New Doing Childcare, Need Help with Taxes

[Unregistered]

Hi,

I started doing childcare last year in July. I handed out a form letting my parents know how much they paid me. Now, how do i go about filing taxes? What do i all need? I have saved all my receipts. I just don't know what to do now. Could someone please help me. Thank you in advance. Take care

Elena

[mac60]

This is what I have done for 10 years and have been told I go above and beyond what I need to do.

You need to do the following:

Compile your monthly expenses: electric, water/sewage, gas, electric, trash pickup, phone, etc, and any other monthly utilities you pay. Add up all monthly expenses.

You need to have the following information wrote down:
Property taxes paid
Homeowners/Daycare Insurance Paid
Add up all home maintenance expenses
Cost of doing taxes

Receipts-----you need to go thru each receipt and log what expenses you used for daycare for each receipt. I underline the item on each receipt then put the total at the top, then log it on a sheet of paper titled expenses.

You need to figure your time/space percentage and that is the % that can be deducted for monthly expenses, etc.

Mileage.....each trip you make to the store for groceries, supplies, etc that you use for dc, the mileage can be added up for these.

Once I go thru my receipts, I transfer each receipt expense onto a piece of paper....On this paper i have the columns.....date, where, amount, mileage. When I fill a sheet I attached the receipts to the paper and I add everything up and move on to another sheet. I keep doing this until all receipts are recorded.

I then go thru and add up each of the individual expense sheets and put the total down.

If I wrote a check for a monthly expense, like electric bill, I put the check number down too.

You need to know how many days you were open, figure out how many meals and snacks were served.

I am sure I forgot some things. I just have everything wrote down and totaled and give the paper to my tax lady. I save receipts for everything.

[Michael]

Nice reply mac60!

[originalkat]

Mac just about Covered it...

That is pretty much what I do except I use Minute Menu online managemant software throughout the year to record all of this. I also recommend the book "Family Childcare Record Keeping Guide" by Tom Copeland.

[Chickenhauler]

If you have pets, their food and vet bills are also tax deductible (educating kids on critters).

Grounds maintenance....you have to mow the lawn, remove the snow, etc for your business, if you don't mow the lawn, you could lose a kid in the backyard jungle. Maint, repairs, parts, tuneups, gas, oil, are all deductible if used for groundskeeping.

[tymaboy]

I like buying Tom Copeland's book. That way I know that I am getting the allowed deduction & I dont miss anything.

[originalkat]

Some Notes about Pets...

If you have a pet especially for the children like a fish or hamster then it could be considered tax detuctible. However, dog or cat expenses are almost never deductible. An exception would be if your licensing agency requires immunizations and they are not otherwise required by your city/county or for fencing the pet in to keep children safe. But it is not advisable to deduct dog or cat food/vet bills because these could be an issue if you were audited. I got this info on page 91 NONDEDUCTIBLE EXPENSES of FCC Record Keeping Guide...which from here on out should be referred to as "THE BOOK". LOL::

[Unregistered]

I have another question

Am I supposed enter 60% or full amount on my taxes from my electric bill? My operation of hours are 6am to 6:00pm Monday thru Friday. It would be 3000 hours a year.


Otherwise, I signed up the register from daycare.com a month ago but I still haven't gotten activation from director. I have tried ahold of the director 4 times with no luck.

Thanks!

[mac60]

You have to do the time percentage factor to determine what percent of utilities you can deduct.....60% sounds quite high. Mine is 41% and I am open 6:30 to 5:15.

[MarinaVanessa]

I got lucky and found a Tax preparer that specialized in home-daycares

I took a workshop here in Ventura County, CA that was called "The Business of Childcare". We had a great speaker that talked to us about money management and how to look at daycare as a business first. He just so happened to be a tax preparer and I liked all of the info so much he does my taxes. This is what I learned from the class and along the way.

