The First-Time Homebuyer Credit is still available for homes purchased through November 30, 2009. This year's credit is a true credit. (The 2008 credit was really loan paid back over 15 years.) It's also "refundable," which means the credit is treated like a tax payment. Therefore, even if you have no tax liability, you will get a refund equal to the amount of the credit (up to $8,000).

Posted on 2009-06-30 00:02:18

The Consumer Assistance to Recycle and Save Act of 2009 authorizes the issuance of an electronic voucher to offset the purchase price or lease price for a qualifying new fuel efficient vehicle upon the surrender of an eligible trade-in vehicle to a dealer participating in the program.

Posted on 2009-06-29 23:54:26

For 2009 and 2010, you can claim a refundable Making Work Pay Credit if you are employed. The amount of the credit equals the lesser of 6.2 percent of your earned income or $400 ($800 if married filing jointly). However, the credit is phased-out when your modified adjusted gross income is between $75,000 and $95,000 ($150,000 and $190,000 if married filing jointly).

Posted on 2009-06-29 21:42:52

All or part of your unemployment benefits received in 2009 will be tax-free under the American Recovery and Reinvestment Act.

Posted on 2009-06-29 21:37:59

The Hope Credit, which was a tax credit available for tuition expenses paid during the first two years of college, has been expanded and renamed the American Opportunity Tax Credit for 2009 and 2010.

Posted on 2009-06-29 21:36:07

There is a new deduction for state or local sales tax imposed on new motor vehicles purchased after February 17, 2009, and before 2010.

Posted on 2009-06-26 18:22:55

There are benefits to hiring your children to work for you. If your children are under the age of 18, you are not required to withhold social security and Medicare taxes from their wages. You are also not required to pay federal unemployment taxes on their wages until they reach the age of 21.

Posted on 2009-06-26 18:16:35

Required minimum distributions (RMDs) from qualified plans [i.e., 401(k), 403(b), 457(b), etc.] and IRAs have been waived for 2009 only. Thus, you do not have to take an RMD for 2009 if you are the account owner or a beneficiary. If you already withdrew your RMD for 2009, you may be able to roll it over to an eligible retirement plan within 60 days.

Posted on 2009-06-26 18:12:33

The nonbusiness energy property credit for energy-efficient improvements to your principal residence was not available in 2008. However, it’s back again for two more years in 2009 and 2010.

Posted on 2009-06-26 18:09:33

In addition to the energy credit for home improvements, you may also claim a residential energy efficient property credit for property that uses solar energy to generate electricity or heat water for your residence. You can also claim this credit for property that uses a wind turbine to generate electricity in your residence, or equipment that uses the ground or ground water to heat your residence.

Posted on 2009-06-26 18:06:47

A family child care provider writes:

>Would you mind telling us the best software to purchase for our daycare business? We would like to keep our records better than last year.

Better record-keeping is a great goal. It's one of the most straightforward ways to reduce the income and self-employment tax you pay and keep more of your hard-earned dollars. You may earn a higher hourly rate working on your bookkeeping than you do caring for children!

Posted on 2009-06-23 17:20:58

A family child care provider writes:

>My husband is no longer working and does not have medical insurance coverage. We are in the process of getting a family plan through Kaiser, through the business. My question is do we need sign up for a HSA (Health Savings Account) or can we get a regular family plan not under a business plan? I want to make sure I sign up for the right one, so that we will be able to write off the cost on our taxes. Please advise.

Actually, I don't expect that you will be able to get a health plan under the business name.  My understanding is that Kaiser business health plans require something like 3 full time employees (and I assume that other insurers have similar restrictions). 

Posted on 2009-05-08 12:11:39

A family child care provider writes:

> It has come up in discussion on my providers list that a provider can pay her child to do daycare tasks and then use that payment as a write-off. Is this true?

For instance....if I have my son keep a notebook of mileage and trips for me, and I pay him to do this task, can I use that as a write off? Currently he has always helped me clean up after daycare and helps clean the toys and such, and I do pay him for this. Can any of it be claimed?

