Help Needed from Experienced Daycare Providers! Tax Question-

Hi K.~
Funny, I also live in Cortland!! Kind of crazy since its a pretty small town!
Anyways, I am a licensed provider and claim all income. I personally suggest getting a tax id#. I did it because I don't want to give my social security number to anyone, and this number replaces that. It's really easy--Just google IL Tax ID# and it brings you right there. You need a "name" so I just used J.'s Home Daycare. Easy enough. You will get the id# issued right then and there. Print it and file it! The IRS will also send you an official notice with it. I use turbotax for my taxes. I file separate from my husband since it's just easier with all the deductions. I do the filing for the self employed. I keep ALL receipts for anything I but for the kids. You can deduct everything!! Rent, utilities, gas mileage, food expenses, etc. Anything you do and/or buy for the kids is a deduction. Keep recepits for everything though--anything I just mentioned AND keep a log of all payments she gives you. I have an excel spreadsheet with payment date, payment amount, check # or cash, and a rolling balance. You will need this for taxes and so will she. That's all I can really think of right now. I'm sure there's much more!! If I think of anything else, I will private message you. And, if you have any questions you'd like to ask me, feel free to send me a message!!
Hope this helps!!
J.

I am a CPA and the catch is you can only deduct a PORTION of your rent, expenses, etc. Otherwise, if you could deduct the whole amount, everyone would be doing it. Just a word of caution, business use of your home is a huge area that puts up a red flag for IRS audits. So, I would error on the conservative side of estimating what portion of your home is used for childcare.

In order for your friend to deduct the expense on her tax return, she will need to use your S.S. # or tax ID #. This is the way the IRS tracks the $$. The IRS will then look under either your S.S. # or the tax ID # to find the same amount reported as your income. You will file Schedule C on your tax return to report your income and your day care expenses. Also, be aware, you will now be self-employed, so you will be responsible for employer/employee FICA taxes, which amount to 13.3% this year.

Best of luck in your business.

If she is using a flexible spending account, she will have forms for you to sign, usually weekly. Just need your social security number. If she is not, then you just write a dated statement for the end of the year with the amount paid, your signature and your social security number. You do not need anything from her for you to claim it on your taxes.
You can deduct a portion of your rent/mortgage, utilities, electric, gas, garbage.....based on the amount of time they are at your house. All purchases made for the daycare are deductible including food. There is a formula you can use that is like $1.25/meal/child, so you don't have to sort out receipts or percentages since a lot of what I feed the kids can be left overs, etc.

The only person who can answer this question so you don't end up paying fines and possible tax evasion issues...lol is an accountant that is familiar with this type issue. He will need to help you file your taxes the first year or so. You can claim part of your utilities, phone bill, wear and tear and on your home and contents, food costs, carpet cleaning, etc...so much that a regular person could never ever think of the deductions. It saves you so much money and gets you a bigger refund.

He can tell you whether or not you need a business license or any other type of IRS paperwork. If you do need to have a business tax ID to use more benefits then by all means, make up a name and get an ID. It can be used for any style of business if the name is vague enough. Throwing newspapers, taking in ironing, buying things wholesale, purchasing online on sites that sell to businesses, filing taxes for child care.... I can go to Sams and get the business discounts and hours even though we no longer do my husbands consulting business anymore. We can use that ID to shop online and get business discounts. They make so much sense.

I worked as a baby sitter/nanny for several years in the home of a sister at church. Her boss brought her son to the home and I watched him there too. I always claimed my income on my taxes and the 2 ladies I watched kids for kept their checks for their reference. When they went to file their taxes they had their checks to show proof of what they had paid me and I didn't do any letter or anything that said they paid me any money.

http://community.babycenter.com/post/a24491059/faqs?cpg=1... gives you LOTS of answers

this book http://www.amazon.com/Family-Record-Keeping-Eighth-Redlea...
is the bible to us home daycare providers when it comes to taxes

and in IL the rule for license exempt is the 3 children OR only ONE other family no matter how many kids, so if you have a dozen kids and your friend has a dozen and wants you to watch them all you are fine cause it's all from one family. License exempt or licensed or illegal you should claim the income - you get MORE deductions for legal (license exempt or licensed) but you get in trouble with the IRS no matter what if you don't claim your income and that trouble includes HEFTY fines if you are caught.

Those of us that have done home daycare taxes for years are able to help you as much as a tax professional if we are following Tom Copeland's guide (the book author that I linked to). But if you do ask an accountant make sure he really has learned the specifics for our field. MOST get huge errors in their ideas.

In the state of IL you can only care for a total of 3 children (including your own), legally. So I would suggest contacting your Child Care Resource and Referral for information on getting licensed or DCFS.

As for tax information. Tom Copeland has a lot of useful information on everything home child care related.

http://www.tomcopeland.net/