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5 Most Common Questions Regarding Canadian Personal Tax Returns

May 15th, 2012 by

Well the rush of tax season is essentially over.  There will still be personal tax returns coming in over the next few months but the April 30th deadline is now passed.  When considering all the activity over the past couple of months it’s interesting to reflect on the 5 Questions most frequently asked when reviewing personal tax returns with clients.

Question 1) – I owe money and my spouse (partner) is getting a refund. Will the CRA just send the difference?

Answer – No, they will not net the amount.  The personal tax returns reflect your personal status at December 31st of the prior year. Whether you indicated that you were married or living common-law, the CRA treats your returns individually.

Question 2) – I forgot to include some donation receipts in my 2010 return. Can I use them in my 2011 return?

Answer – Yes you can.  You are allowed to claim those donations made in the previous four tax years that have not already been claimed.

Question 3) – I made more money than my spouse (partner).  Why can’t I claim the child care expense? It would be more beneficial.

Answer – The lower income earner must always claim the child care expenses, with the following exceptions;

  • The spouse (partner) was a student in attendance at a designated educational institution or secondary school, and enrolled in a full-time or part-time program.
  • The spouse (partner) was certified by a medical doctor to be incapable of caring for children.  There are a number of criteria that pertain to this and you should consult with the CRA to determine your qualification.
  • The spouse (partner) was confined to a prison or similar institution throughout a period of not less than two weeks in the year.
  • You were living separate and apart from your spouse (partner) at the end of the year and for a period of at least 90 days in the beginning of that year because of a breakdown in the marriage or common-law partnership. Again there are additional criteria and the specific situation should be discussed with the CRA for eligibility.

Question 4) – For our family, do we each claim our medical expenses separately?

Answer – No, to get the most of the medical credit, it is better to combine the eligible family medical expenses and have the parent with the lower net income claim the total amount.  The lower net income is determined by looking at line 236 (net income), on the personal tax returns.  The medical amount eligible for the credit becomes effective when the amount exceeds 3% of your net income, or if the medical expenses exceed $2,052.

Question 5) – Since I owe so much tax, will I now have to make installments?

Answer – Possibly, if your net tax owing for 2012 is more than $3,000 and in either 2011 or 2010 you will be required to make installments.  For more information on tax installments, click here. This installment guideline also pertains to HST for annual filers.

If you have unanswered questions concerning your Canadian 2011 tax return (or prior years), I would be happy to try and answer them for you, just connect with me here on the blog, or via the information on my contact me page.

As always, I love getting feedback. Don’t forget to leave a link back to your own blog via the commentluv feature you’ll find here on the site.

Until next time,

Maureen

 

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Newly Retired? 5 Considerations for Your Ontario Tax Return

Apr 3rd, 2012 by

This tax season I’ve spoken to a number of my clients that retired last year.  Some think that since I’ve done their returns for so many years that there’s nothing out of the ordinary that they need to give me.  After a general conversation that goes something like “how have you been this past year?”, and “how’s business?” other specific issues like health and elderly parents come up in the bantering. Retirement is a major lifestyle change and it’s important that you take the time to discuss with your tax preparer anything they or you should be made aware of. Here are 5 considerations.

1. Health Insurance – Some clients were fortunate to be part of health benefit package at their place of employment.  Depending on their age of retirement, the plan could be transferred from employment to that of a personal plan.  The annual expense is an allowable medical expense. Also health insurance when traveling away from Ontario is an allowable medical expense.  So “Snowbirds”, those large premiums you’re paying to go to Florida or Arizona each year could have a positive impact on your tax liability.

2. Medical Expenses – Whether in Canada, or other parts of the world, expenses incurred for health reasons such a doctor, hospital, prescriptions or ambulance services are allowable medical expenses.  And don’t forget to take the exchange rate into consideration.

3. Caring for Elderly Parents – You may be retired but have now taken on the responsibility of caring for elderly parents.  If they are dependant on you due to impairment in physical or mental functions, and they live with you, you may be able to claim the Caregiver amount.

