The 3 Most Important Rules To Follow That Will Reduce Your Taxes
Keeping records is not a fun activity for most family child care providers. But, some record keeping activities are worth paying more attention to than others. Here are the three most important record keeping rules you should follow that will save you the most money on your taxes.
One: Save receipts for all expenses associated with your home
You are entitled to deduct at least a portion of all expenses associated with maintaining, cleaning or repairing your home. This includes, toilet paper, light bulbs, welcome mat, dishwasher detergent, furnace repair, lawn mower, and so on. My book Family Child Care Record Keeping Guide lists over 1,000 allowable business deductions that can amount to thousands of dollars. If you’re not sure if the item you bought is deductible in your business, save it anyway. You can sort out that out at the end of the year. The message here is: save receipts for everything!
Two: Keep a record of all the meals and snacks served to the children in your care
Most providers use the standard meal allowance rate in claiming their business food expenses. This rate is set each year by the IRS. You do not need to save any food receipts! Instead, keep a daily record of all the meals and snacks you serve. If you are on the Food Program, save your monthly claim form. But it’s critical to keep a record for those meals and snacks that you serve for which you are not reimbursed by the Food Program. Forgetting to record one afternoon snack a day for one child for a year will cost you over $200 in a food deduction!
Three: Track all the hours you use your home for business use
Most providers do a fairly good job of tracking the hours children are present in their home. Your records should show the moment the first child arrived and the last child left each day. If a parent picks up a child later or arrives on time but stays longer to talk to you, keep a record of the actual time the parent and child left.
Next, keep at least two months of careful records showing how much time you spent in your home on business activities after the children left: cleaning, parent interviews, activity preparation, meal preparation, time on the Internet (reading this blog!), parent phone calls, and so on. Use the average of these two months for the rest of the year.
Tom Copeland - www.tomcopelandblog.comImage credit: https://www.nerdwallet.com/article/taxes/how-long-to-keep-tax-records
For more information, see my book Family Child Care Record Keeping Guide
