Just 15 more days till tax day...in Canada

My family and I spent most of 2009 as expatriates in New Brunswick, Canada, but today, alas, I bring no bawdy tales of being screeched in as an honorary Newfoundlander, or of seeing mooses in Cape Breton, or of watching whales blow in the Bay of Fundy, or learning how to curl (which is far more difficult than it looks).

No, comrades, the topic du jour is an international freelancer's view of the differences in our income tax systems, which for some reason is on top of my mind today.

• I can't speak for anyone else, but at our income level, a Canadian pays more than a comparable U.S. citizen. A lot more. Keep in mind, this is on top of an already-nasty federal/provincial sales tax (13% in N.B.) and, worst of all, wicked tariffs on liquor. Oddly enough, easy access to unemployment benefits (known shorthand as "EI," for Employment Insurance) and healthcare are not free. They are expensive.
• Although we paid into the healthcare and EI systems, we were not eligible for benefits. We were covered by a Cigna International policy.
• That being said, I admire how simple the Canadian T1 General Income Tax and Benefit Return is. Ours was 19 pages long, and it covered both federal and provincial taxes.  
• By comparison, our fed and Arizona forms ran 47 and 16 pages, respectively. And to add insult to injury, the postage to mail our 1040 cost almost a dollar more than the T1!
• The T1 is also admirably clear about what your tax rate calculation is, compared to the byzantine B.S. charts in the U.S. system. The Canadian government appears quite content to spell out how badly you're getting reamed.

On a final note, for U.S. citizen freelancers who find themselves outposted north of the border: Make sure you're an LLC. As it turns out, freelancing in Canada went very smoothly and my fears from last May of owing taxes to the Dominion on my worldwide income were unfounded. Our tax preparer concluded that "Boomvang Creative does not carry on business in Canada through a permanent establishment maintained in Canada."

Uncle Sam, you're very welcome.

What your business can learn from another roadside attraction

On the Trans-Canada Highway in New Brunswick just shy of Nova Scotia, there's a tourist attraction called Magnetic Hill. It gained fame in the 1800s as a place where your horse cart would appear to roll uphill, though today it's arguably better known as an amusement park/water slide/zoo complex that also holds rock concerts for long-in-the-tooth headliners like AC/DC. There are enough "gravity hills" in the world that Wikipedia has an entry for the phenomenon, though the one from which this particular site takes its name is pretty well an afterthought at this point.

Like so many roadside attractions, Magnetic Hill is, alas, a tad underwhelming. You pay your five bucks, get your instructions from the hill attendant (a frontrunner for Boringest Jobs in North America), and drive to the appointed marker a hundred meters or so in the distance. Put the car in neutral, crane yourself around so you can see out the rear window, let off the brake and, voila, your brain thinks you're coasting uphill. The illusion isn't terribly convincing--as my teenage son put it, "I think it's more like Momentum Hill."

So, the business angle. You always hear experts say that you should never overpromise and underdeliver, but that's the business plan of just about any roadside attraction, isn't it? Their marketing abilities deserve the utmost respect, surviving on no more than an endless tease of billboards and quarter-page ads in local tourista publications. Because they're dependent on a fool-me-once clientele, the "underdeliver" part doesn't really matter. Repeat customers, on the other hand, require reliability and trust. The lesson in here for freelancers, or for that matter any type of businessperson, really comes down to promising and delivering. Say what you're going to do, then do it, and you'll have a good chance to do it until you don't want to anymore.

Then again, you could argue that our family has derived far more than our $5 worth of laughs since being lured off the highway on that fateful summer afternoon. Unforgettable experiences come in a variety of packages, eh?

Arizona Dust

I'm taking a break from loading the trailer while a snowstorm drops the first of 30 centimeters on us. My computer will get boxed next, so this will be my last post till I hit the road in the morning.

Yes, our Canadian tour of duty is complete and it's time to head Phoenixward. Too many thoughts rattling around in my head to do any of them justice, so I'll let Blue Rodeo, a quintessentially Canadian band, handle the outro for me. Their lyric--"As I’m eating Arizona dust/And wishing I was home"--testifies to the power of returning to the places that make you happy, even if they're not the same for each of us (and occasionally 180 degrees different).