4. Ontario Trillium Benefit and the Ontario Senior Homeowners’ Property Tax Credit (formerly Ontario Property Tax and Sales Tax Credits) –  This also takes into consideration rent paid and a long-term care home and not just property tax paid. This form is used for Application for; the Ontario energy and property tax credit (OEPTC) and the Ontario senior homeowners’ property tax grant (OSHPTG). While working your income may have exceeded the threshold for the refundable credit. Now living on savings, RRIFs and pensions you may qualify for the monthly cheques which will commence in July 2012. You will have to apply for the Sales Tax Credit on another section of the tax return.

5. Disability Tax Credit (click here for a previous blog post) – This is a valuable credit that should not be overlooked at any age. Perhaps you took early retirement due to a disability, or have a common-law partner or spouse with a disability.  Do not ignore having the form completed and submitted to the CRA for their approval.  It could save you thousands each year, and the worst they can say is No.

One of my greatest feelings of satisfaction is knowing that I have educated my clients and guided them using the best tax savings strategies possible. Sometimes we just don’t know what we don’t know.  So if you’re unsure about something you’ve read or heard that may affect your personal taxes, then please contact me.  I would be happy to try and guide you along the tax savings path.

I’d love your feedback! And here on this blog, you’ll get commentluv so don’t forget to leave a link back to your own blog via the commentluv feature here on the site.

Until next time,

Maureen

 

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Canadians – How to Get Your Vegas Casino Tax Refund

Mar 21st, 2012 by

What Happens in Vegas doesn’t have to stay in Vegas!

Are you a Canadian who won in Vegas but the US Casino held back 30% percent of your winnings as tax? Have you asked yourself “how do I go about getting back my refund on those taxes?”

Casinos and other gambling establishments in the US typically withhold 30% of Canadian visitor winnings as per IRS requirements with some exceptions.

In order to qualify for a Casino tax refund, the following criteria needs to be met:

  1. You won in the last three years,
  2. Were a resident of Canada at the time of the winnings,
  3. You were issued a 1042-S form (typically looks like a receipt from a store or restaurant) as well as a Casino Tax Win Slip from the Casino where you won,
  4. Have the necessary identification documents for your Casino Tax Refund.

Canada formed a treaty with the US during 1996 wherein gambling losses can be offset against gambling winnings to either eliminate or at least reduce taxes on Casino winnings.  If you want to recover the taxes withheld, you will need to substantiate your gambling losses with proper documentation as proof and produce valid receipts.

The IRS provides the following guideline on their website: “It is important to keep an accurate diary or similar record of your gambling winnings and losses.  To deduct your losses, you must be able to provide receipts, tickets, statements and other records that show the amount of both your winnings and losses.”  Your diary should record the date, location, and type of your gambling activities, as well as amounts won or lost.  If you have winnings from blackjack, baccarat, craps, roulette, or big-6-wheel, there should not have been any tax withheld and you cannot use these when calculating your winnings or losses.  If the Casino did withhold tax, then all of the tax is refundable.

Note:  These records do not have to be submitted with the tax return, but must be available if requested by the IRS.

In order to claim your recovery, you must apply to the IRS for an Individual Taxpayer Identification Number (ITIN) as well as submit a tax return (1040NR).  In order to obtain your ITIN you will need to complete form W-7 which requires you to provide certified or notarized copies of your passport or a combination of two or more other pieces of identification.  These copies must be certified by the “issuing agency or official custodian of the original record”, “or notarized by a US notary public legally authorized within his or her local jurisdiction to certify that the document is a true copy of the original.”  U.S. notaries public are available at US embassies and consulates in Canada.  You can pay a Canadian authorized IRS “Certifying Acceptance Agent” to apply for the ITIN on your behalf.  A list of the Certifying Acceptance agents located in Ontario can be found on the IRS website.

