Confused By tax calcualtions

[playfelt]

A few years ago many caregivers in the Ottawa area were targeted for audits. The results were not favourable and a couple people did end up taking their claims through the tax court system - and won!. Basically it came down to auditors not understanding our business either. Water is one of the things I mentioned earlier that was disallowed but in court person argued what you mean we NEVER wash a child's face, NEVER use water to boild veggies for lunch, NEVER wash their bedding, etc. of course it was added back to the deductable list. Another thing I remember being disallowed was the ketchup - again obviously the auditor didn't have kids. Her swingset she claimed 100% dacyare and auditor said no 50% personal and 50% daycare but she argued since her own kids were aged 16 years and older that they were not able to use it and therefore it was just for the daycare and again she won.

The pestering of caregivers here in Ottawa lasted a couple years and then they moved on to another home based sector. It was as if we were targeted. But the person I am referring to claimed everything and I mean everything so yeah red flags would be excesses in any catagory.

Proving mileage was one really sticky point with them. If you drive to playgroup you have to sign a log in usually so there is proof available that you did go there at least. When you drive to the park there isn't so how do you prove that you drove to the park 3 times a week.

Really the best you can do is have receipts for everything that you are claiming and be prepared to back up what you write down so if your log says Monday drove 3k make sure it says to where as in what park and then is consistent so every time you go to that park the mileage claim is the same 3k. Just being able to say why you claimed something should you be asked can go a long way in an audit.

Make your expenses in proportion to your income. Example in times of lower attendance I tend to play games more than make crafts to keep costs down. That means at the end of the year my expenses are more in proportion to what I spend in years I earn more. That can't always be helped but glitches happen in any business.