Receipts/taxes for private dayhomes - Alberta

Hi there,
I'm new to the dayhome world. I've worked in childcare for over 5 years and I am currently the program director at an out of school care program but I am quitting my job to start a dayhome so I can spend more time with my son. I plan to open November 1, I just don't know exactly how to go about it. How do taxes and receipts work for a private dayhome? I always thought you had to be licensed to claim anything but my research today proves otherwise. Do we have to pay in each month? Or just do a claim at tax time? I did read canada revenue's booklet on what you can claim.

Thank you in advance!!

I give out receipts at the end of the year or when a family leaves. All money you receive needs to be claimed. Then you calculate what you owe at income tax time. I suggest getting a good accountant to help you so you claim everything you can.

Is it usually a lot that ends up being owed? And do you claim each month or just at the end of the year?

You file your taxes once a year like any other person, you'll just owe taxes then on everything you've made that year. I suggest taxing yourself, ie, setting money aside from every payday or every month into a separate account so that you don't end up owing a ton come April. You will be charged CPP too, and since you're self-employed, you pay 14%. (Most people pay 7% and their employer pays the other 7%, but we don't have employers, so we pay both)

The only additional program you can choose to pay into is EI for self-employed people. I don't know how you go about starting to pay into that, since I do not, but essentially you pay into it in one lump sum (I think, or maybe you can set it up to pay quarterly) so that you can go on EI for sick leave or maternity leave. You can choose to pay into the program or stop paying into it whenever you wish, but you can't USE the EI benefits until you've been paying into it for a year, and once you claim EI benefits, you must continue to pay into it (you can no longer choose to opt out). Because the benefit would only be 55% of what I make in a year, after deductions, I don't pay into it, but it's worth thinking about.

I set aside about 20% of what I make for taxes. That covers taxes and CPP generally, although this is only my second year doing this and my first wasn't a full year, so I'm sure people who have been in this business longer can let you know how much they set aside.

depends on what you make and what your deductions end up being. There are tons of things you can deduct. Keep all receipts and claim it all!

For myself I claim 50% of my hydro, water, food, bank fees, TV, internet
100% for anything completely for daycare such as equipment, toys, office supplies, art supplies, advertising costs,
100% for cell phone but zero for home phone
I also keep track of km's driven for all shopping and we claim a portion of gas,
I total all reno receipts for any home repairs, car insurance, house insurance, interest paid on mortgage, property taxes, any capital property purchased (new fridge, new computer etc). I give my accountant totals for everything and he figures out what percentages to use.

My accountant claimed my expenses prior to me opening my first year while I got my daycare space ready. I use my whole basement as 100% dedicated daycare space instead of shared family space. It works out to more in deductions.

I also pay into EI as well. I believe I owed approx. $1800 last year and that included my CPP and EI. If you are opening in November your expenses will far outweigh your income. I think my first year (started in sept) I had over $7000 to carry over to the next tax year.

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Originally Posted by adriannadt

Is it usually a lot that ends up being owed?

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That will depend on your own personal situation. If you have a spouse with a good income and only one dependant child, then you will pay more than a single parent with more than one dependant child. Without knowing your personal situation, this is an impossible question to answer.

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And do you claim each month or just at the end of the year?

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You don't claim when you are self employed - you never get money back because you aren't paying in during the year.

At the end of the tax year, you will need to declare all of your income. Keep a spreadsheet of who makes payments to you, because you need to produce a tax receipt for them at the end of the year (some providers write a receipt each payment they get and then a summary total at year end, some just do year end only). The parents use it to claim a tax credit on their child care costs and Canada Revenue use it to double check the claims made where you are the carer, match your statement about earnings.

Receipts must detail dates care provided, amount paid by parent, name of parent, name of child, your name, your address and your SIN number. In home day care is one of only two job codes which do not required the business to be registered (being a registered provider is something else entirely and refers to community services/agency approval and the ability to take subsidiary clients). If you don't want to provide your SIN then you have to register your business and get a company registration number to provide instead but without a company reg number, you are obligated to include your personal information.

