Paying Taxes as a Contractor. Get Organized Today!
As an on call nanny, you are considered a contractor, so rather than paying taxes throughout the year, you pay your taxes in one lump sum at tax time.
Even though tax season is behind us for this year, if you start getting organized NOW, cutting that cheque to Revenue Canada next spring, will not hurt as much.
Remember that ALL income must be declared!
As a contractor, you are able to use a portion of certain expenses to reduce the amount of taxes you pay. No matter how small the expense is, they all add up, which results in money in your pocket!!!!! If the expense is related to earning the income, you may be able to write off that expense.
PAN Card Seva resource states the list of possible deductions that could reduce the amount of tax you pay:
• Supplies for work (play dough ingredients, craft supplies, baking ingredients, kids’ games, kids’ books)
• Monthly transit passes
• Car expenses (Insurance, license, gas, maintenance)
• Bank charges
• Home office expenses
• Mortgage interest/property taxes/rent
• Home /cell phone
• Nanny conferences/training courses
Keep all your receipts and invoices. There is no rhyme or reason to who gets audited so make sure that you are prepared! Your best tool is organization. An accordion folder from any stationary store works well. Make sure that it is accessible (and not in the back of your closet!) and file as you go.
Roughly 25% of your money you make is tax so do not consider this money yours and spend it! As a rule of thumb, set aside 25 cents for every dollar you make. Paying taxes is inevitable, so do yourself a huge favour and start saving this money today! Opening a separate bank account for this 25% is an easy way to separate tax money from your spending money. With online banking, it is very easy to transfer money from account to account. This way, when Revenue Canada comes knocking at your door, you have the money set aside! How easy is that?!?
Another way to save money is to file on time and pay on time. Why pay the penalties when you don’t have to?
I learned on Facebook that STRESSED spelled backwards is DESSERTS. Since tax time is in the spring, who needs all those extra calories before the summer?!?!!? Get organized TODAY and thank yourself later!
***NB. I am not an accountant so I do recommend speaking to a professional.
Kate McGeachin has been matching nannies and families for 8 years. She lives in Vancouver with her husband and her daughter. When she is not camping, skiing or biking, she is scouring the Internet looking for the latest vegetarian gluten free recipes.