So don’t think that, oh, I registered for HST, but what about when I sell to BC?

Do I have to register for GST?

No, you can just charge your client in BC 5% if that’s what you’re supposed to be charging.

But it gets complicated.

I do have also a guide.

It’s called What the HST Am I Doing?

It’s free.

It goes into what rates to charge in what provinces, what rates to charge to US clients, and there’s even a tracker to help you track your GST.

I’m gonna download that.

That’s really helpful.

It took me forever to figure out that because I had some digital downloads, and I did services across the country, and then I’m like, wait, do I have to?

And I did.

I registered in every province.

There’s PST, QST, RST, and I’m like, I just want to make sure I’m doing it right.

But I’m like, this is way too complicated.

This shouldn’t be this difficult.

And that’s what most people feel like.

They’re like, so just because I offer some service to people across Canada, I have to think about all these different provincial taxes?

I’m like, potentially.

But that’s also the other thing is figuring out, do I actually have to charge PST and GST or not?

Yeah.

Yes.

It’s the provincial sales tax and the QST, the Quebec sales tax.

Generally, if you are not in the province that has the PST, what I tell people is to keep an eye on the volume of your sales in that province.

If you start to make a high volume of sales, like if it’s just one sale, let’s not have to hire a tax accountant and register.

It’s when you start to have a high volume of sales.

Or if you’re particularly targeting that region with your marketing, then if down the line somebody says, hey, you should have been charging PST, you’re like, I don’t know.

They’re like, well, you’ve been advertising in this province for months now.

So if you’re specifically targeting a province that has PST, then make sure to look into it right away.

Otherwise, if you have a few sales here and there from different provinces, wait until you have some more volume and then you can look into like, should I do QST or PST?

And I guess the other thing too is when you’re thinking about whether it’s a service or a product you’re selling, whatever checkout cart that you’re using to make sure that it is also collecting that sales tax.

Because for years, I used this one for this course that I sold, and it’s based in Vancouver, but they did not have a mechanism to charge sales tax.

So I defined a roundabout way to do it because they’re like, oh, it’s tax inclusive.

I’m like, no, that just means that I’m making less money.

Because you’re not going to charge a weird number you want to have an even number.

And now they do have that because the government’s like, you have to include this.

We want our sales tax.

Because I think a lot of people probably weren’t doing it right.

But that’s the other thing when you’re looking for a checkout card, especially if it’s like US based and they don’t really account for Canadian taxes, it will just make your accounting so and your bookkeeping so much easier if it does that automatically.

Yes, yes.

And these huge brands like Kajabi, for example, I know people love Kajabi.

Kajabi doesn’t separate sales tax.

No, no, that’s it.

I can’t do that.

I can’t, right?

You want your system, if you’re selling in volumes online, you want to have a system that takes your customer’s legal name and address and then adds a tax based on that.

Exactly.

And there’s lots of great ones now.

Like for years, I used one that was like the only one I could find that existed called Quaderno.

It’s alright.

But like Shopify, they do that.

Thinkific now does that.

When you’re searching for which platform should you use for whatever, find one that also makes your life easier when it comes to bookkeeping because it’s not fun trying to like separate those amounts.

Oh my god.

No.

The hours you’ll be spending.

No.

I want to kind of move on and talk.

Another bunch of questions I get is how do I register for a business?

Registering is also complicated, I think, depending on if you want to, like, for example, when I started doing some freelance writing and stuff on top of my day job, I was just automatically under my regular name, sole proprietor, didn’t have to register for anything.

But then I realized I actually don’t want to use my personal name.

I want to use my brand name, which is a different last name.

So I had to register.

But again, it depends on what province you live in.

And yeah, if you want to have a different name, do you want to kind of speak to what does registering a business actually mean?

So I will speak to it from a CPA standpoint, than a legal standpoint.

And what I’ve seen is, so when you first start your business, like if you’re just starting out and you’re billing things under your own name, you’re like, I don’t know what’s going on.

I’m just collecting money for sales right now.

Then from a tax standpoint, a CRA is like, great, cool.

Do you just make sure to tell us how much money you collected and put it on your personal tax return and you’re good to go.

But then what happens is if you’re like, hey, my name is Jami, and actually I am collecting money under the name Chill Books, which is the name of my course.

And I start to bill under that name, then I need to have a master business license, which I can get in.

So I’m familiar with the Ontario one, which is like you can get it from the Ontario Service Ontario website and just register the fact that I’m operating my sole proprietorship.

We’ll just say in this example, Jami Monte under a name Chill Books, which is different from my legal name.

So then once you incorporate your business, when you incorporate your business, then you actually pick a name for that incorporated business.

So let’s say I now incorporate my business, and it’s Monte International Inc.

But I still want to bill my clients as Chill Books.

Then I need to make sure that I register that Chill Books name still as a name that Monte International is doing business as.

Now, the I don’t know the exact website or how you would do it, but I know that you need to register doing business as.

So it’s really when your legal name is not matching the name that you’re selling and doing business under.

