Common Mistakes Made on Family Child Care Tax Returns - Part I

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

Common Mistakes

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 KidKare 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.

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.

Nobody ever said preparing a family child care tax return is easy. Try to avoid these common mistakes.

Tom Copeland - www.tomcopelandblog.com

Image credit: https://publicdomainvectors.org/en/free-clipart/Mistake-ticket/82300.html

My Family Child Care Tax Workbook and Organizer offers line-by-line instructions on how to fill out all of your federal tax forms.