The ITIN application can be submitted with your US tax return.  The tax return must include all winnings less losses and taxes paid in order to calculate whether or not you will be getting a refund.  There is a rare possibility that if your wins exceed your losses, additional taxes may need to be paid.

Once you have completed the ITIN (W-7) application and your US tax return (1040NR) and submit them, be prepared that it could take up to six months to process your return and refund.

So don’t be frustrated by the amount of paperwork.  Once you have it pulled together, it is pretty straight forward.  Or if you need assistance please do not hesitate to contact me.

Have you found yourself in this situation? I’d love your feedback. And here on my blog, you’ll get commentluv so don’t forget to leave a link back to your own blog too!

Until next time,

Maureen

 

 

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Changes to the 2011 Ontario Property and Sales Tax Credits

Mar 6th, 2012 by

There are very few people I’ve spoken to so far this tax season that are aware of the Changes to the Ontario Property and Sales Tax Credits.  It is the low income, specifically seniors, that are being hit with this change.  Those that live on low fixed incomes rely on these credits, not necessarily for a refund but to eliminate or reduce their personal tax liabilities.

The Ontario Property and Sales Tax Credit helps low to moderate income individuals 18 years of age and older, and families, with the sales tax they pay on energy and property taxes.  In previous years, this credit was included in their tax returns.  Starting with the 2011 tax returns, the credits have been removed from the general tax return and moved to be part of the new Ontario Trillium Benefit (OTB).

The OTB (the Sales Tax Credit, the Ontario Energy and Property Tax Credit (OEPTC), and the Northern Ontario Energy Credit) will be incorporated into twelve equal monthly payments with the Ontario Child benefit starting July 2012 through June 2013 and will be based on information in your 2011 personal income tax return.

One of the results from this change has been that lower income families who previously had their tax returns adjusted to reflect the property/rent tax credit which sometimes generated a refund, may now need to pay when filing. They then will have to wait until the new Benefit program is implemented to start receiving the payment.

To receive payments, you must complete the ON-BEN form, included in the T1 General income tax package, when you file your personal income tax return.

Am I eligible?

You may be eligible for the Ontario Energy and Property Tax Credit for the 2012-13 benefit year if you:

  • were a resident in Ontario on December 31, 2011
  • are a resident of Ontario at the beginning of the payment month
  • had rent or property tax paid by or for you for your principal residence in Ontario
  • are 18 years of age or older, or
  • are under 18 years of age and have or previously had a spouse or common-law partner, or
  • under 18 years of age and are a parent who lives or previously lived with your child

If you live on a reserve and pay home energy costs, or if you live in a public long-term care home and pay accommodation costs, you may qualify for the energy component of the credit.

When will I receive my credit?

To receive your monthly payments beginning in July 2012, you should file your 2011 personal income tax return on or before April 30, 2012. If you file your return after this date, your payments may be delayed. You must be a resident of Ontario at the beginning of a month to receive that month’s payment. Refer to the chart below.

Benefit payments for the period starting July 2012 through June 2013 will be based on the information you reported on your 2011 personal income tax return.

If you are eligible for the 2011-12 Ontario Energy and Property Tax Credit based on your 2010 personal income tax return, you will receive the remaining two 2011 payments for the 2011-12 benefit year in March and June 2012.

Payment Schedule 2011-2012 Benefit Year

2011

2012
 

Jul

Aug

Sep

Oct

Nov

Dec

Jan

Feb

Mar

Apr

May

Jun
OEPTC  X  X  X  X
OTB

 

Payment Schedule 2012-2013 Benefit Year

2012

2013
 

Jul

Aug

Sep

Oct

Nov

Dec

Jan

Feb

Mar

Apr

May

Jun
OEPTC
OTB  X  X  X  X  X  X  X  X  X  X  X  X

 

If you are being impacted by this change I would love to hear from you. Did you know this prior to completing your 2011 tax returns?