Veterans and Remembrance days

With one foot in the U.S. and one in Canada, a Veterans Day thank you to those who served and a Remembrance Day thank you for your sacrifices.

Mommy-Blogging Bait

I'm not a mommy blogger and don't consume beauty products other than soap and toothpaste, but as a former denizen of the custom-publishing world, this story in Ad Age caught my eye... "P&G to Launch Custom Beauty Magazine Rouge in U.S.: Package Goods Giant Plans to Build Database by Relying on Mommy Bloggers to Spread the Word." The scale of the project is pretty astounding for a mailed piece:

Procter & Gamble Co. is enlisting help from mommy bloggers as it makes over its Canadian custom-published quarterly Rouge for a full-scale U.S. launch expected to reach 11 million households in both countries by next year....

...The appeal driving mentions of Rouge among bloggers is pretty simple: It's available at the internet's favorite price (free) and comes loaded with coupons, which happen to drive much of the routine chatter regarding package-goods brands in social media.

I do wonder if the mommy bloggers will get behind the cause without a quid pro quo; maybe the bad economy is what makes coupons an attractive ploy. Even without knowing the cost per unit, I'm inclined to think that P&G will eventually kill the physical magazine and focus on the web site after a few issues (i.e., once they've captured the names). Then again, a custom publication isn't at the mercy of the horrific ad sales environment, and with publications going out of business, it may be a buyer's market in the print biz.

Anyway, they got their links and couple of minutes of free press out of me, so I guess I'm an honorary mommy blogger after all...

Search me

Took a quick cruise through my Google Analytics to assess what topics drove the most traffic over the summer. No big surprise that six-figure freelancing and mommy blogging were among the leaders, though I confess that's a tad disheartening; I was attempting to inject some realism into a get-rich-quick world. Then again, who am I to dash the hopes of boxer-short billionaires and tighty-whitey titans?

I had to chuckle at the fact that the Sons of Maxwell "United Breaks Guitars" video delivered a real spike. (Even though I'd used it as a jumping-off point to discuss customer service, I'm sure googlers were a bit baffled to end up on a blog discussing freelancing and small business topics.) On the other hand, it seems as good a time as any to link to their second video--which features a catchy singalong hook, guys in lederhosen, and a white van with UNITED duck-taped on every side:
United Breaks Guitars: Song 2

Playing "Easy to Get"

A not-insignificant portion of my freelance time is spent tracking people down. For corporate copywriting clients, that time is generally on their clock--no harm done, part of the frictional cost of doing business. When it's a resource I need for a magazine feature, however, any runaround comes at my expense--deadline and pay rate.

A few weeks back, I contacted a well-known political figure for an article in Speaker magazine, which named her as one of the nation's 25 top professional orators. She replied by email that she was too busy, and her assistant was equally unhelpful and unresponsive. I frankensteined together a profile from existing public documents; serviceable enough, but unsatisfying.

Contrast that with yesterday. I'd been assigned to write a profile about someone whose book currently resides on the New York Times bestseller list. Mentally, I prepared myself to endure a multi-week game of phone tag that would push me up against my deadline, and to perhaps never reach him at all.

Low and behold, I received a positive email response back in less than 2 hours. Within 3 hours, his assistant had sent me a list of 10 possible interview times to choose from. Woohoo! There are all manner of conclusions you can draw from this type of response, not the least of which being the difference in responsiveness one can expect from a businessperson compared to a politician. Most of all, it reminded me how powerful a personal statement it is to be easy to reach, fast to reply and eager to help.

I can't reveal his name or the name of his book at the moment, but will do so at a date closer to publication. I'm about halfway through the book, and very much looking forward to interviewing him later this week.

***

I'm still wrapping my head around what a surprising and fantastic trip we had through Atlantic Canada, and will write further in the coming weeks. But what I will say is that St. John's, Newfoundland, was the most genuine, most welcoming place I've ever been. (I was going to say "bar none," but they're kinda famous for the several dozen watering holes on George Street.)

