Every individual who is able to spend one whole day with not just one child but several of them can definitely be considered to have a pretty brave soul. Even more, those people who decide on starting this type of business is even more worth commending and acknowledging. Although a daycare business is pretty much reputable, what do you think does the IRS think of such type of small business? The IRS looks at daycares as potential cash cows, as how they do with other small businesses out there.
In this type of industry, it tends to become very difficult to trust anyone. Many daycares are owned by partners and as an IRS-Hitman it is definitely easy to see one person running away with the money while leaving the other owner with nothing but a huge tax debt and no cash on hand. Even if the tax debt would be assessed on the business so technically you and your former partner would both be liable for the debt, you are still left with the bigger problem since you do not have any money with you to keep your daycare business running. So what now can you actually do?
What you can do is simply use your hardship to your actually benefit. You can decrease the amount of your debt to the IRS due to that unfortunate event. If your small business happens to be the victim of theft or embezzlement you can get the IRS to remove any penalties assessed on the debt. But since the penalties only cover between 20-30% of the debt you would still need to find another way such as a payment plan to take care of the rest of your IRS tax debt.
Looking ahead could definitely work to your advantage. There are some things that you can do in order for you to prevent tax debts in the future. There are a number of deductions you can claim when you run a home based business. Not only can you deduct the usual business expenses such as materials, equipment, etc. There are some specific costs that are unique to home based daycare businesses.
You can get the most out of your home. Since you use your home as your primary place of small business you can claim part of your mortgage, utilities, even food as business expenses. But how much can you claim? It’s pretty simple to know and determine.
Take the square foot of your home that you use for your daycare activities and use this to figure out how much of your rent or utilities can you actually claim as deductions on your taxes. Divide it by the total square footage of your home and that will give you the percentage you can claim.
For example, you have a 2000 square foot home. You use half of it, 1000 square feet, for your daycare. So you would divide 1000 by 2000 to get 50%. That means you can claim 50% of your mortgage and utilities as business deductions. And that can be pretty helpful when trying to lessen your tax debts.
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