Yes, it is quite permissible to hire your child and deduct the payments as a business expense, but there is some criteria to fulfill.

Posted on 2009-04-17 16:14:03

The husband of a family child care provider writes:

 > My wife started babysitting in 2008. She works out of our home, the kids are dropped off and picked up by their parents at our home. She babysits for two separate families, they each have two children under 5 years old, and they are here at different times of the day. Her total income was $1325. This is her only job. How do I report this on our 1040? We file MFJ.

Filing a tax return for a self-employed child care provider is actually pretty complicated.  I hope that perhaps you have perused some of the information on my website, including my Letter to New Providers.

Posted on 2009-04-17 12:33:05

Posted on 2009-02-25 15:23:44

A babysitter in West Virginia writes:

> I was babysitting in the children's home for 16 weeks and got paid $4,100. I have asked the mother for a W-2 and she says she doesn't have to give me either a W-2 or a 1099 because I was just a babysitter. She set the hours and I worked in her home... how do I file my taxes?

Posted on 2009-02-02 00:20:52

NAEA Press Release, Fremont, CA, January 26, 2009 – Child care providers have it harder than most taxpayers, given the daunting array of records to collect and organize, all while caring for children up to 12 hours per day. Figuring out how the numbers go onto the tax forms is no easy task either, especially given the special tax rules which apply only to child care businesses. Kay Paasche, owner of Grandma’s Place Day Care in Union City, knows only too well how time consuming and stressful tax time can be. An active member of the Alameda Family Child Care Association, as well as the statewide California Association for Family Child Care, she understands the value of good, professional guidance. In 2006 another child care provider referred her to Alison T. Jacks EA, an Enrolled Agent in Fremont. “My previous tax preparer suddenly closed up shop and took months to return my records,” says Paasche, “Alison corrected two prior year returns and got me up to date with my tax filings. She helped me through a very difficult situation.” It was about this same time that Jacks decided to make family child care providers the focus of her tax practice. “I kept seeing providers with similar tax problems and decided to specialize,” she says, “Many child care providers have trouble finding tax professionals who understand and welcome their business.”

Posted on 2009-01-31 19:48:16

A family child care provider writes:

> Although I did not receive my childcare license until this year, I purchased many items and supplies last year. I don't want to miss out on these deductions. I also earned a little money caring for two children while their mom attended college courses.

Posted on 2009-01-28 16:00:36

A family child care provider writes:

> My partner and I are both on the license. I am trying to figure out the home (rental) space measurements. Do we split the square footage in half??

Posted on 2009-01-28 13:33:14

A family child care provider writes:

> We rent, but we rent from my grandmother so we are basically allowed to do any renovations that we want at our own expense. I have some expenses that we incurred when we landscaped our backyard and am not sure where to categorize those expenses (trips to the dump, rental of heavy equipment)?

Posted on 2009-01-26 17:51:15

A family child care provider writes:

> Is a business auto any auto used for business purposes (grocery etc)? We own 2 cars. I have taken both cars at different times to do business related shopping, however, I did not keep records on what outings I took what car. Is that a problem? I also did not write down what our mileage at the beginning of 08 was for either of the vehicles. Any suggestions? Is that a problem when figuring our mileage deductions?

Posted on 2009-01-26 17:28:04

A family child care provider writes:

> Can you please tell me two things? Are we required by law to submit a statement to parents with a TOTAL for their taxes? If so where do I find the law? I heard the only regulation was to provide your ID number. Also, if the parent owes me money and did not follow the rules of the signed contract, can I withhold the statement until their account is paid in full? Is this legal?

Posted on 2009-01-24 13:08:58

A family child care provider writes:

> Maybe you could help me with finding workers' comp insurance. I have offers from $1000 per year and this is much too much for a part-time helper that maybe earns about $2400 per year. Maybe you have another home child care provider who has experience with this?

Posted on 2009-01-23 15:21:49

A family child care provider writes:

> Just wondering what form to give my parents who have paid for child care so they can do their taxes!