You said you have read the CRA guide on what can be claimed - so keep receipts for any allowable expense you had. No receipt/proof you paid the expense means you can't claim it.

Keep it simple - whether you are going to do your own taxes or pay someone, it takes less time if you are at least somewhat organized.

Keep receipts in an envelope or sandwich baggie by month and staple the receipts to each other in chronological order. I write on the envelope the month/year but also, for each receipt, I have the date, what it was for, and how much. It only takes a couple of mins when I walk in the door but it's so much easier to find a receipt if I need one fast.

Your taxes for your business are filed through your personal tax return - this goes back to in-home carer's being one of those two job codes where a company registration isn't required and therefore there are no company accounts - it all goes through your personal tax return.

Your total business income minus your allowable business expenses are all detailed out on your tax return. After your business expenses are deducted from your earnings, you are left with your day care's profit/net income which is also your personal gross income from your business.

Then, like any other individual, you will have tax allowances based on your personal situation which come off your gross income before you pay tax. Once your personal situation and personal tax allowances have been calculated, you will end up with a figure that you have to pay CRA - for tax and CPP contributions. Remember, without an employer contributing CPP on your behalf, you will be liable for the full amount yourself.

Also, self-employed people can now pay in to EI. Check the CRA website though and see if it's worth it for you. Only certain situations will be paid out for - i.e. you can claim EI for maternity leave if you have another child but you will not get a payment for having few to no day care children currently with you, unless you close the business entirely. If EI has benefits that you can use, you must contact CRA and opt IN. You are not able to make a claim until a full year after opting in.

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Originally Posted by mickyc

depends on what you make and what your deductions end up being. There are tons of things you can deduct. Keep all receipts and claim it all!

For myself I claim 50% of my hydro, water, food, bank fees, TV, internet
100% for anything completely for daycare such as equipment, toys, office supplies, art supplies, advertising costs,
100% for cell phone but zero for home phone
I also keep track of km's driven for all shopping and we claim a portion of gas,
I total all reno receipts for any home repairs, car insurance, house insurance, interest paid on mortgage, property taxes, any capital property purchased (new fridge, new computer etc). I give my accountant totals for everything and he figures out what percentages to use.

My accountant claimed my expenses prior to me opening my first year while I got my daycare space ready. I use my whole basement as 100% dedicated daycare space instead of shared family space. It works out to more in deductions.

I also pay into EI as well. I believe I owed approx. $1800 last year and that included my CPP and EI. If you are opening in November your expenses will far outweigh your income. I think my first year (started in sept) I had over $7000 to carry over to the next tax year.

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can you claim all those expenses even if youre not licenced/have a registered business?

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Originally Posted by reach_anna

can you claim all those expenses even if youre not licenced/have a registered business?

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In-home day care is one of only two job codes in Canada that does not require your business to be registered if self employed. Licencing has nothing to do with it either - that's merely a status in terms of government funded places for subsidiaries.

You can claim these expenses providing :-
1. You are claiming the income - afterall, how can you have expenses on an income not declared?
2. You have receipts/proof of the expense

There are limits that CRA consideres "reasonable expenses" and these are not published but CRA knows what to expect from an in-home daycare providers annual return. And so will question excessive claims and request the supporting documentation.

They know roughly what your food bill will be based on the number of children in your care, they know what they consider reasonable for heating, water, etc. Don't forget, you are only claiming a portion of the bills as some are your families share. It's quite straight forward though.

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Originally Posted by reach_anna

can you claim all those expenses even if youre not licenced/have a registered business?

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Yes. I am a private in home daycare. I completely recommend getting a good accountant to help you out.

Side note: I do have a registered business name but that has nothing to do with my taxes. I can claim the cost of registering my business name. If you are going to name your daycare you should be registering it. That way no one can steal your name, your name can't be too similar to someone else and it guarantee's that you are not using someone else's name. I think it cost around $75 to start and then I renew it every 3 years for about $40. There was someone who was using a very similar name as mine (she actually even stole most of my wording from my ad). I contacted her stating that she could not use a name that was so close to mine. She quickly changed it. My guess is she wasn't registered.