For today’s nannies, getting ready for tax time can seem like the straw that broke the camel’s back. Sorting through a mountain of paper work is a most unwelcome chore to anyone with work commitments and family obligations. It’s no wonder so many people procrastinate and end up feeling overwhelmed as the tax deadline nears.
The following tips will help ease the stress of tax season.
Organize Your Forms and Papers
Regardless of whether you do your taxes personally or simplify your life by using a professional accountant, you must collect, sort and organize the required documents.
Locate the necessary forms and papers and store them together in a file folder or envelope. Your folder should include:
By the end of February, you will have received your T4s as well as any other T slips, including RRSPs and donation receipts.
As a self-employed, you are required to keep income and expense records:
Keep track of the gross income your business earns. Gross income is your total income before you deduct the cost of goods sold and expenses. Your income records should show the date, amount, and source of the income. Support all income entries with original documents. Original documents include sales invoices, cash register tapes, receipts, bank deposit slips, and client receipts
Keep track of your expense receipts or other vouchers when you buy something for your business. When you buy merchandise or services, the receipts have to show:
- the date of the purchase;
- the name and address of the seller or supplier;
- the name and address of the buyer; and
- a full description of the goods or services
In general you are able to deduct expenses that directly contributed to the earned income, these may include deductions to cover the cost of a home office, mortgage interest or a portion of your rent, a portion of your heat/gas/electricity, property taxes and insurances, eligible healthcare expenses and the costs of computers and other business equipment and more.
If you are using the services of an accountant, make a list of questions to ask. For example, you may want to inquire whether or not certain items are deductible. Better yet, start a list of questions immediately and add to it as queries come to mind. Do this throughout the year and you will be better prepared for future tax seasons.