I managed to totally freak myself out last night. So much so, I sent D off to bed by himself so that I could work on it late into the night.
First of all, I got my month end statement from work. It was good. I made $222.16 extra (take home) over projections and now I have my income for the year. Total extra net income for 2009 comes to $10765.43.
All was good until I inputted the numbers into my online income tax software. I thought I was close to breaking even with respect to income tax. Here I was thinking I got the system down pat.
It turns out I didn't, not by a long shot. When I started replacing last year's expense numbers with this year's, I noticed a trend.
My frugality efforts at home has significantly rubbed off at work too. My default expense tax numbers from last year were too high, way too high, some cases 50% too high.
So you know what that means, I will owe next April, in the thousands. Not happy that I will need to make room for that expense on the spreadsheet.
I still have Dec. expenses to add in but it will not likely make a significant impact as I am not anticipating spending much on my business in the next few weeks.
Yikes. My first frugality horror story!
I can now understand why people scramble for "write offs" at the end of their fiscal year.
D thought this would be a great use case for going out and leasing my EVO... (he was joking) Fortunately I am not the type to do such spur of the moment things for tax relief.
Really, when you think about it, you still need to spend first and that goes against the point of this exercise.
Instead of giving the money to the government, do you have enough RRSP contribution space (and money) to make a contribution large enough to wipe out your tax liability?
ReplyDeleteDepending on D's income situation, are you two maximizing all available income splitting opportuniies?
I hate owing taxes! We pay enough through the year - it's a real downer when you learn you have to write them another cheque in the spring. You have my sympathy and understanding!
Thank you for your understanding!
ReplyDeleteI don't know anything about income splitting outside of the rsp and cpp framework but I'll definately look into it.
It will cost in the $15000 range to nearly wipe out my tax liability. I am looking into whether I'm willing to cash in some non reg. money for it...sigh!
Depending on the income differential between you and D, you could, for example, give him a loan at the prescribed rate (which I believe is 1% right now) and he could use that money to invest/ whatever your financial goals are - the investment income would be taxed in his name...voila...income splitting!
ReplyDeleteYou would need an accountant to help you set this up. Details can probably be found on the CRA website.
I talked to D about it and he doesn't think we have enough of an income difference for it work right now.
ReplyDeleteAs I scale back however, this may be a very viable option for us. Thanks again for the great tips!
Your "extra" income is my gross income as a work-at-home mom. But the good news is my income tax is VERY low! And I am available to the kids and don't need to pay rather pricy daycare costs (and then daycares don't accept them if they are ill either, so income is lost those days -- my school agaed kids catch everything!)
ReplyDeleteLong story short, my tiny income is just fine for our frugal lifestyle -- but my husband takes the biggest sacrifice being the main breadwinner for the house and working full time and then some!
Kids change everything. Financially they are a hinderance, but OF COURSE they are worth it for us!!!
Oh-- I got off topic!
Hi Pol!
ReplyDeleteI think it is awesome you are able to be at home with your children. It is incredible how much childcare costs -- private or public.
A lot of people I know still do not believe it but you and I know how powerful frugality is. It can allow many things to happen. Staying low on the tax radar is one of them! Good for you!