Claiming ALL your income/Hiring accountant
I'm new to dancing but I'm not new to being self-employed. I've taught piano for seven years and I'm paid cash. I've always claimed all my income but because I'm still low-income and have been a full-time student, I have always gotten money back and never paid taxes. I'm also Canadian.
I've been planning to claim all my dancing income because I want to have proof of my income for when I go to rent or buy a place or get any kind of financing. I find it disturbing that both my jobs (dancing and teaching piano) have sketchy paper records.
I told this last night to one of the girls at the club who I get along with very well. She is one of the older girls, in her 30s, and very mature. She told me that I should not file more than $30,000 and that she was able to get a mortgage no problem because she has good credit.
I don't really know what I'm looking for but I don't know what advice to trust. I want to file all my taxes but some people have made me feel so dumb for that. A little reassurance I guess and maybe some advice. :-\
Also, should I hire an accountant? My piano teaching income has always been easy to claim because I have never claimed expenses because they were so minimal but I have a TON of receipts for dancer wear, business supplies, ect.
One last thing, I swear: On my personal spreadsheet I deduct house fees, tipout, plane/hotel if applicable, and cab rides from my income and I plan on not claiming the approx. $5500 I will spend on these things in 2008. Obviously I won't be claiming them as expenses either. Is this acceptable?
Sorry if these issues were covered elsewhere. I don't spend much time in Dollar Den but I think I really should start taking a little more responsibility on this side.
Thank you! :)
EDIT: I just went to taxtips.ca and did the calculator and it looks like I'm going to have to pay about $8000 in taxes which I seriously cannot afford. :( I am paying off $7000 of credit card debt I accumulated as a student but there is only room to claim "student loan repayment" and this does not count as a student loan, I don't think.
Re: Claiming ALL your income/Hiring accountant
Okay, I'm sorry if this sounds super whiny but I'm going to put myself on the chopping block. I will have made about $40,000 working part-time stripping and teaching piano for 2008. I also went to school part-time for 12 months which is close to the regular 8 months full time and I have tax credits from tuition to carry over from previous years. I have about $7000 in business deductibles mainly money used to buy a piano. This is what the government expects:
$40,000 minus $8000 to taxes = $32,000
$32,000 minus $7000 credit card repayment = $25,000
$25,000 minus $7000 business deductibles (mainly towards a piano for my piano teaching)= $18,000
$18,000 minus $5000 tuition (which I claimed) = $13,000
I can't live on $13,000 :(
Re: Claiming ALL your income/Hiring accountant
Your tax logic seems to be a bit off. In concept, your taxes should not be based on your total $40k gross business income. Business expense deductions for your piano + dancer wear + business supplies should result in an adjusted business income nearer to $30k. Applying a 20% tax rate to the $30k would leave you with a net after-tax income closer to $26k.
Yeah, spending $5k on tuition plus $7k to pay down your credit card leaves you with only $14k to live on ! But hey, as a Canadian, you get free national health care coverage in exchange for the $4.5k in taxes you are required to pay !
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Re: Claiming ALL your income/Hiring accountant
Thanks for the tips, Melonie. I'm going to redo it just to make sure I did everything properly.
There is a place for students loans. Do you know if there is any way I can get credit for the $7000 I'm paying towards my credit card since the debt was accumulated as a student? I know there probably isn't but I'm hoping.
Thank you :)
My payable is $8000 without the $7000 deductions and $6000 with the $7000 deductions so the deductions save me $2000.
Re: Claiming ALL your income/Hiring accountant
^^^ in regard to the student credit card, if you comb through your individual line items you will probably be able to find expenditures for books or other college materials that may be deductible. I'll admit that I'm not an expert on the way Canada handles tuition payments (and potentially other educational expenses) versus educational tax credits.
As to the future creditworthiness for new mortgages of Canadians earning $30k per year, I would only point out that Canadian banks have not escaped US 'subprime' mortgage loan losses ( three major Canadian banks got stung by Countrywide ), and are gearing up to expect increasing mortgage loan losses from the Canadian side as the negative effects of the stronger Canadian dollar ripple through Canadian industries. The Canadian banks have also had additional problems of their own with Canadian corporate paper. Thus while the Canadian press makes it a point to announce that there won't be any Canadian equivalent of Bear Stearns, nevertheless Canadian lenders are now carefully watching their capital ratios and loss risk the same as US lenders (albeit a year later in Canada than in the US). A couple of Canadian banks just announced a big drop in corporate profits + increasing writeoffs, with CIBC's situation being particularly ugly ( see ) .
The obvious result will be that Canadian banks, like American banks, British banks etc. will now do a much more realistic income versus debt level risk assessment on all new mortgage applicants. Another likely result will be that Canadian banks, like American banks, British banks etc. will demand significantly higher equity (down payment) levels from new mortgage applicants in order to offset possible additional future declines in property values. From that standpoint, new mortgage applicants earning $30k gross per year are likely to meet with disappointment.
Re: Claiming ALL your income/Hiring accountant
Thanks for the info, Melonie! Buying a house is at least 5 years down the road but I want to make sure I have a roadmap that dates back as far as possible. I'm sure that when I am done school I will be making more than $40,000.
I will look into what school expense deductibles were charged to my CC.
Thanks again!
Re: Claiming ALL your income/Hiring accountant
Mel, thanks for putting that green paper over my face, but all my friends still recognized me. I lost my job, my wife and my kids. I've been advised to file suit...where can I get you served? Just kidding.
All true, with a couple additions: 1)any app coming from a broker will get closer inspection, 2)"approved" appraiser list will be a whole lot smaller, and 3)the appraisal will be scrutinized big time, with attention paid to how appropriate the comps are and what kind of adjustments are made to "subject" value.