Questions Your Tax Preparer Must Answer Correctly
It can be a challenge finding a tax professional who understands your family child care business. This is because there are a number of unique rules affecting child care providers.
To make sure your tax professional is familiar with your business, here are some key questions to ask:
Should I depreciate my home? - Answer: Always yes! No matter what.
Can I count the hours I spend cleaning my home, preparing activities and meals, using the Internet, and record keeping for my business after the children are gone? - Answer: Yes! These hours will make a big difference in increasing your Time-Space Percentage.
Can I depreciate the furniture and appliances that I owned before I went into business? - Answer: Yes! Claiming this depreciation will help reduce your taxes.
If have never claimed this depreciation, is it too late to claim it now? No! You can file IRS Form 3115 and recapture this depreciation as far back as you have been in business. I've talked with child care providers who deducted thousands of dollars of past depreciation on their home, furniture and appliances.
Can I deduct meals that are not nutritious and not reimbursed by the Food Program? - Answer: Yes!
Can I deduct household items such as cleaning supplies, light bulbs, lawn mower, rugs, pots and pans, couch, bed that children sleep on, doorbell, new window, etc.? - Answer: Yes! You are entitled to deduct all "ordinary and necessary" expenses associated with operating a home learning environment for children.
Can I have an exclusive business room and other regular use rooms when calculating my Time-Space %? - Answer: Yes!
If I have a substitute who helps me care for children for six days this year, do I treat her as an employee or an independent contractor? - Answer: Employee! Unless this person is self-employed as a substitute caregiver who works for other providers, you must pay payroll taxes (Social Security tax, unemployment tax) regardless of how few hours she worked or how little you paid her.
If the person you are considering doing your taxes cannot answer these questions correctly, and insists that the above answers are wrong, you should seriously consider finding someone else to do your taxes.
My book, Family Child Care Tax Companion is designed for providers who use tax preparers. Give a copy to your tax preparer to ensure he/she is not making major mistakes on your tax return.
Here's an article: "How to Find a Tax Professional."
Tom Copeland - www.tomcopelandblog.com
Image credit: https://www.forbes.com/sites/kellyphillipserb/2019/02/07/how-to-find-the-perfect-tax-preparer/?sh=2a9ba41516f9
For more information, see my Family Child Care Tax Companion.
