Tax help

So I'm about to get pretty technical here, I apologize in advance!

This is my first year doing home day care so I've never done my taxes before. I've been keeping all my receipts and tallying everything, all that fun stuff. So I was checking in with my accountant (again never used her for this, though she did our "regular" taxes last year) and explained that I have all my totals, listed the categories I've been using, etc.. I also told her that I have some idea of the percentages I plan to use (as far as what portion of say, our home insurance, to claim). She wrote back and told me that we'll use the same percentage to claim everything... umm what?

For anyone who has done it on their own, or has been involved in some capacity... is that right? I want to know if it's a Revenue Canada thing that they'll only allow one percentage, or if my accountant is being lazy... in which case I'm going to try to find someone else...

I had thought that different categories would have different percentages associated with them, for example:

Cleaning supplies, use of home and office expenses I imagine can all be claimed as the same amount, based on time used for daycare (40hrs/week,49 weeks/year, 85% sq. footage = 20%)
Toys, crafts, wipes and clothing supplies should have a higher percent, as they are being used equally between the kids during the week (albeit Saturday and Sunday would be only my kids: 3dck/5, 4 days/week = 43%)
Groceries I plan on claiming 100% of my total, as I've been using $8/day/child to get the total. I was thinking that my training and criminal record checks should also be claimed 100%, as well as agency fees and child care insurance.

Thank in advance :)

Also, does anyone want to share what they pay for CPP? I know it depends a lot on what you deduct for expenses, but my basic accounting skills have me owing around $2000 JUST for CPP contributions. :blink:

for myself I use 50% as my whole basement is used for daycare only! I use 50% of the following totals for the year: food, hydro, water, internet, tv. I use 100% of the following: cell phone (cannot claim home phone), toys, office supplies, craft supplies, advertising. My accountant figures our what percentage of the following can be used: household repairs, car insurance, gas (I give him mileage that I have used for all trips to the store), interest on mortgage, property taxes, house insurance, capital expenses such as new computer and fridge we bought. You can also claim your bill to get your taxes done. I think I paid approx. $900 in CPP last year. I also pay into EI for self employed.

I give my accountant all of my totals as well. I suggest getting a different accountant. There are different percentages for different things that can be claimed. My first year I had way more deductions and ended up being able to carry over approx. $8000 in expenses to my 2nd year.

I use my whole basement for daycare and it's half the house so 50% is used for all the household bills (hydro, water, land taxes, cable, internet, cell, house insurance etc).

I claim 100% dc food, dc supplies, toys, advertising, basically anything that is ONLY dc related. I also claim a portion of the interest paid on our car loan, km's on the car, car repairs and any other big purchases that the dc also uses. I used to have a house cleaner and claimed half of that as she cleaned 2 hours, 1 hour for dc and 1 hour upstairs. I keep gas receipts as well for the car, lawn mower and snow blower. I believe you can claim 100% of your training and criminal record checks

If you use your whole house you will have to figure out the usage (hours open x space used x days of week open) and I believe that is the percent that all your household bills can be written off.

I tally up my receipts and all bills and refuse to pay an accountant a ridiculously high price to enter the numbers I provide so I found a retired accountant who does my taxes for me. (I'm dreading when she retires from this as well lol) You will have to pay both portions for CPP as you are the employer and employee. I think last year I paid $2500 but this year I decided to pay into EI so I am expecting it to be around $3000. It will differ slightly year to year depending on your expenses and total income.

I thought she was bit out to lunch.

Like I said, I haven't sat down with her to talk about it, but I'll try to find someone else if she's not open to using different percentages. My only thought was that perhaps she had a ball park number that she thought would be good to claim and was going to "work" the percentages to get close to that number. I'm not sure I'm super comfortable with her doing that though.

For those of you who claim 50% of your home... have you even been audited? I did mine based on 85% of the home (I might increase this to 100%, since it's really only 1 bathroom that we don't use, and our family room that we occasionally do use for dc), 4.5 days a week (I started at 4 days a week, and bumped up to 5 halfway through the year) for 10 hours a day, 49 weeks/year and got around 22%. I'm paranoid to claim too much and be audited, but at the same time, that doesn't work out to a very big claim.

I've never been audited but this is only my 3rd time doing taxes.

From my understanding, the formula to use when figuring out the percentage you can claim is... (days of the week you are open/days of the week) x (rooms in your house used/total rooms in your house) x (hours of day you are open/24 hours total).

