How much record keeping do I need to do? I didn't think of to keep all of the grocery bills. :( Would that be a problem for me? Has anyone been audited by CRA where they come to your home and ask for all your paper work? I feel stressed!
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How much record keeping do I need to do? I didn't think of to keep all of the grocery bills. :( Would that be a problem for me? Has anyone been audited by CRA where they come to your home and ask for all your paper work? I feel stressed!
Taxes are stressful!
The more organized and cross references your business records are the 'smoother' an audit would go!
I keep all my contracts for the year accompanied by my copy of each clients childcare tax reciept in my tax file. On my flash drive for that tax year I also have my electronic file of fees billed and received for each client on an Excel sheet which matches or cross references that. I also have a daily log i keep which records attendance which cross references my 'billing and receiving' ... so several different ways to document and prove my income that all back each other up as 'proof'.
For expenses keep EVERY receipt you can as back up to anything you write off as a business expenses and if you purchase something or spend money on your business that does not GIVE a receipt than make your own.... so for example sometimes I have to pay for parking for field trips we go on - I make a receipt for the cost of that indicates the date, place and reason for the expenses. In my daily log of attendance and program activities I would also note that 'field trip' as a cross reference to that expense in an audit.
My accountant suggested it is ideal to keep ALL your grocery receipts - both daycare portion AND personal portions .... even if you do two different check outs to keep them separate ... rationale being that in an audit you need to be able to prove your expenses were indeed 'daycare related' and not personal mixed in so being able to show receipts that cover 'both' is helpful....otherwise you could get a CRA auditor who makes life difficult saying that without personal receipts they feel your expenses are not reasonable. So for example last year I claimed almost $8000.00 for groceries for my business to feed 5 children 3 times a day - some might think that is 'excessive' depending on their cooking and nutritional practices however I have grocery receipts for almost $20,000 which shows that A) a higher amount was saved for personal use despite the fact that B) we are only a family of 2.5 my spouse and I and my stepson is only here part time and the reality is that I likely spent MORE than $8000 on business portion of food - however did not want to be too aggressive in write offs.
If you have not done it for the first year not much you can do about it now - but moving forward I keep ALL receipts for anything that is going to be written off for business purposes .... so if you are writing off a portion of your hydro bills, your gas bills, your call answer or ID on your phone cause you got it for business purposes, any toys or equipment of craft bills and so forth!
If you are struggling and stressed - hiring an accountant your first year or two to 'help' you get your book keeping and record keeping organized is an awesome and many people just feel more comfortable having the accountant long term - their services are a business expense you can write off in future years!