I bought an accordian style file organizer with LOTS of dividers (26 tabs) although I don't use them all. I then label file folders and put these inside to keep my papers and receipts organized. The very first division I call my "To File" If I pull something out or need to put a receipt away but am in a hurry I stuff it in this one until Friday evening which is when I schedule time to go through receipts and file them etc. The rest I Categorize and sub-categorize like this:
-Income: I keep records of payments, receipt/invoice copies and payment logs here)
-Direct Expenses: misc. expenses that are only for the daycare
-Indirect Expenses: expenses that are shared by my family and the daycare (toilet paper, paper towels etc.)
-Time Calculation:
-Time Percentage Calculation; A breakdown of my time percentage
-Additional Time Spent by Children in the Home; My log sheet of any time that a child has to stay later than what my business hours are.
-Working Hours when Children are Not Present; a log sheet of the tie I spend researching for recipes, setting up for activities or doing anything that is for the daycare only when the children are not here.
-Home Related Expenses
-General Repairs and Maintenence; Any time that something has to be repaired for the home (faucets, toilets, fencing etc.)
-Auto
-Auto 1; my car's mileage logs, gas receipts, maintence etc.
-Auto 2; my fiancee's mileage logs, gas receipts, maintenance etc. (i ask him to do errands for me while I have kids in the daycare and you better believe that I'm going to write that off too)
-Household Improvements
-Household Improvements; Any major remodeling due to the daycare goes in here
-Outside Equipment; large play equipment receipts, storage shed's for kids equipment etc.
-Training; my CPR, licensing, any college courses that have to do with child development etc. Receipts all go in here.

Each - has it's own file folder. I add as more as I need to but I find everything pretty much fits into those categories. You can also divide the Categories even further if you like (i.e. Direct expenses; groceries, toys, office supplies etc. but I just divide those by labeling envelopes and put them in those instead. That way instead of each individual expense having 12 envelopes (each month) I only have one envelope for each expense for the whole year.

P.S. A few thing I learned that you can claim on your taxes per time percentage cleaning supplies, toys, kids videos, toilet paper, utility bills, groceries and food, office supplies, printer ink, craft supplies etc. If you can use it for your daycare it counts.

Oh and also the more of your home you say is open to your business the higher percentage you have to claim on taxes. For example, my master bedroom may be closed to children but my desk is in there and that's where I pay bills and do research and plan activities so I include that in my time percentage anyway. My garage is used to store toys and play equipment so I include that too. I use 95% of my square footage for daycare.

Oh another thing! For those of you like myself that have a child at home and have a saving account for them ... claim it as a tax expense. Yes, that's right. Does your own little pick up toys when other kids are gone? Does your little help you take out the trash, wash dishes, vacuum, dust, clean etc? Guess what? He is now your employee. If he is your own child the child labor laws don't apply, well at least not in Califiornia (I worked for my parents at their business until I was 18 without pay). It may be worth it to you to ask. Deposit money automatically into the savings in your child's name and write it off as payroll.

[mac60]

Just a reminder......you have to pick either/or when it come to car expenses.....either mileage OR maintenance and insurance, it can't be both, at least that is what I was told.

Meaning you can't claim $2000 on maintenance and insurance AND clam you drove 1800 miles.

[kitkat]

Elena: Are you feeling overwhelmed yet?

Seriously, the best advice is to get the FCC Book. It spells everything out for you and gives you examples of the tax forms filled out. I think I paid $25 for it (book + shipping) and it was well worth the money.

Like Mac60 said, you need to figure out your time/space % and remember to multiply your home expenses by that.

Also, if you decide to do your taxes on your own, you can do them online. I have used Taxact in the past, but recently used TurboTax (that was much easier and faster). If you do use one of those programs, it will ask you questions and fill out the appropriate forms for you.

[MarinaVanessa]

I use Minute Menu online managemant software

How much does this cost and how does it work? I looked it up but the site isn't very informative. Is it worth testing it out on the trial?

[GretasLittleFriends]

I have Minute Menu through my food program so it's free. If you are a licensed home are you on the food program? Most of them use Minute Menu or CK-Kids. They are the same thing really. It's a very wonderful program. Definitely worth testing with the trial period.

[originalkat]

Minute Menu

I would not do Family Childcare without Minute Menu Kids. LOL! Okay, that might not be true. But, it makes everything so simple and does all the calculating for you. At the end of the year, I just print out all the forms--schedule C, Standard food deduction, etc... and input all the info into TurboTax Home and Business. Well worth it for accounting, taxes, food menus etc... Unfortunately no Food Program sponsers offer it so I have to pay yearly, but of course it is tax deductible and well worth the cost. I paid like $65 the first year and $35 yearly after that.

And by the way...my time space percentage this year was 29%. I though that seemed a little low but all the calculations were correct.