Because also, not that I’m a lawyer, but also you want to make sure your contracts are protecting the right entity.

If my contracts say Chill Books, but yeah, I don’t have a business license for Chill Books, and something happens, like it’s going to come to me, I’m not to Chill Books, and also there is no contract then, because there’s no legal entity that doesn’t exist.

But yeah, it sounds so simple when you say it, but most people are like, I’m so confused.

And yeah, it’s not, I think it’s because it’s also a little bit different depending on what province, which is super annoying.

One resource that I always tell people, because there’s just a lot of great articles on it, is Owner, and they make it easy to register.

Yeah, it’s a little bit of money, like you could do it, I guess, for cheaper, if you just go through the provincial website and stuff like that, but if you want something a little bit easier.

But again, also they just have a lot of articles about province to province, how things kind of differ.

So that might be a resource people want to check out.

Now, we kind of touched on this a little bit, but for small business owners who were just getting started, what are some big mistakes or little mistakes that you see quite often that people should try to avoid?

So the first one I would say is just to touch back on that GST, HST, is they register for sales tax, and then they don’t realize that it’s actually a separate filing from their personal…

Yes, I’ve gotten that question, like, so when do I follow this with my income taxes?

I’m like, you don’t.

No, they’re totally different.

And I guess we should also clarify too, because I get this question often too, is it should not affect your bottom line, your revenue.

And I think a lot of people are afraid, I don’t want to register because I don’t want to earn less money.

It’s not at all, right?

Correct.

Absolutely.

That’s such a good, I hear this all the time too.

I’ve heard people who specifically want to keep their sales under 30,000 because they don’t want to register.

And you’re like, that doesn’t make any sense.

You should want to make as much money as your business can.

Like, yeah, this is a real thing though, because taxes are a mystery for a lot of people.

And so they’re just like, I just don’t want to complicate things.

I know this is going to complicate things.

And so definitely, if this is you, grab the guide because it’s going to help you and give you, you can kind of review it and really sink into what it means.

But tax, like you said, you add it on top of what your sales is.

So if I’m selling something for $100, once I register for a sales tax, I’m in Ontario, my rate is 13%, then I start charging my clients $113 instead of $100.

So same $100 is coming to me.

And then you give that $13 to the government.

You don’t get it.

It’s not extra revenue, but it’s also not.

So it’s costing the customer something.

Exactly.

But if your customers are businesses that are registered for sales tax as well, then on the flip side, they get that $13.

In that example, they get to claim that as a credit at the end of the year if your clients are businesses.

And you’re talking about input tax credits, which again is a big mystery to people.

Yes, yes, exactly.

I like to tell people that when you register for GST or HST, you’re now acting as an agent on behalf of the CRA.

And your job as an agent is to go around and collect your tax rate, whatever it is, I’m 13%.

I’m going to collect 13% from every client that I sell a good or service to.

And then what happens is because you’re an agent, you also get agent benefits, which means you don’t have to pay that 13% on your business expenses if they are business expenses related to your business.

So that means that say I were to go to Jessica and purchase something from Jessica and she charged me $113, 13 of that being tax, then I get to go back to the CRA at the end of the year and say, look, I paid Jessica $13, but that was actually related to my business and I’m registered.

I’m acting as an agent on behalf of the CRA, so I get that $13 back.

That’s an input tax credit.

The net of it is you take however much sales tax you collected in the year, and then you are supposed to give that back to the government, but you also get credits for all the sales tax the GSC or HSCU spent on your business.

So you get to remove that from what you give back at the end.

So another kind of incentive, business expenses are great because there’s the deductions, but then also on top of that, there’s the input tax credit.

So do not forget about that.

But again, another really great reason, an important reason why you should be doing your bookkeeping, keeping those receipts, so you can keep track of all the sales tax that you’ve been paying that you can maybe claim back and get back in your pocket.

But again, it takes time.

It takes time, but then once you understand the system and the rules, you’re like, oh, this isn’t so bad.

This is manageable.

And it’s nice to get some of that money back, let me tell you.

Yeah, and that’s why we have systems, is because we don’t need to hold all this information in our brain.

You basically need to understand it at one point in time while you’re implementing your system.

And then you just have your monthly rinse and repeat process that this is where I put my receipts.

This is how I code things.

This is what happens.

And then you don’t have to really think about it.

Exactly.

And just one thing that I want to clarify, because I don’t think we touched on this, when it comes to charging sales tax to customers, you did that to Canadian customers, not international customers.

So if you have a US customer that’s buying a product from you, you’re not charging them HST, because they do not live in this country.

Yes, with an asterisk, because we know sales tax can be complex.

And if you’re selling a product, there could be some things to keep in mind.

So if you’re selling a service, then yes.

I will just speak to what I’m familiar with, is what I’m selling a service to somebody in the US.

And this person or client in the US does not have an office in Canada.

They don’t have a Canadian location.

Then I can say, I’m only going to charge them.

I’m not going to charge them any tax.

Yeah, because when you think about it, it’s like if I were to buy something or a service from someone who is US based, and they charge me their state tax, I’d be like, why am I paying your state tax?

