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I was just wondering how you go about figuring out how much to set aside each month/week for these things (Taxes, CPP, EI). I don't want to make it complicated. I just want a percentage of my gross so that I have enough money to pay the government at the end of the year, but not such a high percentage that I am overtaxing myself.
A lot depends on how much you make. You wont have to pay EI because you are self employed. tax and Cpp are based on your earnings. I usually pay between $800 and a $1200 dollars but that is mostly CPP. I know that I should put money away each week but life always seems to get in the way. Fortunately hubby gets enough of a refund that nothing comes out of our pockets, we just use his refund.
Hmm, I was under the assumption that if I were to ever go off on maternity leave again that I had to pay into EI too. I know someone told me it was optional, but I'm probably going to pay into it only because we don't know if we're having another child yet :)
What percentage do you use to figure out how much to take off? My hubby thought 20%, but then someone else thought that would be way too high.
Reggio, I believe, made a very good point on the EI contribution topic. That once you decide to contribute you can't just stop contributing (once you either decide no more babies, for example). So, for the amount you would pay in contributions well worth it not to (for the small amount you would get in return) and to put that money in an investment. Hope that all made sense.Quote:
Originally Posted by venusrockstar
Wow! I think I pay on the very high end of the tax bracket around $3,000 a year. I think I need to find a new accountant!
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Originally Posted by Zoeysdaycare
That is quite high but like I said it depends on your income and how many deductions you have.
It could be that the accountant isn't aware of all of the extra things we can deduct compared to other home based businesses - water is one example in theory not allowed in the formual for say someone who is a writer or real estate agent with a home office since making coffee or using the bathroom is considered personal whereas for us cooking lunch, washing faces, toys and bedding is considered work. The amount of home use products ie cleaners, paper towels, toilet paper, lightbulbs, batteries, etc. is often underestimated. Also the amount of the home being used for daycare can greatly effect the formula so the more of your house you use in your daycare day the better it is for you in terms of deductions.
I basically put 15-20% away in savings for taxes, vacation/sick time i might take, and rainy day fund ... so I put 1 child's fees into savings each week if I have a time where I am not full than I scale that back accordingly.
How much tax totally depends on how much your income is over your business expenses as well as your household income, dependants and so forth which affect the tax breaks/rebates you might be entitled to ... I know providers I network with who we all make roughly the same revenue and expenses and some pay ZERO in taxes and others pay anywhere from $800 - 2000 in taxes .... all because of their spouses income or number of children they have being different aka if you have no spouse AND children you are going to get the most tax breaks / rebates, if you have a spouse and 4 children you are going to get way more tax breaks and rebates and someone with a spouse but 0 children and so forth ... it really does vary vastly!
I honestly recommend that you either tax a business tax course geared for home childcare if you are going to do them yourself OR hirer an accountant with a good reputation for dealing with home childcare industry to help 'set you up' to do it yourself ... both are tax deductible business expenses and wise investments!
As for the paying into the EI as a self employed person ~ yes this is an option now ~ however I would totally look into the MATH of that for your family to see if it is worth while! As unlike being employed where you pay a 'portion' of it being self employed you have to pay ALL of the premiums both the employer and employee portion ... and than if you need to make a claim you only get 55% of your NET PAY for the previous tax year which if it was a 'slow year' could result in a significant less mat leave than you were hoping for :(
Plus if for some reason you do not end up 'needing' it you have paid all this money into something that benefited 'others' and not yourself .... if you were to determine how much $$ you would get for a mat leave if you did pay into EI and than put aside that into your OWN savings for a mat leave if you than end up not having another child the money is still YOURS and you would be able to than use that revenue for retirement, vacation, education of your other children and so forth ... you pay into EI and never use it the government says 'thank you for your kind donation' ;)
Also think about maternity leave in terms of will you actually take a full year off and benefit. Since we are at home many take only a few months and then start back into care. You can't work and collect benefits. The reason for paying in is mainly for maternity leaves. I don't believe you can collect for any other reason such as low enrollment so as mentioned you would do better to just save the premium yourself each month and then pay yourself while on mat leave.
For home based business you have to allocate on income tax return either room or square footage use ie: 1 out of #rooms in house or 300 sq ft or 2200 sq ft home and eligible home expense will be calculated by the software. Home expenses you can claim are HEATING, ELECTRICITY, INSURANCE, MAINTENANCE, MORTGAGE INTEREST, PROPERTY TAXES, OTHER EXPENSES.