So to use my home for example it would be.. (5/7) x (5/10) x (9.5/24) = 14%. We had initially calculated it this way and my HR Block accountant (I go to a private one now) said she would be okay with raising it to 20% as that wouldn't raise any red flags. Than when I explained that I only use my basement for daycare she said I didn't need to follow the formula and I would be allowed to claim 50%. I would think that claiming 85% would raise a red flag. Unless I am not understanding your post correctly....which could be very possible! lol :)

You mention that you don't use 1 bathroom and the family room but what about the bedrooms/master bedroom?

Yes, sorry, that was confusing. I meant that I use 85% of the rooms in my house for the time that I am open. My "claim" percentage was around 20% for home expense things.

We only have 3 bedrooms and they are all used for naps in the afternoon, to try and minimize the noise they have to endure. The one family room we only really use if we're watching movies (which is really only if someone is sick) or occasionally the kids will play up there at the end of the day because they think its fun to watch their parents drive up. The ensuite bathroom is the only room that is never used for daycare.

Oh okay!! Makes more sense now haha.

Unfortunately, I don't think there is much you can do. The number you get with that formula is the legal percentage you can use to claim things at.

I don't base mine on a percentage exactly. I used a square footage over square footage for space loosely figured and then following the formula given above you then include the business use of home expenses total and that gives the amount you can claim. Have never figured each item out on a percent basis. Remember the items that are daycare specific are 100% claim not the percentage. I'm a little confused by some of what has been written so far so do be careful that the person that is doing your taxes totally understands what home daycare means. It is very different than say the accountant that works from home and can claim only the bedroom they have turned into an office, can not claim water because it is not used in their business dealings etc. Practically out entire home is our place of business and the smaller the home the more likely that 100% is used. And yes don't let them tell you water is not included. You can't claim your house phone unless you have a second line but you can claim a portion of your cell phone because that is the emergency line for when you are on outings or parents need to reach you.

Good point playfelt, I had done a percentage for the "daycare specific" because my children are 2 & 4 so I was under the impression that toys, craft supplies, etc, should be claimed as to not include them.

She's done another day home before, but who's to say she wasn't wrong that time? I've emailed her to ask clarification. Hopefully I'm satisfied with her response because other accountants I've contacted charge $200 more.

In theory toys you buy that will be used by your kids and daycare are supposed to be 50% such as what they got for Christmas Anything outside their ages such as an infant toy would be 100% because it is because of the daycare. Also realize you buy more because of the daycare so having 10 puzzles where you would have bought your own child only 3-4 so claim accordingly. As far as craft supplies goes remember that the wastage is just that so in many cases you cut hearts out of red paper and get extra which your child uses so it isn't always that they are taking the full percentage. Also realize that most of the crafts you do are because of the daycare and likely wouldn't do them all if it was just you and your own child at home. Food is the same way in that if you open a can of something and it feeds all the kids the cost of food for that meal is still the cost of the whole can of food since you can't go to the store and buy 3/4 of a can of something - the wastage got eaten by your own child instead of being tossed in the garbage.

Just remember that if you are audited that they won't be coming to your house to do a full inventory of what is in your daycare - they will be looking over your receipts. If you have a receipt for toys and you say it is a daycare receipt then how can they tell you that it isn't?

I claim 50% of all household expenses. I use my basement as daycare and we do not use this space at all outside of daycare hours. When you use your whole home for daycare and personal use then you have to use the calculations of how many daycare hours based on how many hours in the day etc. Make sure and add an additional hour onto your day for daycare for prep work/cleaning etc. You can claim 100% for a cell phone but 0 for a home phone.

My accountant costs $400 for me and my husband to get our taxes done. Cheaper isn't always best and I would rather pay to get it done right. Also you can use it as a deduction.

Question on the cell phone...why is it 100%? I only have a cell phone so obviously I use this outside of daycare hours. I will have to double check with my accountant but I think I claim 50%.

I agree cheaper isn't always better but in this case it is for me. I did the expensive accountant and they made a couple mistakes that shouldn't have been made. I found a retired accountant with years of experience and trust her. Just as cheaper isn't always better neither is the more expensive. Make sure you find an accountant that knows what they are doing :)

Not sure why 100% but my accountant told me that. He said 0 for home phone but a cell could be 100% deduction as a business expense. Not sure if it should only be 50% if it is your only phone though.

Yes I agree always the most expensive isn't the best either. But just like we don't want parents to go to the cheaper daycare's the same should apply to an accountant as well. Find one that is good and price shouldn't matter. My accountant is excellent and I recommend him to anyone and yes he is a bit more money but that is OK.

All good points, thanks.

This girl was recommended from a friend, the price was really a bonus. She did clarify a few things, so it seems like we're on the same page. I'm just not the type of person to put my income entirely in someone else's hands. I think we're responsible for having an idea of what the government considers claimable and "reasonable" - I don't want to get in trouble because neither of us knew what we were doing.