Posted on 2009-01-21 22:22:19

A family child care provider writes:

> I am interested in your services. I would be filing separately from my spouse since he is employed outside the home.

Posted on 2009-01-13 11:44:58

If you're a business owner (or landlord), you must give a Form 1099-MISC to any independent contractors you paid $600 or more for services provided to your business (or rental property) during the year. And you must do this by January 31. If it's February already, don't despair, follow these special February instructions immediately. If you have a home office for tax purposes, I recommend that you also give 1099s to any home service providers paid $600 or more.

Sending 1099s is not optional. They are mandatory, unless the service provider is a corporate entity. If your service provider happens to be an attorney, however, then a 1099 is always required, whether the attorney's business is incorporated or not.

Preparing and filing a 1099-MISC protects your business tax deduction. If you neglect to prepare a 1099 and later get audited, your deduction of the fees paid to the service provider will automatically be disallowed. That's a potentially hefty and immediate increase in tax for you, plus interest and penalties.

Important: 1099s cannot be used for workers who should properly be treated as your employees (and note that child care workers are almost always employees). You must provide them with a Form W-2 instead. Refer to the IRS website for help in determining how to treat your workers: Independent Contractors vs Employees.

If you need payroll forms guidance, refer to my Small Business Payroll Tax Guide.

To find out how easy it is to prepare your own 1099-MISC forms, read on.

Posted on 2009-01-04 17:22:05

1099s are supposed to be sent to recipients no later than January 31, but the true deadline is February 28. That is the deadline for mailing your 1099s to the IRS.

Read my main article on 1099 preparation to see how simple it is, but pay attention to the pointers in this article if you are preparing the forms in February.

Posted on 2009-01-04 17:19:55

As stated in the Frequently Asked Questions on the website of the California Division of Workers' Compensation, California law requires employers to have workers' compensation insurance if they have even one employee. The same is true for most other states. What's truly scary are the fines imposed on employers without coverage.

I'm almost sorry to give you the details, but keep reading. It's better to hear this in advance of a problem. The good news is that you probably can find reasonably priced coverage if you need it.

Posted on 2009-01-03 14:31:23

As part of the IRS’ new program to step up enforcement, they are going to start contacting taxpayers directly via telephone calls if they have a question, are preparing to audit the taxpayer, or are engaging in collection activity against the taxpayer. Like the cop show where the cops are hoping that the suspect doesn’t “lawyer up,” the IRS also hopes that a taxpayer whom they wish to speak to does not have representation. Unfortunately, they are not required to give the equivalent of the Miranda warning like the cops of TV. Be aware that you are never required to speak to any employee of the IRS in the absence of an administrative summons (more on the next page). There is no law or statute which requires you to do so. Please be aware of the following rights you have.

Posted on 2009-01-03 01:15:42

This colorful two-page document highlights the most important record keeping chores for child care providers and contains tips to prepare you for tax time, let you pay the lowest tax and help you avoid audit problems.

Click here to download - Day Care Record Keeping 101.pdf
(Document may take a minute or more to download)

Contact me with your name and mailing address if you are a California family child care provider and I will send you a two-sided hard copy. California Family Child Care Associations, Resource and Referral Services and other organizations serving child care providers are welcome to request larger quantities for distribution.

Posted on 2008-12-29 20:31:05

Rates effective January 1 through June 30, 2008:

50.5 cents per mile for business miles driven;
19 cents per mile driven for medical or moving purposes; and
14 cents per mile driven in service of charitable organizations.

Rates effective July 1 through December 31, 2008:

58.5 cents per mile for business miles driven;
27 cents per mile driven for medical or moving purposes; and
14 cents per mile driven in service of charitable organizations.

Rates effective January 1 through December 31, 2009:

55 cents per mile for business miles driven;
27 cents per mile driven for medical or moving purposes; and
14 cents per mile driven in service of charitable organizations.

These IRS rates apply to cars, as well as vans, pickups and panel trucks.

Posted on 2008-12-03 20:45:36

The Internal Revenue Services seems to be responding to the grim realities of the federal budget by auditing more taxpayers and especially sole proprietors and home businesses. This is not good news for family child care providers and other small business owners.