Until next time,

Maureen

 

 

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Get a Handle on Family Spending and Budgeting

Feb 28th, 2012 by

I recently met with a couple that came to me with a request for Family Budgeting.  After an interesting discussion and them baring their spending habits, it became clear that what they really needed was to get a handle on where there money was being spent before a budget could be considered.

The working couple has a combined gross income of over $300,000.  They felt they were spending almost $1,500 more monthly than they were bringing home. They’ve tried on numerous occasions to monitor their income and expenses, but like most of us, life gets in the way and recording money spent is not at the top of their priority list.  With two young active children and a few pets, the wallet and purse always seem open.  So putting the budget concept aside for now we came up with a plan to track where the money is being spent.

Because they are both business professionals, we decided to record ALL their transactions in QuickBooks and treat their lives and finances as a business.  Since they pay most of their expenses online or with a debit card, we will be reconciling all their bank, charge card, line of credit and investment statements monthly.  The few cash receipts will also be entered. The end result will show how much they’ve spent, where was it spent and who the money was spent on.

Going back to January 1st of this year they are coding all income and expenses.  There will be his, hers, child1, child2, pet1, general house etc. categories.  A simple example is haircuts.  They will be able to see the total amount being spent on haircuts plus which member of the family the money was spent on.

I prefer using QuickBooks over a spreadsheet for a few reasons;

1) You know exactly where the money was spent i.e. Dentist, gym, Metro, The Bay.

2) Who the expense was for child1, pet1, etc.

3) After a few months, potential changes in spending can be determined based on reviewing the balance sheet and profit and loss reports.

4) QuickBooks has an easy to use budget set-up so spending versus budget can be easily reviewed.

5) There is a history of spending recorded.  So this time next year they can compare their spending habits in January 2012 to January 2013.

6) It’s a great way to ensure nothing is overlooked when preparing to have personal tax returns done.  The children’s fitness credit and activity credit won’t be overlooked because it’s been recorded and receipts can be requested if not received or printed online.

I am not a financial planner but I will make suggestions once a few months of income and expenses are recorded.  Perhaps investing for retirement is causing the negative cash position.  When the term of the car lease is coming to an end, maybe it will be better to purchase the vehicle and eliminate the monthly payments.

With all the facts, better spending and investment decisions can be made.

If you would like to share your challenges or successes in family spending and budgeting, it would be great to hear what works, or doesn’t for you.  Don’t forget to make use of the commentluv plug-in here on my blog to leave a link back to your own blog!

Until next time,

Maureen

 

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6 Must Dos For Starting Your Own business

Feb 22nd, 2012 by

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There are very few individuals that come to me prior to starting their own business, which is a real shame. At The Montana Group we do thousands of hours of bookkeeping and hundreds of personal tax returns annually that pertain to small and medium sized businesses. I believe we are experts in guiding individuals on the “must dos for starting your own business”.

I recently read a book detailing the author’s dream of having her own fitness gym.  For the purpose of full disclosure the author is Robin Smith, a facilitator for the Master Mentor group I belong to.  We’ve met monthly over the last couple of years and shared our successes and challenges in running our individual businesses.  During this time I didn’t really get to know a lot about Robin personally.  What knowledge I had, pertained to her two businesses and love of her dogs.  I also knew she was goal oriented and very focused.

The book “Jump For Joy, When Your Dreams Come True” gives the reader a full and honest insight into the writer and her dreams.  The type of dreams so many of us have, but fear stops us from moving forward. It also details the steps she took to make her dream a reality.

The following is a combined list of what I believe you must do to start or purchase a business and Robin’s experiences which are included in her book

Step 3 from Robin’s Book – Make A Plan Based On Your Dream But Set In Reality

1)    Take as much time as needed to think about what you want your business to look like if you are successful.

2)   Research the industry you are planning to become involved in.  Between books and the internet there is no reason to enter into this exciting venture without the necessary knowledge required to make good decisions.

3)   If this is your first business then you also need to research what is involved in starting or purchasing a business in general. Proprietorship or Incorporation, purchasing or leasing options, government reporting are just a few examples.

