Filing daycare taxes can be a daunting process, especially for a new daycare business owner. So we enlisted the help of Tom Copeland, tax and child care business specialist, to answer tough tax questions and provide helpful daycare tax tips.
Question: I have a weekday job Monday through Friday so that’s a different income. Then I have my registered home daycare on the weekends. I filed for the EIN number in October. So do I file separate from my regular job?
Tom Copeland: Report your income from your daycare business on Schedule C. Report some of your house expenses on Form 8829 and your depreciation expenses on Form 4562. Then transfer these expenses to Schedule C where you will claim the remainder of your business expenses. Your profit from Schedule C gets transferred to Form 1040. The income from your weekday job also gets reported on the same Form 1040.
Question: I’m not licensed as a daycare; I’m merely babysitting in my home. Can I still deduct time/space percentage, etc.?
Tom Copeland: Yes. If you are exempt from your state’s child care licensing rules you can deduct the same expenses as if you were licensed. This includes you house-related expenses. If you are in violation of your state’s licensing rules, you cannot deduct house-related expenses, but you can deduct all other expenses: food, toys, supplies, mileage, etc.
Question: Is the w-10 the form we give parents with the total year payments to us providers?
Tom Copeland: You can use Form W-10 as a record of parent payments, but you will have to enter the amount the parent paid you on the top of the form, because the form itself does not leave a space for this amount. You don’t have to use the W-10. You can give the parent a receipt on any piece of paper.
Question: My home daycare is starting this year, actually any day now. But I spent money for it last year, toys, supplies…etc. Can I carry over last year’s expenses for this year’s taxes?
Tom Copeland: Yes. Expenses incurred before your business began can be deducted in the year your business begins.
Question: It is just my husband and I that live in our home and then the daycare. What percentage do I deduct from my grocery bill; I have not separated what I spent. I use the food for both although some things are used only for daycare.
Tom Copeland: You can use the standard meal allowance rule to claim food expenses. Using this method, you don’t need any food receipts. Instead, add up all the meals and snacks you served (including any you were reimbursed by the food program) and multiply by $1.19 breakfast, $2.22 lunch/supper and $.66 snack. The second way you can calculate your food expense is by saving receipts and estimating the actual amount you spent on food for the day care children. There is no specific percentage of your total food bill you can use, because every provider’s food spending habits are different. Most providers use the standard meal allowance rule because it is much simpler.
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