If you receive a notice from the IRS or your state tax authorities, remember this: It is quite likely that some or all of the proposed tax return changes are incorrect. Many notices are generated by computer and often they take away legitimate business deductions.

Quick action in responding to a notice is the best way to protect yourself against paying additional tax. If you receive a notice from the IRS or the California Franchise Tax Board, do not ignore it!

Posted on 2008-11-13 22:51:06

I can tell that tax time is near because I am hearing from a steady stream of new child care providers. They are being proactive and looking for help with their record keeping and taxes. These folks will be happy they took the time now to get organized and decide how to handle their income tax filing.

If you are a provider (new or experienced) looking for help with your 2008 taxes, now is the time to find it. Better than waiting until January, February, March or (heaven forbid!) April, when your choices will be narrowed and finding the right person can be difficult.

Posted on 2008-11-13 22:49:31

As a family child care provider, your home is your workplace. Hundreds of items all through your residence are used in your business. Furnishings and room decor contribute to the home care environment that parents have chosen for their children.

Doing a household inventory allows you to take a business deduction for furniture, appliances, and other items used in your business. I strongly urge all new child care providers to take such an inventory. Most established providers can also benefit from taking an inventory, as long as your business start date is not too far in the past and you can still remember what you owned at that time.

Posted on 2008-11-13 22:46:34

As we approach the end of the year, some parents will present their child care provider with a holiday gift. If the gift is an item (flowers, book, plant, etc.), this does not need to be reported as income. If the gift is in the form of cash or a gift card, it does need to be reported as income. You can include the cash or gift card as part of the parent child care payment, or you can list it separately as Other Income.

This C-K Kids Tip is courtesy of Newslink from Resources for Child Caring. Note that it applies equally well to client/customer gifts received by other small business owners.

Posted on 2008-11-13 22:37:17

The Economic Stimulus Act of 2008 that gave many family child care providers a rebate check also contains a business tax benefit.

Providers who buy items in 2008 may be eligible for a special 50% depreciation allowance. This allowance allows providers to deduct 50% of the business portion of the item in 2008 and depreciate the remaining 50%, thus creating a much higher business deduction this year.

Property that is eligible for this special allowance includes: computers, office equipment, furniture, appliances, play equipment, fences, driveways, and a car. The purchase of home improvements or a home does not qualify. The item must be purchased new in calendar year 2008 and used in your business this year. The purchase of a used item does not qualify.

If you are planning to purchase an eligible item this year, this new 50% depreciation allowance will help you reduce your taxes in 2008. However, it is never a good idea to purchase something just because you can get a significant tax deduction. The amount of the tax deduction you will get by purchasing something will never be equal to the cost of the item to you.

Read the rest of this October 2008 Newslink newsletter from Resources for Child Caring to see an example of how this special allowance works.

Posted on 2008-11-13 22:29:41

Family child care providers are no strangers to licensing issues and it can be daunting for those starting out in business. The array of licensing and registrations required can be quite confusing. Let's review and clear up any misconceptions about social service licensing, local business licenses, fictitious business names and IRS tax id numbers.

Posted on 2008-11-10 18:08:12

Persons you pay to come into your home and work in your family child care business are almost always your employees. It doesn't matter how few hours they work or whether you hire them for one day, one week or the whole year.

The only circumstance where a person helping you care for children is not your employee is if this person is in the business of providing substitute care for a number of providers. You might also have an independent contractor if you ever engage the services of a storyteller, tutor, puppeteer, or other specialized businessperson. Household help (as opposed to child care helpers) should qualify for independent contractor treatment, if they carry out their duties (such as cleaning the house) with very little direction from you.

Visit the IRS website for more information on how to distinguish between an employee and an independent contractor.

If you engage the services of an independent contractor, be sure to obtain a their federal tax id number. Give the person a Form W-9 to fill out at the beginning of the engagement. You must have written statements, bills and/or invoices from the service provider and should use a contract with substitute care providers. Give the person a Form 1099-MISC by January 31, if you pay her $600 or more during the year. Failing to provide a 1099 means that you will automatically lose the deduction if audited.

