Question About Taxes From A Very Newbie Provider.

Hi ladies,

So I'm going to put it all out there, and would love to hear back with your thoughts and experiences with this..

So I started looking for clients middle of February, went through many many interveiws, finally at the end of march I sighned on my first family..

The next family started April 15

The fourth family started second week of may

My last family started the last week of may..

So in the course of about 2.5 months, I have made roughly $5000..

Now when I started all I had we're toys from my son, over the course of the 2.5 months I have stalked up on toys for the kids, dishes, dippy cups, carpets, play structure, pretend stuff ect. and just this last week craft stuff..

I am now finally ready/able to put money away for taxes..

Now my question is.. Shoukd I be worried or concerned that I haven't saved any money yet..?? I have every single receipt saved?? I'm just feeling kind of nervous right now.. Also, if you don't mind telling, how much did you have to pay in taxes at the end of the year..

Would it be a good idea to hire myself an accountant, I don't mind and I know I can right it off at the end if the year.. Does anyone have any experience with paying the tax portion monthly and sending it in and getting money beck at the end of the year? How does that all work?

Thanks for reading and for your replies very much appreciated!!

Hi there, it sounds like your business is off to a terrific start. =) Good for you ! I don't think it's necessary to hire an accountant for your taxes. I do my own and it's pretty straightforward. That said, being organized is important - and it'll make things so much easier for you. =) I pay my taxes in one lump sum every year and I find that it works pretty well for me. This past year I had to pay (approximately) $4500 - gulp ! What I found helpful was as soon as the new year rolled around (in January) I filled out my tax paperwork online (Netfile). Don't submit it though - you're just trying to get the dollar amount that you owe. Once I knew how much money the taxman wanted I still had the better part of four months to save up what I needed. (I had underestimated what I would owe by about $1500 so my "tax" savings account was a little skinnier than it needed to be. LOL) If you set about $500 a month aside for your taxes you should be fine. Do keep those receipts though - things add up in a hurry. I'm always amazed when I calculate what I've spent on expenses every year - last year my food bill was $8000 ! (It costs me about $5 a day to feed my monkey's which I gather is pretty typical) Still - you want to be able to claim that kind of expense for sure ! I assume that you're issuing receipts to the parents, so it should be pretty straightforward for you to track what you've earned in a year. In addition to toys, craft supplies, cleaning supplies, and food (all of which you can claim 100% of the costs) there's a bunch of other stuff that you can claim as well. i.e. professional memberships (do you belong to Child Care Provider's Resource Network or any other caregiver groups - if there's an annual fee you can claim it) job related training that you paid to participate in (i.e. St. John Ambulance training) You can also claim a percentage (I claim 10%) of your heating bills, your hydro bill, your internet (if you use the internet for advertising purposes) and your water bill. I also claim a portion of my home insurance (because I have additional insurance for my daycare) You can also claim office supplies that you are using for daycare purposes - I claim a couple of printer cartridges every year (printing out contracts) and my friend claimed her new printer (she uses it to print out flyers/newsletters for parents) Lastly, you can also claim any equipment that you need to buy for the daycare (playpens, high chairs, strollers, wagons) Hope this helps, and hope things keep going well for you. =)

Yes, definitely have an accountant do your taxes, especially the first year. Have a sit down with him/her and discuss your expenses, what you can claim, percentages you can claim for your utilities, percentage of your home for daycare space and possibly home office. There are many things you can claim that you would not have thought of so start out with professional advice. It can save you alot of money. I have always had an accountant do my taxes. Piece of mind in case I get audited and I know it is done correctly. I want to be able to sleep at night. And of course their fee is a business expense. Congratulations on a great start to your business.:thumbsup:

Hiring an accountant only works if you get one that understands the nature of our business and what things that we can claim that some other home businesses can't such as water.

Also when you consider there are 168 hours in the week (24x7) and children are in care for 10 hours a day for 5 days that is 50 hours you should be able to claim closer to 30% of household expenses rather than 10 so that will bring your amount owing way down. I know many that earned $40,000 in income but with their expenses did not pay any taxes other than their Canada Pension so for sure don't be upset that you have not saved yet. Often we try to put away the fees from one child into a towards taxes fund which pays the taxes and gives you a bonus of money in April. There are several threads on here about taxes that includes links to the Revenue Canada site where they have a booklet you can download on using your home for daycare. Doing your own taxes is really quite easy if you have saved your receipts all you have to do is add them up and put the numbers on the right line of the form.

I prep all my receipts for my accountant who then has to look at totals. Every year I learn a few more things regarding taxes for a home based business that serves the needs of others in-house. If you bring your paperwork prepared, the cost is low. I paid 125.00, live in the GTA and if an accountant has trouble figuring out the tax laws for our type of business, then they need to find another line of work.

Something I was told about claiming household expenses, it is not just the time your business is open, but you also have to factor in the percentage of your house that the daycare uses. So you may use the daycare 30% of the hours in a week, but if you only use a third of your square footage for daycare you can only claim 10% of your house-related expenses. Which makes sense for property taxes and such but not when it comes to power and water, which are way higher due to the daycare.

Yes there is a formula but most people use more than a third of their home for the daycare and that is an area where an accountant gets confused as there is an I think 25% limit for a home business but we are not in the same category as someone who has an office in the home that they work from. Most of us use pretty much the entire house at some point in the day by the time kids nap in family bedrooms. The formula takes the space used divided by the total square footage of house times the hours of care used divide total hours (168 hours per week) x total expenses for the house including utilities, insurance, property taxes, mortgage interest, household repairs. That gives you a pretty hefty reduction usually.

Also one of the things to remember is that you can claim a lot of what you already have when you start care that belonged to your own children such as a playpen or highchair they no longer need that you will now use for the daycare. You sell it to yourself the same as if you had bought it at a neighbourhood garage sale. Write yourself a receipt giving date the change in use was made and the amount you are claiming.