It’s time for family child care providers to start pulling together their business receipts and other records to get ready for filing taxes.
Keeping good records means having documents that back up your business income and expenses. IRS rules say that you should have an “adequate record” for each expense that you claim on your taxes. The ideal adequate record is a receipt for each purchase.
But what if you don’t have a receipt? Maybe you lost it or never received one. What do you do now?
If you don’t have receipts, you can still claim expenses on your tax return without them. Other adequate records may include: cancelled check, credit or debit card statements, written records you create, calendar notations, and photographs.
All is not lost even if you are missing some of these records at tax time. You can take steps to reconstruct records that will be acceptable to the IRS in an audit. Here are some examples:
If your receipt has faded and is no longer readable, see my article “The Case of the Fading Receipt.”
Mileage records – If you don’t have receipts to show business trips, review your cancelled checks, credit/debit card statements, training certificates, mileage log, and calendar notations for records of trips. Photographs may show field trips with the children. Bank deposit slips or your check register will show trips to the bank. Use Mapquest or GoogleMaps to determine the miles to your destinations. See my article “How to Keep Records for Craigslist and Yard Sale Purchases.”
Individual items – If you have no records at all for individual items you purchased for your business: Take a picture of each item and write down what you can remember about where you bought it, when you bought it, and how much it cost. If it was purchased new and you know the name of the store, look up the item in the store’s online catalog and copy the catalog page.
If you purchased used toys from another child care provider, look up similar items on Craigslist or Ebay and copy the page with the advertisement on it. If you paid by check, save the check. Write the notation “toys” on the memo line of the check.
Show a pattern of spending – When you realize that you don’t have receipts or other key records, your first step should always be to start keeping better records from that day forward. This can help support your claim for expenses when your records are not complete.
For example, let’s say you weren’t keeping receipts for cleaning supplies from January – March. If you started keeping receipts in April through the end of the year, you could use your average monthly expenses for the last nine months of the year as an estimate of these expenses for the first three months.
Monthly review – Going forward, conduct a monthly review of your records so you can identify any missing records right away.
Tom Copeland – www.tomcopelandblog.com
Image credit: https://www.flickr.com/photos/span112/
For a complete discussion of how to keep good records, see my book Family Child Care Record Keeping Guide.