If you feel tempted to treat your worker as an the independent contractor when you shouldn't, read on to learn how this can come back to bite you severely.

Posted on 2008-11-10 15:55:52

The Internal Revenue Service announced pension cost-of-living increases for 2009 on October 16, 2008. Here is the full text of IR-2008-118: IRS Annouces Pension Plan Limitations for 2009.

Posted on 2008-10-20 23:41:55

August 2008

What are the tax consequences of buying a building to store your extra day care equipment, supplies, furniture, etc.? If you used the building to store items used 100% for your business, then you can deduct 100% of the cost of the building. This would include mortgage interest, property tax, utilities, repairs, insurance, and depreciation of the cost of the building. (If you simply rented space from a commercial storage company, you could deduct 100% of the cost of the rent.) If you stored items that were used by your family as well as your business, you could deduct a portion of the cost of the building (or rent). The business portion would be based on your Time-Space Percentage.

www.resourcesforchildcaring.org

Posted on 2008-08-15 14:16:23

August 2008

One of the most important record keeping tasks you can do is to track the hours you are spending on business activities in your home. This includes the hours you are spending caring for children as well as other hours you spend on business activities after the children are gone such as cleaning, activity preparation, meal preparation, parent interviews, etc. You should be maintaining careful daily attendance records in the "Attendance" section of the software.

In addition, you should be tracking the hours when children are not present in the "Accounting" section, under "Time-Space Percentage" section. Enter these hours under the tab "Time-Other Activities." It's not necessary to track these hours every day, but I strongly recommend that you do keep records for at least two months a year and use the average for these months for the rest of the year. If you haven't yet tracked these hours, use the month of August as your first month this year.

C-K Kids (also known as Minunte Menu Kids) is the premier child care management software for home-based family child care businesses.

www.resourcesforchildcaring.org

Posted on 2008-08-15 14:12:40

Family Child Care Providers may deduct actual grocery cost as a business expense on their income tax return or they may use the standard meal rates shown below to calculate their food deduction. Using the standard meal rates is easier and safer, in case of an audit. If you have records showing attendance and meals served, the IRS will not contest a food deduction based on the standard rates. When deducting actual grocery cost, it can be difficult to prove which groceries were consumed by day care children and which groceries were consumed by your own family. Nevertheless, if actual grocery cost is likely to be greater than the meal allowance deduction, it is still to your advantage to deduct your actual grocery costs. In this case, be sure to save ALL grocery receipts, even those for personal food. When using the standard meal allowance rates, providers need only save grocery store receipts that show non-food deductible items.

Read on for more information and to see the actual meal rates for tax years 2005 though 2009.

Posted on 2008-08-14 16:04:40

For general information about using standard meal rates to calculate your food deduction, see my main article on meal rates.

This post provides the special rates that apply to family child care providers in Alaska.

Posted on 2008-08-14 16:00:24

For general information about using standard meal rates to calculate your food deduction, see my main article on meal rates.

This post provides the special rates that apply to family child care providers in Hawaii.

Posted on 2008-08-14 15:36:50

[1] If you haven't yet filed a tax return to get your stimulus payment, you still have time to do so. You must file by Oct. 15 to get your payment this year. If you've already filed but have a question or issue, visit the IRS Stimulus Payment answer page.

[2] Keep separate track of business miles driven in the first half of 2008 and miles driven in the second half of the year. For business miles driven from Jan. 1 through June 30, 2008, the standard mileage rate for the use of a car (including vans, pickups, or panel trucks) is 50.5 cents per mile. The IRS raised the rate to 58.5 cents per mile effective July 1.

[3] Last year I wrote of the tax complications facing California Registered Domestic Partners, including the fact that they must file single federal tax returns and a joint state tax return. These same complications now apply to California same-sex married couples. Before marrying or registering a domestic partnership, I recommend that all couples receive competent legal and tax advice. This is especially true for same-sex couples, because lack of agreement between federal and state law creates many thorny issues.

