What percentage of your income do you put away? I will put away a certain amount every bi-weekly pay so it accumulates over the year, but wondering how much from each I should be putting away.
What about EI and CPP payments? Can/do you make those?
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What percentage of your income do you put away? I will put away a certain amount every bi-weekly pay so it accumulates over the year, but wondering how much from each I should be putting away.
What about EI and CPP payments? Can/do you make those?
I put away roughly 20% of my fees each week into a high interest savings account ... this works as both my pool of money for taxes, if I were to get sick and for my 'retirement' savings as well. I also put all my security deposits from clients into this account so that I do not 'spend' it and when a client gives me notice if I have enough notice I can plan my budget to do without their last two weeks income and KEEP the security deposit in my savings account as additional savings but if they give me minimal notice and I therefore 'need' the money I can withdrawal it out into my chequing account to cover expenses during those two weeks before I fill the space with someone.
We are all required, based on our income, to pay into CPP when we do your taxes at the end of the business year ~ how much you pay into this will vary depending on your income and there is a 'max' that you pay where it does not matter how much more income you earn over that the CPP contribution are the same.
Some providers are able to earn enough 'income tax credits' based on their household income that they actually do not appear to have to pay CPP and either just own nothing and some actually get a 'refund' despite not having paid any income tax over the year because they paid enough in other taxes like GST, Sales, Property and so forth that the credits earned there resulted in the government owning them money ~ but they still have paid into it its just that their credits outweigh what they owed in CPP.
I personally do not pay into EI because it is not required and I do not see the benefits for myself as I am past child bearing years and no longer in need of maternity benefit and I do not want to pay a premium on a short or long term illness plan that in all reality I will never get my 'money back from' because when it comes time to claim I would only receive 55% of my after taxes income which is well SQUAT ... so choose to putting that $$ into a personalized savings plan where if I get sick and 'need' the income it is there for me and if I do NOT that it is still therefore me to use as I see fit in my retirement!
I do is this:
Take my weekly income, multiply it by 52 weeks. Then I divide it by 12 and do 20% of that. It ends up being a little less than being 20% per week. I put away that amount per month. Since the taxes are based on how much you make for the whole year, then I try to figure out how much I would make for the year and put away money for taxes based on that.
Just wondering, since you ladies said you put away 20%...do you end up actually paying that much in taxes at the end of the year?
I'm a bit nervous now. I usually put away 15% of what I make each month. Is that too little??
Oh good lord no ~ I have basically been full since I started with maybe 4 weeks a year where I have had only 4 kids between transitions ... and honestly most I have paid so far was $800 and that was my FIRST year and it was due to having cashed in an RSP the year I started because I had been employed a portion of that year, on sick leave a portion of that year and than started the daycare the last portion ... every year since than has been less because my full years worth of expenses gets my income down to less than half my revenue ... and you can earn up to $11,995 or something like that and pay no tax on that portion so it is only the % above you are paying tax on ~ and than it would depend on which bracket you which % but seriously you have to earn more than $42,000 AFTER expenses to be paying more than 15% tax.Quote:
Originally Posted by kangaroomama
http://www.cra-arc.gc.ca/tx/ndvdls/fq/txrts-eng.html
I put away not only for taxes but also for my savings for when enrollment might be low and retirement!
Oh I'm so glad you don't actually end up paying that much. I've been putting away about 100 - 150 a month as that's what other providers in my area said they do and with thier write offs they never end up owing. When I seen the 20% last night I was freaked out and started thinking I was going to have a huge bill at the end of the year. I contribute to an RRSP and savings seperatly so I guess I have those other aspects covered. 20% of my monthly is approx 500 so 6000 a year and I was thinking THAT MUCH?!? Even after my write offs?! lol.
Anyone contribute to EI for self employed? I don't know how much it is but as my hubby and I are thinking of maybe adding to the family sometime soon I was thinking I should start contributing.
Nope I do not ~ personally I do not think it is a viable resource for long term home childcare providers ... my understanding from reading about it is that once you opt IN you are not allowed to opt OUT you have to continue paying into it until the day you retire and when / if you make a claim you are only going to get 55% of your 'taxable income' from the previous tax year .... so theoretically speaking if your revenue for your business is $40,000 and you have over $20,000 in expenses that means your 'net income' is $20,000 - $11,995 tax free base we are not 'taxed on' so $8005 is your 'taxable income' ... so you would only get 55% of the $8005 or a whopping $4400 for your mat leave and for that PERK you are going to have to pay EI contributions for the next however many years until you retire? Not to mention that if your previous tax year for your claim was a BAD year where you were not full or something and your income was low than your going to get even LESS but future years when higher income than you are paying EI premium based on that :(Quote:
Originally Posted by Toregone
Now if home childcare is a short term option for you and you are going back into the 'employee' workforce anyway and are going to have to being paying into this mandatory anyway than sure go ahead ... personally I plan to stay self employed until I retire cause I cannot imagine having to work for someone again so for ME it is best to just invest into a strong savings account ~ if I need to take time off work than I can draw on my savings to cover bills and if I never have a health emergency than I have that $$$ in my own savings account it is not going into some social service pot for the government to waste on me on high administration costs ;)
Also another option for maternity leave for home childcare providers is to keep your daycare open and hire someone to come in and work for you ... this way you still get all the tax advantages that year of the home based business and 'some' income coming in after your expenses of paying an employee and you do not have to start your daycare over again when your mat leave is over ... many providers find this a win win situation?