Child Care Supplies
In the past two weeks I've seen these common mistakes made by family child care providers on their tax returns:
* Not deducting car loan interest
* Counting time spent shopping
* Not depreciating items owned before the business began
* Claiming 100% of household supplies
Car loan interest: Many providers who are self employed fail to deduct the business portion of their car loan interest, even when using the standard mileage rate to claim car expenses.
Time percent: You cannot count hours spent on business activities outside of your home (shopping, attending training workshops, meetings in other provider's homes, etc.). This is because your Time-Space % is used for house expenses and when you are away from your home, even when it's for a business purpose, you are not using your home.
Property depreciation: Every Minute Menu report and tax return I looked at failed to claim depreciation on household items owned by the provider before she started her business. This is a big deduction that you should not overlook. See my article "Conduct a Household Inventory To Save Money."
Household supplies: Many providers try to deduct 100% of their household supplies (toilet paper, paper towels, cleaning products, laundry detergent, etc.). Since these items are also used personally you must apply your Time-Space % before deducting them. If you buy these items separately for your business and personal use, keep receipts for all business and personal purchases.
Depreciation: A number of providers entered items that cost less than $500 into the depreciation section of Minute Menu Kids Pro. You do not have to depreciate items costing less than $500. See my article on this topic. Entering a $400 table or couch into Minute Menu Kids Pro can be confusing because you are likely to choose the expense category of "Furniture/Appliances." But, any items entered there will be treated as something to depreciate. Instead, enter items costing less than $500 under "Household Items."
Nobody ever said preparing a family child care tax return is easy. Try to avoid these common mistakes.
To get your free review of your tax return and/or Minute Menu yearly reports, join or renew The Child Care Business Partnership. The annual $15 fee is tax deductible and I'll refund it if I can't save you at least $15 in taxes! Members of the Partnership also get access to nineteen instructional videos on how to use Minute Menu Kids Pro software more effectively.
Tom Copeland - www.tomcopelandblog.com
Image credit: blogs.angloinfo.com
My 2014 Family Child Care Tax Workbook and Organizer offers line-by-line instructions on how to fill out all of your federal tax forms.See also:
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