Vacation, all I ever wanted

I always find it curious when self-employed folk resist taking a vacation, as if the world would stop spinning in their absence. No, you don't get paid while you're gone. No, an important new business call might come in and there's no one there to answer it. It's the circle of life, Simba.

So, today we're off--sans kids and sans electronic connectivity--to Cape Breton and Newfoundland for 10 days of simply messing around in boats, on bicycles, and on beaches.

I'll look forward to catching up with all y'all upon our return on July 26. Be well and be good. But not too good.

Sons of Maxwell: "United Breaks Guitars"

Anyone who's ever had luggage delayed, stolen, damaged or pulverized by an airline will appreciate this Sons of Maxwell video and the backstory on the band's website about the destruction of a $3,500 Taylor guitar and subsequent customer service runaround. A couple of thoughts, in no particular order:

• This Canadian band's humor, employed in a video that's now been viewed nearly a half-million times, is a far more devastating approach than 100 handwritten letters and phone calls to customer service
  
• I love, absolutely LOVE, the fact that they call out the name of the customer service person that gave them the final "no"--instant, well-deserved infamy!
  
• What conversations are taking place at United right now about how to handle all the negative PR they're getting?
  
• Do you think they regret taking responsibility and doing the right thing?
  
• Will United approach things differently next time? Do you think their competitors have taken notice?
  
• How many times over have these guys made back their $3,500, thanks to people like me having downloaded Dave Carroll's solo CD at $10 a pop? I think their only mistake is to not have any of the Sons of Maxwell albums available on iTunes. I emailed Dave; will let you know if I hear anything, but I suspect he's got a busy schedule!
  
• Dammit, I wish I could play the guitar. Or sing worth a crap.
  

A Tale of Two Costcos

Our first visit to a Canadian Costco showed it to be a reasonable approximation of the U.S. version, minus the booze department. (Not having $10 jugs of Yellowtail is a dreadful minus, but I digress.)

In four-plus months we've found Canadians to be exceedingly orderly and polite in lines, which makes queue-intensive activities such as skiing and shopping generally pleasant. But Costco's Scylla and Charybdis of bulk toilet paper and 12-paks of Chef Boyardee seems to have jammed the collective radar: The parking lot was utterly chaotic, and inside, with the monster carts and no evident traffic pattern, was no better.

We survive the melee and arrive, overflowing, at the checkout. But they don't take the Costco credit card. And our debit card won't work at the checkout or ATM because it has a VISA logo on it. And our Canadian debit account doesn't have enough cash to cover the bill.

Uh-oh. The line is growing and we are Ugly Americans in progress.

Ah, but here's where Costco and its employees shined, a testimonial to good hiring and training. The cashier swiftly hailed a manager to let him know what was going on, pulling us aside with the full cart and our receipt so that the line could keep moving. She'd also overheard us say that our card usually works at Scotiabank, and so she pointed out the one on the other side of the mall. I hustled across the lot (dodging cars) to get the dough, came back, and paid the bill.

Costco's customer service hit exactly the right notes. The cashier was profusely apologetic, which she didn't need to be, but it certainly made us feel less horrible at having caused the snafu and nearly an international incident. The lesson for client relationships is that there's no benefit to beating up a customer when they're already doing it to themselves.

The epilogue is that we took a 20-minute wrong-way detour before getting on the right highway to go home, but, hey, you probably could've predicted that.

A Tale of Two Borders

We're four months into our year-long Canadian adventure. Suffice it to say, the cultural differences have been more significant than we'd anticipated, and more than you'd ever realize in a two-week holiday jaunt. Not in a bad way, mind you, but surely in ways that make you think.

At the risk of oversimplifying, our goal while we're here is to follow the Switzerland principle: Take no sides. We've encouraged our kids to err toward silence while the States' way of doing things takes a daily bashing from classmates and teachers. My wife and I have strived to be models of neutrality in the face of same. (It's actually quite humorous when someone goes on an anti-U.S. rant thinking that we're Canadian.)

