Tax question

I have never had to pay anything so far, but I've always only had 2-3 kids enrolled so maybe that's why? Plus my father in law is an accountant and he does our taxes, we have received between 1500-2500$ for a few years, although I doubt we will get that much this year since hubby makes more money now.

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Originally Posted by Wonderwiper

As a self employed person, you MUST pay into CPP. You pay both the personal and employer contributions. You do not have to contribute to EI but of course you can not collect it.

CPP payouts at retirement are based on how much you have contributed.

If you manage to claim expenses that bring your income down to the lowest level then you will not owe any tax. It would be rare for this to happen after the first few years unless you are not actually making any money.

So technically what you heard is correct. You can not claim EI if you do not pay into it and your CPP when you retire will be based on your contributions.

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See this is why i think i was told that. After deductions (yes, i deduct all that i can) i don't quite make the maximum non taxable amount (called the basic personal income?). Maybe that's why?? I don't have all full timers in my care so i don't make anywhere near 18,000 (only in my dreams :)

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Originally Posted by Fun&care

I have never had to pay anything so far, but I've always only had 2-3 kids enrolled so maybe that's why? Plus my father in law is an accountant and he does our taxes, we have received between 1500-2500$ for a few years, although I doubt we will get that much this year since hubby makes more money now.

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Yeah thats like me

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Originally Posted by Lilywildcat

See this is why i think i was told that. After deductions (yes, i deduct all that i can) i don't quite make the maximum non taxable amount (called the basic personal income?). Maybe that's why?? I don't have all full timers in my care so i don't make anywhere near 18,000 (only in my dreams :)

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ok well I don't know about what you have to pay if you don't make the basic personal amount but I have basically had all full timers (had two kids go to pt during mat leave) in my care for the last several years and make well over the basic amount after deductions and since starting my dayhome have never had a refund

Crayola, I owe about the same as you and am wondering about the monthly payments you make. Do you make these payments for the next year in advance? Are you paying it to the gov't? Do you find this is better than just setting money aside each month (this is what I currently do).

Sorry for all the questions lol. I'm just wondering if that option is better than what I'm doing now.

5 Little Monkeys- my understanding from talking to my accountant last year is that this is free service (meaning no interest etc) that you set up after one year of business with Revenue Canada. They basically look at what you pay this yr and divide it by 4 and you send them 4 payments (quarterly). Anything left owing you pay at tax time.

Thanks Torontokids....so if I'm understanding, there really isn't a huge benefit of doing this over just setting money aside each month?

Torontokids has it correct. First year in business, you aren't required to pay anything during the year, but if you expect to be in the taxable range, you may want to anyway. After that, you are required to use your previous year's income as an estimate for the following year. Whatever your business taxes were last year, you are supposed to pay the same this year in 4 quarterly installments. If you don't pay at least that, the government will charge interest on what wasn't paid.

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Originally Posted by 5 Little Monkeys

Thanks Torontokids....so if I'm understanding, there really isn't a huge benefit of doing this over just setting money aside each month?

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If you didn't pay tax on business last year, it could be more logical to put money aside and earn interest on it. Otherwise, you give it to the government and they make interest on it.

yes that happened to my husband ....he didn't make installments thru the year and he got an interest bill...yes 5 LM I just send monthly payments to the government ( I chose the amount so I hope I don't get an interest bill) and for me I would rather send it to the government every month then trust myself to save it ...it just works better for me ....and I made it part of my budget so its affordable. I use internet banking so the heading was revenue Canada instalments