4)   Make a business plan. If you need financing you won’t get money without one. Even if you don’t need funding you need to chart the direction of the business in all its details. When working on the plan you will also be made aware of some additional Pros and Cons of running a business. I personally think this is one of the most important steps.

5)   Develop your own panel of experts.  Once you start with your business plan it should become clear where you’re going to need help.  Whether it is a bookkeeper, accountant, lawyer, publisher, IT professional – the list can be long.

6)   Surround yourself with people that will give you honest feedback and support.   And be aware that not all of your friends and family will give you their automatic support.  Some may not want you to succeed, or they worry you will change if you become successful.

If you do your homework to determine what needs to be done to make your dream come true, then congratulate yourself and get ready to take the next  step.  Or perhaps, Jump for Joy!

As mentioned earlier, there is an endless supply of reference materials to help guide you to your business dream.  But if you have one or two particular questions you would like some help on, please contact me.  It would nice to be considered a dream maker.

I’d love your feedback! Here on my blog, you’ll get some commentluv. This is a wonderful opportunity to leave a link back to your own blog when you leave a comment.

Until next time,

Maureen

 

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3 Tips For Preparing Your 2011 Tax Return

Feb 14th, 2012 by

It’s that time of year again.  Some fear it while others look forward to getting it done and their refunds firmly deposited in their bank accounts.  Preparing your personal taxes is just a fact of life whether you do it yourself or pay a professional to do it.  In this blog post, I’ll give you 3 tips for preparing your 2011 tax return and help you get organized for 2012.

The personal tax return is also known as a T1.  Besides your T4 and RRSP contributions, donations and medical expenses recorded in it, the T1 is also where you record your income and expenses from a rental property, self-employed earnings and employment expenses, to name a few. I’m frequently asked if self-employed earnings are separate from a personal tax return.

Have you been good about keeping all your receipts, and in some easy to understand format?  Are you ready to have your personal tax returns done? Each year I have a few clients come in with a box or bag filled with unopened envelopes.  They’re assuming they’ve received everything they need to complete their returns.  But if you leave it to the last minute and depend on the postal service, you may be disappointed.  With so many receipts now coming electronically, you need a system to guarantee you have everything.

Here are three suggestions for preparing for your 2011 tax return and how to start 2012 off well organized.

1.    If you like the paper system then I suggest you have envelopes or an expanding file folder with the titles of each of the receipts and expenses written on it.  Keep all medical receipts in one section, donations in another,  and don’t overlook the rent or property tax receipts you have. Since some donation receipts come after December, I suggest you write on the envelope or a slip of paper that you keep in the file folder the following information:

  • whom you donated the money to
  • the amount and
  • the date of donation

That way when it comes time to record your donations you’ll know if anything is missing and can contact the not-for-profit organization.

2.    A spreadsheet can make it very easy for those that like the computerized approach.  A number of my clients record their various expenses and receipts on spreadsheets, which is then easy to total. Have a separate tab for each category and prepare a summary sheet  from those totals.

3.    Need a simpler system if you’re self-employed, extremely busy and in your vehicle constantly? Keep a large envelope between you and the passenger seat and put all the receipts in it.  In February put all your receipts in a folder marked ‘February’, then exchange it for the March envelope come March 1st. Don’t stick the receipts in your console, glove compartment, sun visor, wallet or pocket.  Those that you don’t lose, will be faded, wrinkled and not worth the paper they’re printed on. And to really get ahead of the game, sit down now and mark the months on all of your envelopes and keep them in your vehicle.

There are as many ways to record receipts as the type of receipts out there.  What I’m suggesting is establishing a system that works for you, and stick with it.  The more receipts and expenses you have for the year the potential of reduced taxes is increased.  And isn’t that why we’re keeping them in the first place?

Please share your system for organizing your receipts and expenses. I love getting feedback! And here on this blog, you’ll get commentluv. This is a wonderful opportunity to leave a link back to your own blog too!