But as we were chatting over breakfast this morning, we hit upon kind of an interesting nonparallel (perpendicular?) situation from our experience in the States. Our home is in Phoenix, a few hours from the Mexican border and the Sea of Cortez. We have friends, many of whom have lived in Arizona for years, who hate Mexico. They do not go there. They do not care that the beaches are beautiful, the beer is cheap, the food is great, and the people are friendly. Like Dr. Seuss's Sam I Am, they won't go if invited, and they'd never go on their own initiative.

In contrast, you don't have to go very far around here before finding scads of people professing to dislike the U.S. who nonetheless cross the border on a regular basis for cheaper and more-varied shopping, half-price booze and vacations. (As above, I find it humorous rather than injurious to my patriotism.)

I make no judgment presenting this here, not on Canadians for going to the U.S., nor Phoenicians for refusing to go to Mexico. I know full well that we are just one data point in one province, and I am aware that you can't draw an equals sign between traveling to the U.S. and Mexico.

It is simply, as Rod Serling used to say, "for your consideration..."

$59.50 screwdrivers and other bad ideas

We've all heard about the feds paying $300 for a hammer. They're a bloated bureaucracy; that's what they excel at. But even a non-bloated, non-bureaucracy runs the risks of such inefficiencies. All it takes is for otherwise-smart people to fail to think things through.

About a year ago, my neighbor Anne-Marie borrowed a screwdriver from me--a standard-issue Stanley phillips head. Then she accidentally left it in a rental car. She said she'd replace it, and I told her not to worry about it. Then she moved out of town.

Fast forward to last Friday. I'm running my freelancing business in Canada, but maintain a U.S. business address in order to make life convenient for my clients. We've also forwarded all of our home mail to the business address, and every two weeks, the mailing service packs up and forwards everything to us in a letter-size Priority Mail envelope.

So this week's shipment comes in a huge box, and inside that is a smaller box, and inside that smaller box are two bubble-wrapped (!) screwdrivers from Anne-Marie. (Addressed to "Matt," which just added to the unintentional comedy.) For fun, let's do the math:

• 2 new screwdrivers=$20
  
• Postage to send screwdrivers from Anne-Marie to Phoenix=$4.50
  
• Excess postage to send big box instead of letter size to Canada=$20
  
• Original lost screwdriver=$5
  
• Screwdriver that I'd already bought 11 months ago to replace the lost one=$10
  
• Jake's lost braincells=Priceless
  

Because my head already hurts, I'm not going to calculate the time cost of all of the participants, or worry about why someone would bubble-wrap a screwdriver. And, in her defense, she had no idea of the Rube Goldbergian route her kindness would take. But let's just say an alternative plan would have been, for example, mailing me a $10 bill or $10 check. Or simply forgetting about it altogether.

Stop me if you've heard this one before

So an American attorney, a Canadian tax accountant and an American CPA walk into a bar...

Well, they didn't really walk into a bar--I've been talking with them in trying to get some international tax issues sorted out. Being self-employed in another country comes with a heap of implications far beyond the usual capabilities of QuickBooks, TurboTax, voodoo and chicken blood.

Long story short, we were informed by the Canadian tax adviser that I am going to owe taxes on my "worldwide income" to Canada for the time I am here, and U.S. law provides for the Foreign Income Exclusion so I'm not in double jeopardy. (Note: All of my clients are in the U.S., but because I am doing the work while residing in Canada, they have a claim on the taxes.) So far, so good.

After arriving at the arcane intersection of immigration law and tax law, however, I concluded that there was another key step: I needed to make sure I wasn't obligated to pay into both countries' social security systems. This is precisely what the US-Canada Social Security Totalization Agreement does, and we have similar treaties with dozens of countries.

You can read the legalese in its entirety if you can't get to sleep tonight and/or want to have nightmares, but here are the steps I'm taking based on the counsel I've received:
1) Apply for a Certificate of Coverage as a self-employed individual from the U.S. gov't.
2) Present said certificate to the Canadian gov't.
3) Apply for an Individual Tax Number for Non-residents, which gives me a route to pay taxes to Canada.

"And the taxman’s shouting ’cause he wants his dough
and the wheels of finance won’t begin to slow."
--The Jam, Burning Sky