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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.

See: Home to start a daycare home business

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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.

See: How to start a home daycare business

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