10 Record-Keeping and Tax Tips for New Child Care Providers
Starting your journey as a family child care provider is exciting, but it also comes with responsibilities—especially when it comes to record-keeping and taxes. As a self-employed professional, staying organized and informed about tax requirements can help you maximize deductions and reduce your taxes. Here are some essential tips to set you up for success:
Keep Every Receipt: Collect receipts for all business expenses, including cleaning supplies, maintenance items, and more. Proper documentation is key to claiming deductions.
Know When to Deduct Expenses: Begin tracking and deducting business expenses as soon as you start caring for children, even if you haven’t met all local regulations yet.
Track Food Costs: Monitor the number of meals served each day and use the standard meal allowance to claim food expenses—no receipts required!
Conduct Monthly Reviews: Don’t wait until tax season to organize your records. Review receipts monthly, store them by category, and create notes for any undocumented expenses.
Plan for Estimated Taxes: If you expect to owe $1,000 or more in taxes, make quarterly estimated payments. Consult IRS Publication 505 for guidance.
Understand Employee Rules: If you hire substitutes or helpers, treat them as employees—not independent contractors—to comply with tax laws and avoid penalties.
Inventory Household Items: Take a room-by-room inventory of items used for your business, as you may be able to deduct or depreciate their cost.
Be Strategic About Year-End Purchases: To avoid limitations on deductions, plan major purchases outside the last three months of the year.
Track Your Time-Space Percentage: This critical calculation determines how much of your home-related expenses can be deducted. Track all work hours and the space used for business.
Record Home Improvements: Save records of all home improvements before and after starting your business. These may be deductible and can reduce taxes when you sell your home.
By staying organized and proactive, you can confidently navigate the tax process and ensure your child care business is on solid financial footing. Remember, good record-keeping isn’t just about taxes—it’s about building a stable and successful business.