Until next time,

Maureen

 

 

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Personal Tax Returns and Bankruptcy

Jan 31st, 2012 by

Every once in awhile, a tax client that I haven’t seen in a couple of years, returns.  Sadly when I ask them what they have been up to, they will say that they needed to declare bankruptcy.  While there are so many issues to consider when declaring bankruptcy, this blog post will only address personal tax returns and benefits as they relate to bankruptcy.

Personal Tax Returns

The Trustee prepares a pre-bankruptcy tax return for the year of the bankruptcy to the date of the bankruptcy.  If you declared bankruptcy on May 31st, the Trustee will prepare the pre-bankruptcy tax return from January 1st through May 30th.  They will also prepare any personal tax returns not previously filed. Any refunds will be kept by the Trustee for all years that they file.  The Trustee will also prepare the post bankruptcy tax return from May 31st through December 31st.  If taxes are owed on filing of the post-bankruptcy, they must be paid by the debtor.

Child Tax Benefits (CTB)

The CTB are not withheld by the government or forwarded to the Trustee. They will continue but may not be received in the same timely manner.  There is often a delay in the exchange of income tax information with the Trustee.

GST/HST Refunds

Up to and including the year of bankruptcy, as filed by the Trustee, all GST/HST refund cheques will be sent to the Trustee. Based on the way the CRA calculates these funds, it could be up to two years from the date of bankruptcy before a refund is received by the debtor.

Even though winning a lottery or receiving an inheritance is not considered taxable income on your personal tax returns, they must be turned over to the Trustee.  The Trustee will then pay the creditors and any surplus will be returned to the debtor.

If you’re even considering bankruptcy or a consumer proposal, speak to your tax preparer, accountant or someone that has declared bankruptcy. You need to know what to expect financially and emotionally. If you decide to proceed, deal with a professional Trustee in Bankruptcy that treats you with respect and explains everything to your satisfaction.

I’d love your feedback. Here on my blog, you’ll even get commentluv. This is a great opportunity to leave a link back to your own blog!

Until next time,

Maureen

 

 

 

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7 Things To Know About The Children’s Activity Tax Credit

Jan 24th, 2012 by

The Children’s Activity Tax Credit (CATC) is effective with the filing of 2011 tax returns.  Do not get it confused with the Children’s Fitness Tax Credit, which is a completely different credit even though some of the criteria are similar to both. This is a Federal initiative but the amount of credits can vary by province or territory. In this blog post, I’ll discuss 7 things you should know about the Children’s Activity Tax Credit.

The following are the guidelines for claiming the CATC in Ontario.

1. The fees paid in 2011 must be for a child born in 1995 or later.  If the child is eligible for the disability amount, then the date of birth must be 1993 or later.

2. A spouse or common-law partner can claim the credit to a maximum of $509 for each child.

3. If the expense is eligible for both the child care expense deduction (CCED) and the CATC, it must first be claimed on the CCED and any unused balance can be used on the CATC.

4)    There is specific criteria that qualifies the programs for the CATC:

  • It must be weekly for a minimum of 8 weeks; or
  • Daily with a minimum of 5 consecutive days; or
  • The child is a member of an organization that allows them to choose from a variety of activities and the program must run for a minimum of 8 weeks
  • It cannot be part of a school’s curriculum

5)    Here is a shortened version of the type of programs that qualify;

  • It must contribute to the development of creative skills or expertise in artistic or cultural disciplines including; performing arts, music, languages and literary arts
  • It helps the child develop and use particular intellectual skills
  • It provides enrichment or tutoring in academic subjects
  • It helps children develop interpersonal skills

6)    If part of the registration or membership fee includes the cost of equipment or uniforms, it is allowable for the CATC.  If you buy the equipment or uniform from a third party supplier, the expense does not qualify.

7)    If the organization has indicated that their program qualifies, then ask for a receipt.

What must the receipt include?

