Let me start with a good story that will make our transition to taxes a little more enjoyable. (Don’t worry this story is not random, it is connected to taxes, so keep on reading.)
Last summer I went to visit my family in Europe and had a great time. Unfortunately, every visit comes to an end, and saying goodbye was tough with many tears at the airport. (Even security guys asked me if I was ok or if I needed help – embarrassing!) After a very dramatic parting with my family, security screens and a little “cheer me up” shopping, I finally found my gate and was waiting for boarding.
While waiting, I noticed a lovely couple who was being loud and entertaining, especially the wife. I don’t remember what she was saying, but it was a much needed break and distraction from my crying. When I got on the plane, as I was looking for my seat, suddenly “Lo and behold”, guess who I was sitting next to? YEP, you guessed it right: the “funny lady” and her husband!
I could not believe it. Of course they greeted me and teased me right away, and I just knew they were my kind of people! I was sitting next to Chet and Mary, a sweet couple from MI. Mary was a daycare provider before she retired, so we had a TON of things to talk about. And Chet, her husband, is a TAX person! (see I told you this is not a random story)
They made my trip back to the US very enjoyable with LOTS of laughter. Mary and I stayed in touch and we became good friends. I love her spunk and her beautiful heart!
You never know who is going to pop into your life – so keep your eyes open.
During this tax season, I asked my new friend, Chet, if he would give us a few helpful tips for filing taxes. When you take into consideration that (1) Chet has many daycare providers as clients, (2) Chet has personal experience with Mary’s daycare (their own business), and (3) Chet has taken many classes to gain tax knowledge and expertise, I would say Chet is an expert of what is allowed and deductible when it comes to running a daycare business.
So here we go …
Chet’s input on critical tax info for daycare providers:
A. BE PREPARED.
1. Must be licensed and in good standing with the Daycare regulations of resident State.
2. Keep up to date with all required filings for the tax year, i.e.: food program, employee reports (W-2 and/or 1099) and client end of year reports.
B. TAX ADVANTAGES
1. % deduction for all home expenses based on hours of use vs exclusive use for office in home for other businesses. I.e.; Utilities, mortgage interest, property taxes, insurance etc.
2. Expense deduction for food based on IRS meal allowance even if deduction is larger than reimbursement of actual cost.
3. Paying taxes on net income after expenses not GROSS income like a W-2 employee would.
That’s it! Enjoy!
Chet thank you for your advice, it’s much appreciated!
Ladies, good luck! We’ve got this! Taxes are tough, but we are tougher.
PS. Another friend of mine (tax professional) is creating a little guide with tips and recommendations on taxes. Keep checking in for more information!