I don’t live there.

I don’t get it.

Yeah, there’s no benefits for me.

But yeah, keep in mind, yeah, it’s complex.

It’s complex.

Now, before I let you go, is there anything else, any other kind of popular questions that you get from people who are in this realm that you want to make sure people know about?

The one thing that I want to make sure people know about is installments.

And the first year that you’re filing your taxes, and we’re talking about income tax installments and or GST, HST installments, corporate income tax, personal income tax, all the taxes, basically.

What happens is when you have your first year of business, a lot of people, they don’t put their tax money aside, which you shouldn’t be.

And so they have to pay like a hefty amount at the end of the year that they kind of come up with.

Well, in April.

And then what happens is they’re like, I’m not going to do that again, I got to start putting money aside.

But also, the CRA, depending on how much you owe, they might actually be like, you know what?

You’re not allowed to keep that money all year round.

We want that money in quarterly installments.

Because you’re earning it year round.

Why do you get to keep it until the end?

And earn that interest.

Yeah, yeah, exactly.

So if you, and this is perfect timing for this conversation, because if in 2023 you had to pay more than $3,000 in personal income tax related to your business, or in GST or HST, or in corporate tax, corporate income tax, any of those buckets, then CRA is going to want you to pay installments starting this year.

Because they know that you’re going to owe more than $3,000 again next year, and so they want you to start paying them quarterly.

And they do not shout it from the rooftops.

They often put it on one little sentence on your notice of assessment that’s like, if you have more than $3,000, you need to pay us installments.

I know this because I think it was my second year of business that I did not pay in installments.

And then it’s like, oh, you owe us interest because you didn’t pay on time.

I’m like, what are you talking about?

I thought I’d pay annually.

What are we doing here?

And it’s because, yeah, I was expecting a letter or some sort of notification.

But is it is typically the information like if you log into your like CRA My account, it will be there.

And even still, like if people ask me that, I’m like, I can’t remember.

I don’t know if it’s there.

Yeah, it’s it’s so they do put out reminders in your CRA My account.

But they’re like in the messages.

You’re not, you know, it’s like you expect like a proper email, but it’s like, no, it’s hidden in the messages that you never check.

Yes, exactly.

Check your just do the do the numbers yourself.

Check your notice of assessment, which is the document that you receive after you’re done filing.

So you’ll receive a notice of assessment for your sales tax and for your your income tax.

Check that.

See how much money you owed.

And then and then proactively looking into making sure you’re making the installments that you have to make.

But know that this is why year two of business can feel very challenging, is if you didn’t put money aside for first year, you’re basically paying double the second year because you basically paid last year’s 20.

Right now, you could pay 20, 23 stuff, and then you have to start paying 20, 24 stuff.

And you’re like, what the heck?

Last year, I just paid.

So just yeah, raising the flag now.

Do your best, knowing that there’s going to be some cash flow management.

Maybe you’re not going to be able to pay your installments in time, and you might pay a little bit of interest, but better to know.

Exactly, exactly.

Well, there’s clearly so much for people to know, but you mentioned you have a couple of great resources on your website.

Where can people find more information about you and some of the great kind of downloadables and courses that you have?

Yes, so I’m very active on Instagram at jami.montee.

So that’s where, and Jami is spelled without an E at the end.

And that’s where you can see a lot of day-to-day stuff and lots of educational bite-size pieces of information.

So if this was a lot for you and you want to keep the learning experience up, definitely just hang out with me on my page, and we’ll remind you of things.

And then HST Guide, What the HST Am I Doing?

Definitely get that, even if Jessica said she might download it.

Yeah, I want to see.

I’m like, let’s just make sure I’m doing it right.

You know, there’s always more to learn.

Yes, and just to validate.

Yeah, about it.

You’re like, good.

I’m doing it right.

It’s like, nice to know one last thing to stress.

And then I’ve got that solo printer write off guide.

If you’re just starting out and you want to know what kind of things you can write off, that’s free as well.

But if you’re listening to this and you’re like, holy crap, there is a lot to keep in mind.

And we’ve just scratched the surface here and you’re just starting out.

Or maybe you’ve just kind of ignored this part of your business for a little bit, but you want to finally get it in order.

Then highly recommend checking out ChillBooks.

This is the course that will set you up for success.

It’ll set up your bookkeeping foundation.

I teach you exactly what you need to do from A to Z, from setting up those bank accounts, to looking at your financial statements, to digitizing your receipts, to categorizing, separating your sales tax, all of that in like a chill way.

That’s why we call it ChillBooks.

So definitely check out ChillBooks because it is going to walk you through everything you need to know in a way that’s not going to be overwhelming for you.

Amazing.

I wish that was around when I started my business.

Let me tell you, would have made a lot less mistakes.

Well, thank you so much, Jami, for joining me.

It was so great having you on.

I think you’re going to give a lot of people peace of mind and just like a great foundation to get started.

So thank you so much for joining me.

Thank you for having me.

Really appreciate it.