  • The child’s full name and date of birth
  • Name of the eligible program or activity
  • Organization’s name and address
  • Amount received, date received and amount that is eligible for the credit
  • Complete name of payer
  • An authorized signature, unless the receipt is electronically generated

A receipt should be issued if the amount was paid in 2011 and the activity takes place in 2012.  I’m not too sure why the CRA is allowing that.  Logical thinking would dictate that if the child did not participate in the activity or program in 2012, they would receive a refund for all or a portion of the payment but there is no reporting requirement for that.

With your hard earned tax dollars, it’s important that you are aware of all the possible tax credits available.  And remember, keep all your receipts.

I’d love your feedback! Here on this blog, you’ll get commentluv. This is a great opportunity to leave a link back to your own blog!

Until next time,

Maureen

 

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7 Tips Regarding Supplying Daycare in Your Home

Jan 17th, 2012 by

With ever increasing living costs and higher unemployment, some families have decided the best way to make ends meet is by supplying daycare in their homes. Below are 7 tips regarding supplying daycare in your home.

Some of the benefits to those families are;

  • Not having to pay for daycare for their own children
  • Costs for a vehicle
  • Reduced Clothing costs (as opposed to a traditional job environment, these are greatly reduced).
  • Expensing some of their household bills that they need to pay anyway.

If you are considering offering this service in your home, the following is a list of concerns discussed with my tax clients;

1)    To be considered self-employed, you must control;

  • the number of hours you work
  • the work location and
  • supplies that are used and the daycare duties you perform.

If you care for children on a part-time basis or occasionally, you cannot claim business expenses.

2)    Once you have determined that you are self-employed, you are responsible for reporting the income and expenses with your annual personal tax return.

3)    HST (Harmonized Sales Tax) – you do not have to register or charge the parents of the children if you provide care and supervision for children 14 years of age and under for periods of usually less than 24 hours per day.  The HST you pay for products and services on behalf of your business, are included in the business expense.

4)    You must include the income and expenses in the period in which they were incurred, not when you were paid or payment was made. If you supplied day care during the last 2 weeks of December but were not paid until January the income must be included in the December year.  The same applies to expenses.  If you had a December hydro bill but did not pay it until January the expense needs to be included in the December year expenses.

5)    Motor Vehicle Expenses can be handled in a couple of ways.  If you use your vehicle occasionally for transporting the children for field trips, picking up groceries etc., you may want to reimburse yourself for the number of kms you’ve driven.  If you use your vehicle on a regular basis for the daycare and personal use, then you can claim a percentage of the total operating expenses.

6)    Calculating Business Use of Home Expenses can also be determined in a couple of ways.  If you use specific rooms for daycare only, then a percentage will determine those home costs that you can expense.  If two rooms are used for a total of 30 square metres and your home is a total of 120 square metres, then one quarter of your eligible home costs can be expensed.  But if you use some rooms for running the daycare business and other times are for personal use, then you need to include in the formula an hourly basis calculation.  A more detailed explanation for this (page 17) and other expenses can be found here

7)    Because of the significant tax savings for parents when claiming daycare expenses, you will probably be asked to supply receipts.  You can make arrangements with the parents to determine the frequency of the receipts.  Some of my tax clients receive daycare receipts each month while others are content on receiving a statement at the end of the year.  The frequency of the receipts needs to be a mutual agreement between the daycare provider and the parents.  A receipt should include;

  • The name of the child that was cared for,
  • Whom the payments were received from (one or both parents can be named)
  • The amount paid and
  • The period it covered
  • The name, address and SIN of the daycare provider.

The receipt should also be signed and dated by the daycare provider.

Before starting your daycare business, make sure you are aware of the licensing standards and permits required in your city, municipality and province.

If you have any tax questions regarding the income and expenses of running a daycare in your home, please feel free to contact me through this blog posting.  I will be happy to respond with the specific details you require. Don’t forget to leave a link back to your own blog too!

Until next time,

Maureen

 

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