Expenses Help!

[Misslexi]

Hi, I opened my daycare September of last year. I went through Turbotax software, and it seems that the more business expenses I put in, the less money I get back for a return. Wouldn't it be the other way around? I thought I would owe less taxes since I spent more on start up costs.

[storybookending]

What’s a return? ::

[Misslexi]

I think it might be bc I spent more than I made?

[LittleExplorers]

I think it might be bc I spent more than I made?

It is quite common to not make money your first year according to my tax person. With start up costs etc. Have you read Tom Copeland's posts on using turbo tax? Unless you really know what you are doing I would highly recommend a daycare tax specialist.

[MyAngels]

I've never used Turbo Tax, but I use the H&R Block software, and if you're talking about that little box that calculates the refund or amount you owe in the corner, don't pay attention to that until you get all of your numbers input.

Also, unless you're very familiar with the way the various forms are to be filled in and how daycare provider taxes work, be very careful when using tax software. Unless you're quite familiar with the ins and outs of our taxes it's really easy to make a mistake and not even realize it.

[Misslexi]

Well, I noticed with every expense I put in, i.e. supplies, startup costs, etc. my refund was getting smaller and smaller in that top corner. I've followed Tom Copeland's posts regarding Turbotax. But I thought entering deductions would make my refund larger not smaller.

[TomCopeland]

Tax return

Hi, I opened my daycare September of last year. I went through Turbotax software, and it seems that the more business expenses I put in, the less money I get back for a return. Wouldn't it be the other way around? I thought I would owe less taxes since I spent more on start up costs.

It's likely that what is happening is that you are qualified to get the Earned Income Credit. This credit is a little strange in that there are circumstances where claiming more expenses reduces your credit, even though that doesn't make logical sense. You must, however, claim all your allowable house expenses on Form 8829 when claiming the Earned Income credit. The IRS has written specifically on this point, so don't try to avoid claiming your house expenses.

[Blackcat31]

Well, I noticed with every expense I put in, i.e. supplies, startup costs, etc. my refund was getting smaller and smaller in that top corner. I've followed Tom Copeland's posts regarding Turbotax. But I thought entering deductions would make my refund larger not smaller.

I wish taxes worked like that.
I sometimes feel like the more I spend the more I owe.

I don't understand taxes so I hire someone to do them for me but from my understanding the goal is to break even. Not to get a refund or pay in but like I said, I don't know so I would absolutely find someone knowledgeable in regards to child care taxes and see what they have to say about it.

[Misslexi]

ok thank you! I did qualify for the EIC according to Turbotax, so that is what is happening. Thank you for the explanation!

[Misslexi]

It's likely that what is happening is that you are qualified to get the Earned Income Credit. This credit is a little strange in that there are circumstances where claiming more expenses reduces your credit, even though that doesn't make logical sense. You must, however, claim all your allowable house expenses on Form 8829 when claiming the Earned Income credit. The IRS has written specifically on this point, so don't try to avoid claiming your house expenses.

Thank you for this explanation! That is what is happening