We love our childcare programs, but oh boy when it comes to taxes, it can be a headache. A lot of times, we push it to the back of our minds until it's time to face it head on. No matter how you feel about the tax season, being a business owner, we have an obligation like all businesses to make sure to file our taxes and you definitely want to make sure they are filed correctly.
In most states, you are responsible to pay both federal and state taxes. (Check with your state to make sure). For this reason, you want to make sure you are keeping careful records while also ensuring that you receive every deduction that you are entitled to!
In an attempt to keep records of parent's payments throughout the year, many providers are taking advantage of parent communications apps such as Brightwheel, ProCare, Daily Connect, KidKare, etc.
You are a small business owner whether you are keeping your grandchild, have one or a few children, or a full program. Here are some valuable tips on other records to keep that we can think of off the top of our heads. (If you are using one of the parent communication apps, you are probably already keeping track.)
Attendance records showing the days and hours that a child was in your care
Receipts for expenses
Housing and utility bills
Transportation bills and receipts, including mileage records
Meal subsidy reimbursements
Records of payments for your services
Online purchases such as marketplace, Amazon, or craigslist with a description of purchase.
Don't rely on canceled checks or credit card statements to prove that you made a purchase. Keep and file the original receipts to help ensure that your deductions will be accepted.
Space Deduction: For in-home businesses, the IRS typically requires that a home office or workspace be used exclusively for the home business and no other purpose. The rooms and space that you use regularly when caring for the children of your clients may qualify for a deduction. If you know what you can deduct on your taxes, you'll be able to keep better records.
We recommend hiring a Tax Professional: Even if your income from your childcare business is modest, you may benefit from hiring a tax professional to prepare your annual returns. Professionals may be able to identify deductions that you might otherwise miss. Also, he or she will ensure that you are reporting your income correctly, reducing the risk of an audit or having to pay penalties and interest because of an error in your calculations. If you decide to hire a tax professional, ask if he or she is licensed and also ask if he or she has experience in preparing returns for home childcare clients who are on the food program. If you participate in this program, you'll need to keep track of your reimbursements and actual meal expenses to determine whether you'll be able to take further deductions on the food you purchase.
If you have tax questions, are filing for the first time, or just need a tax preparer who knows childcare taxes for your area, Daycare Time Solutions, searched out qualified consultants that can help. Schedule a free 15-minute consultation by clicking on the link below.