For today’s nannies, getting ready for tax time can be daunting. Sorting through a mountain of paperwork is a most unwelcome chore to anyone with work commitments and family obligations. Whether you do your taxes personally or simplify your life by using a professional accountant, you must collect, sort and organize the required documents.
The following tips will help ease the stress of tax season.
1. Locate the necessary forms and papers and store them together in a file folder or envelope. Your folder should include:
- T slips – By the end of February, you should have received your T4 slips as well as any other T slips, including RRSPs and donation receipts.
- If you are a self-employed individual, you are required to keep income and expense records:
2. Keep track of the gross income your business earns. Gross income is your total revenue 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 totals with original documents. Original documents include sales invoices, cash register tapes, receipts, bank deposit slips, and client receipts.
3. Keep track of your expense receipts or other vouchers when you buy something for your business. When you buy merchandise or services, the receipts should 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. This may include deductions to cover the cost of a home office, which includes 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.
4. 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.
Linh Tsiu, CGA
Nannies on Call Payroll Accountant