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Hi i am wondering what deductions can be made to the net income of my self employment income for the income used for child support. I spend a great deal on fuel, tools, work clothing, book keeping costs ect. These total out to roughly $8600 a year and are the cost of me earning a living. I run a company and my current wife (not my ex) does the books so she takes a 25% earning from the company also. will the cost I incur to earn a living be taken into consideration.
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Your calculation is supposed to be from line 150 of your return wihich is total income. This is after you deduct your work expenses but before you deduct your personal expenses.
You should be filling out a "Statement of business or professional activities" with your tax return which describes your expenses in some detail. If you want to cover your but, you should go over all of your expenses and receipts with an accountant and have him be strict and then he signs off on your return. This is similar to being audited and you should be able to answer any challenges.
You should be forwarding a copy of your tax return to your ex, and she should be able to go over your expense statement and/or have her lawyer or an accountant look it over. You have to be transparent and give this information.
Family law won't necessarily accept all the same expenses as Canada Revenue. But there are endless variations of types of self-employment and types of expenses so there can't be a strict rule about whether you can claim your boots and tools or not. I mean, in general you will say that you need these things to earn a living, you would explain it to an auditor, you would explain it to a family court, they would decide to agree or not, probably they would decide the same thing but no one can promise that.
An example, Canada Revenue might accept me writing off some of my rent for a home office, but my ex would challenge it and a family court would probably side with her. That might be different for other self-employed, it depends on your business and how much book keeping you need.
The thing with paying your wife to do the books is more dodgy. Are you not capable of doing the books yourself? Were never able to do it in the past? Did you used to hire other people to do it and pay them the same amount? Because this could also be a way to share your income with your wife and hide it from your taxes and your ex. I'm not saying that's true, but it's something your ex could challenge you on, and you might have to be able to show that it is a necessity to operating your business.
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