The common belief is that the IRS looks at small businesses, including your home daycare center, as potential cash cows. Whether it is true or not is immaterial – we all know that the IRS really will squeeze every tax dollar it can get from any business, big and small.
There is no problem with the fact that people and businesses have to pay taxes for it is given that when you avail of the services and protection provided by the government, you must pay your dues. However, there could be unforeseen circumstances that makes paying taxes too difficult. One is when your business is not making money. It will be a scary situation when you discover at year’s end that your business did not make any money at all and still, you have to the pay the IRS your taxes. Another difficult situation is when one of the partners of the business embezzles the business’ money or when you have been a victim of a vicious theft or robbery. Even if you are almost totally wiped out, you have to pay your taxes when they become due.
You have an option in situations like these. Use hardship to remove penalties assessed on your tax debt. IRS is not really out to squeeze you dry. You can explain to the IRS your unfortunate situation and they can forego with the penalty assessment on your tax liabilities. However, you still have to find means of paying the rest of your tax debt like making arrangement for a payment plan.
But a home daycare owner need not have future tax debts as there are a number of ways to minimize tax levies on your business. You can claim a number of deductions for your home based daycare center business. First, you can deduct the usual business expenses like equipment, materials and supplies. This will lower your tax payment considerably. Second, use your house as your tax deduction. Remember that your daycare center is a home based business which means that you are using your home space as the area of operation of your business.
Using your house and everything in it as tax deduction is not a complicated matter. All you need to do is determine the portion or percentage of your house area that is used for your daycare business. If you have an 1800 square feet house and you use 900 square feet for your daycare, then it simply means that you are using half of your house for your business. You can therefore claim 50% of the mortgage and the utilities of your house as business deductions. You can also add into the mix the percentage of food and other consumables that are used by your home childcare business. The IRS will not refute the idea that your client children do eat and drink also so they will not disapprove such claim for deduction.
By knowing what deductions to claim and making use of them in your tax filing, you are the one who will take advantage of the IRS, and not the other way around.
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