Day cares have unique income and expense categories, such as meals, educational supplies and home office deductions, that significantly impact allowable deductions and credits.
With a proper understanding of how to handle these taxes, you can ensure compliance with IRS rules, maximize tax savings and reduce the risk of costly audits or penalties, allowing your clients to focus on their business operations with peace of mind.
Below, you’ll find a few of the top questions from a recent webinar on the topic and their accompanying answers. If you choose to attend the on-demand version of this webinar, you can access the full recording and the entire list of Q&As.
Q: Can the taxpayer count expenses for the children of the day care owner?
A: The owner’s children’s expenses are not part of the business.
Q: For calculating meal expenses for the day care children, can the standard or actual meal method be changed every year, or must the same method be used?
A: The method used to calculate meal expenses can be changed every year.
Q: For in-home day care, do most expenses go on Form 8829, Expenses for Business Use of Your Home?
A: Office-in-home expenses are reported on Form 8829, while other expenses go directly on Schedule C, Profit or Loss from Business.
Q: If you go grocery shopping and buy items for both the day care and your family, do you need to purchase these separately?
A: It would be easier for tracking purposes to purchase separately for the day care. If purchased together, you would need to separate the business and personal items.
To learn more about handling taxes for day cares, you can watch our on-demand webinar. NATP members can attend for free, depending on membership level! If you’re not an NATP member and want to learn more, join our completely free 30-day trial.
About National Association of Tax ProfessionalsThe National Association of Tax Professionals (NATP) is the largest association dedicated to equipping tax professionals with the resources, connections and education they need to provide the highest level of service to their clients. NATP is comprised of over 23,000 leading tax professionals who believe in a superior standard of ethics and exemplify professional excellence. Members rely on NATP to deliver professional connections, content expertise and advocacy that provides them with the support they need to best serve their clients. The organization welcomes all tax professionals in their quest to continually meet the needs of the public, no matter where they are in their careers.
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Information included in this article is accurate as of the publish date. This post is not reflective of tax law changes or IRS guidance that may have occurred after the date of publishing.