Is Daycare Even Worth It?

[DCMom]

You can't owe more in taxes than what you make. You are only taxed on the profit of your business; that profit is added to the taxable income of your spouse. So together you would be taxes on $80K before other deductions such as mortgage interest, etc. or the standard deduction.

Bottom line, there is no way that your daycare income increased your taxes by that much. Find another tax preparer.

JMHO.

[LittleCrawfishCC]

My husband made 130,000 this year

[Willow]

I have been doing taxes for a long time. The IRS doesn't care what you gross. The only thing they look at on a Schedule C is what you net (the $10,000)
There is no scenario out there where your Husband's amount stays the same, and $10,000 makes a $24,000 difference in what you get back/owe.
It just isn't feasible.
Take your stuff to another tax preparer if you don't feel comfortable doing it yourself.

Completely agree!!!

Not only take this years to someone else but I'd take your filings from several years past and have someone new look at those as well!

DO NOT LET THIS PREPARER FILE UNTIL YOU GET ANOTHER PAIR OF EYES ON IT!!!!!

[Blackcat31]

Completely agree!!!

Not only take this years to someone else but I'd take your filings from several years past and have someone new look at those as well!

DO NOT LET THIS PREPARER FILE UNTIL YOU GET ANOTHER PAIR OF EYES ON IT!!!!!

This!!!

It is so worth it to have someone else take a look. Like $11,000 worth it!!!!

[Angelsj]

Is there a possibility that with my husband income and my income that we got put into a higher tax bracket? We do file joint

It is possible you are in a higher tax bracket, but it still would never make that much of a difference.
There is a tax estimator here:

http://www.hrblock.com/free-tax-tips-calculators/tax-estimator.html

It will not be exact, but you can drop in some of the major numbers, play with them and get an idea. I can't get you closer without knowing more about your number of dependents, or your hubby's income (your idea of "not much" is likely different from mine), but if this is what you are being told, I would also question earlier years of tax service.

[Angelsj]

$130,000 is not working as much? Seriously?

How many kids of your own can you claim?
How much federal tax has your husband paid in?
You can shoot estimates if you don't want to give out all the info, but even with several scenarios, including LOTS of tax paid in by your husband, and none, this is not possible. $10,000 worth of income just cannot make $24000 difference in the outcome. No matter how you slice it.

[LittleCrawfishCC]

I just sent our paperwork to a friend of mine that also does taxes, and I'm waiting to hear from her.
My husband works in the oil field.

[LittleCrawfishCC]

I know that is a lot to some people, but we have a lot of bills, plus we also take care of my grandmother and my mom, so even on his income and my income we still struggle.

[Angelsj]

I know that is a lot to some people, but we have a lot of bills, plus we also take care of my grandmother and my mom, so even on his income and my income we still struggle.

I wasn't judging your income. Just a little surprised. Most of the people I provide care for are in the low income range, so when you said "he didn't work much"...I was thinking 25,000 not $130,000.

[LittleCrawfishCC]

The parents that I provide care for are pretty well off, most of them make between $70,000 + . We live in a pretty expensive area. The only reason we live here honestly, is because of the school district.

[MyAngels]

It's possible, depending on the exact numbers, that you got bumped into the 28% tax bracket, but that still wouldn't account for that much of a swing in taxes, since it's only 28% on the amount over $142,700 (assuming I'm interpreting that correctly - the IRS tends to confuse me :

Here are the tax brackets: http://taxes.about.com/od/Federal-In...2-Tax-Year.htm

[TomCopeland]

Help!

Well I went to my tax guy today. And I am so angry at this moment. I made 36,000 in income, and had 26,000 in deductions, So I was left with 10,000 that needed to be taxed. Needless to say with filing my joint return with my husband we now owe 11,000 to the IRS! I had my tax guy completely pull my daycare off our taxes and If I didn't run my daycare, we would have gotten back 14,000! It was like putting salt on my wounds. This year I had to upgrade all of my baby equipment. So next year my deductions won't even be as much as it is this year. Im at the point is daycare even worth all of the trouble? When I could work outside of the home, and pay normal taxes, and not even have to worry about buying everything for the daycare. I am so bummed at the moment, I just don't even know what to do. My husband and I have some serious talking to do about weather or not to shut the daycare down.

As many providers have already stated, your number can't be true. If your profit was $10,000 you would owe $1,330 in Social Security taxes (13.3%) and federal and state income taxes. Since your husband made a lot, you're in the 25% tax bracket (joint income less than $142,000). So you will owe $2,500 in federal income taxes, plus state income taxes. No way will this total $11,000 in taxes because of your business. No way would get a $14,000 refund if you didn't do child care. There must be something else going on with your taxes.

Note: even though providers can end up paying 13% Social Security taxes and 25% or more in federal income taxes, you will always come out ahead financially by doing child care. (The only time you might not come out better is if your daycare income makes you ineligible for some tax credits that may exceed your profit). Even if you paid 50% taxes on your profit, you still end up with 50% of your profit left over.

Join me for a webinar “2012 Tax Changes: How to Avoid Mistakes on Your Tax Return” Tuesday, February 12th at 8:30-10:00pm Eastern Time. The cost is $25 (100% tax deductible!). To register: http://events.r20.constantcontact.co...&llr=yatrx4cab