Tax woes in august!!

I stated daycare last April. Came from a corporate retail background, so, being naive, I didnt know that I could claim anything, had to issue receipts etc.
I had 3 families start with me, 2 of them stated from the beginning that they 'are not looking for receipts' (which to me, meant that they wanted 'lower-cast' daycare and wanted to save a few bucks opposed to the p[ricier daycare up the street that issues receipts. I had no quams, and so took them all on. All of them knew I was not issuing receipts. (I was also charging a PER HOUR BASIS! At $27/per day. Cheap!!

After discovering this forum, informing myself, and getting my s**t together, I developed a contract, and new families that I took on in August and November were on this new contract and paying $32. My families that started last April also signed on starting January 2012. They knew the changes were: my rate went up $5 per day, now charging for stat holidays and sick days BUT I am now issuing receipts. All was great.

Come tax time, one of the moms (shes a sweetheart, nice, and pays on time, kid's a doll etc) asked me to clarify if I was giving receipts or no. Shes fine either way. I straight up told her no, because I was charging so little and had just started up I hand planned on it. She said no problem, thaqt was fine. Okay, good. I file my taxes, only claiming the income from those kids I had receipts for and only claiming expenses for food to those kids as well.

Now, TODAY, she texts me and says she is just NOW filing and the daycare expenses would have a huge impact on her return. ($500+) She asked me straight out :"is the reason you did not give out receipts is because you did not claim the income?" (Sounds like she was coached by her tax lady right there, doesnt it? lol).
I explaiined to her what I just explained to you all, I had no idea I could, I was charging less, and all that. But quickly said that I will prepare a receipt for her to pick up this evening. told her I will do an admendment on my taxes and its no problem, she is entitled to it. (Which she is)
Im just a little peeved, how could she be so clueless all those other time she was aware about no receipts, but just NOW, IN FREAKIN AUGUST does she mention it. Of course im not going to stiff her, but it just irks me.
I need to go back and change my taxes now? like wtf!?! arggg!!

Sorry you are being put in this position, but this is why I do not do under the table anything for anyone. :(

Yikes! Sorry this is happening. At least you know going forward to issue reciepts for everyone. Understandable when you were first starting out that you didn't know everything but now you do so make sure to CYA! haha.

I am very glad you are issuing her the reciept because you could be in a lot of trouble if she claims it and you have not. It is illegal to not claim income as it is illegal to not issue reciepts. Just count yourself lucky that you did not get audited!

I would consult an accountant. You could be in very big trouble if audited and you haven't claimed all of your income. If you have ever put cash into your bank account, or unaccounted for cheques, Revenue Canada could come after you. Not trying to scare you, just be aware that it is illegal to accept income for services rendered and not claim the full amount. I would imagine that re-doing your taxes to add income to it that was previously not claimed could draw attention to the auditors.

Ya your dilemma sucks for sure ~ but unfortunately what you were doing was 'illegal' and CRA will not take ignorance of the rules as an excuse specially when a quick google search will bring up their operating a home childcare business out of your home brochure with all the rules in it.

I will admit this is why I do not understand the practice of working 'under the table' because the risk is HUGE to the provider if caught and there is no benefit to the CLIENT because someone who is working under the table likely does not carry insurance and all the other business precautions that protect the client not to mention the TAX CREDIT they are loosing often does not = the 'savings' they thought they were getting ~ aka it costs them more in the long run if they are not claiming childcare tax credit!

Plus as you are learning even if you charged her less in exchange for not providing receipts and they 'agreed' there is nothing from stopping them from claiming the expense anyway after the fact ~ yes they run the risk of getting audited and them saying 'no we are not accepting this claim because there is no SIN or BIN to back trace the receipt from' ~ however there is nothing stopping her TRYING to creating her own proof of expense and providing them with the information she has about your service ~ aka if she paid by cheque giving cancelled cheques with you name on them and even if she paid by cash printing out her bank statements that show she withdrew X amount each week and giving your name, address, and contact info and sending them over to audit you :(

How much income are we talking between April ~ December of last year that was unclaimed? My advice would be to redo your taxes properly claiming all your income not just this ladies but the other people you did not issue receipts too and see how much 'difference' it makes between claiming the income and a 'guesstimate' of all your expenses for those 9 months even if you do not have receipts there are things you can show based on receipts you are keeping NOW to back up those expenses in your first year ~ you might be surprised that you do not owe any more or you might even get a 'refund' depending on your income cause my first year I had more 'expenses' than I had income ~ either way I would refile for sure and just 'explain' that you were unaware at the time that you had done them incorrectly and now are wanting to fix it ...cause IMO better to be safe than sorry if you are 'audited' and you owe back taxes they charge you compound interest on it so that $400 you might own now 7 years from now could equal triple that :(

Sending quick and easy solution vibes your way ~ every adversity we face in life makes us stronger and wiser!

Ya, your client was probably just as "in the dark" thinking that she was saving a few bucks by not taking reciepts. Until she saw her accountant and was asked if she has her daycare receipts. I hope you've raised her rates as well and she is not getting the lower rate based on no reciepts anymore.

This business teaches us all sorts of lessons as we go doesn't it? I hope you have a quick and easy solution and it doesn't cost you too much.

Unfortunately, a lot of parents are in the dark about how claiming daycare costs works. They don't understand that it is a direct deduction off their income!! I can never understand why any parent would be okay with not getting a receipt. Stupid.

Yep lesson learned thats for sure!! The amount is about $4400. My tax lady calculated that it will cost me $1024 that I will owe back to the gov't now. greeeaaatt.

:( It's too bad you couldn't just give the lady the $500. It's less than the $1024 you will owe. Boo!

For not being full and still having expenses to deduct that seems like a lot of tax owing. I would be getting her to show you exactly how she is calculating it. Business use of home when you are not full helps tremendously with reducing our taxes owed.