[4] Are you planning on making any substantial gifts? Talk to your tax advisor first. Gifts with values exceeding $12,000 must be reported to the IRS.

[5] Not only will you save money at the pump if you buy a hybrid vehicle, you may be eligible for a credit on your income tax return. Note, however, that the credit is no longer available for certain vehicles, including the popular Toyota Prius. Check the IRS Alternative Motor Vehicle Credit page to see which vehicles still qualify.

Posted on 2008-08-14 00:37:30

When you are liable for a loan but can’t repay it, some lenders will forgive the debt. What many borrowers don’t realize is that this cancellation of debt (COD) often results in taxable COD income in the year of forgiveness. The lender usually will issue a Form 1099-C to report the cancelled debt. If you receive one, don’t ignore it. Be sure to give it to your tax preparer and discuss the circumstances surrounding the loan.

If you have cancelled debt but are bankrupt or insolvent, you may exclude the income on your tax return. To prove insolvency, you must show that your liabilities exceeded the fair market value of your assets immediately before the debt discharge. The amount of forgiven debt that can be excluded cannot be more than the amount your liabilities exceeded the value of your assets.

Posted on 2008-08-14 00:36:16

On July 30, 2008, President Bush signed into law a housing bill aimed at providing mortgage relief for more than 400,000 US homeowners facing foreclosure, primarily by allowing them to refinance high-interest, adjustable-rate mortgages, or ARMs, into less expensive fixed-rate loans backed by the Federal Housing Administration. Certain provisions will limit the number of homeowners who qualify, including a requirement that lenders write down loans to no more than 90 percent of a home's value. The program starts Oct. 1 and ends Sept. 30, 2011.

Posted on 2008-08-14 00:34:36

The federal housing bill just passed contains mostly provisions designed to help taxpayers. Here's one which does the opposite.

Currently, taxpayers are allowed to exclude up to $250,000 ($500,000 on a joint return) of gain from the sale of their principal residence. Generally, you must own and occupy the residence for at least two of the five years preceding the date of sale. A reduced exclusion is permitted for taxpayers who meet certain unforeseen circumstances.

Under the new law, taxpayers will not be allowed to exclude any gain attributable to a "nonqualified use." A period of nonqualified use is any period after January 1, 2009 during which the property is not used as the principal residence of the taxpayer, the taxpayer's spouse, or former spouse.

Posted on 2008-08-14 00:32:52

Just because the stock market lost money doesn’t mean you have a deductible loss. As long as you hold on to an investment, you only have a loss on paper. It’s only when you actually sell the investment that you have a transaction to report on your tax return.

Fortunately, the tax law allows you to offset your capital gains by your capital losses. You can avoid or minimize taxable gain by selling two investments, one at a gain and the other at a loss.

Posted on 2008-08-14 00:31:14

At some point, taxpayers who have a traditional IRA may wish to convert it to a Roth. Roth IRAs are more flexible in that there are no required minimum distributions when the owner reaches age 70½. In addition, qualified distributions from a Roth IRA are not taxable.

Under current tax law, in the year you convert a traditional IRA to a Roth IRA, you must recognize the amount converted as income on your tax return, with the exception of any basis that may be in the traditional IRA. Depending on the amount, this can significantly impact your tax return. It can even bump you up into a higher tax bracket.

New legislation may make it worthwhile to hold off converting your IRA. For conversions made in 2010 only, the income from these conversions may be included in income over the two-year period beginning in 2011. For example, let’s say you convert a traditional IRA worth $40,000 to a Roth during 2010. You won’t need to report the conversion on your 2010 return, unless you elect to. Your 2011 and 2012 returns will each include $20,000 of income from the conversion.

Posted on 2008-08-14 00:29:32

If you have a high-deductible health plan, you are eligible to open a Health Savings Account (HSA). Amounts contributed are deductible for all taxpayers (even those taking the standard deduction) and funds may be withdrawn tax-free to cover out-of-pocket medical expenses, including deductibles (but not premium payments). If you open your account part way through the year, you can still contribute the calendar year maximum for a full tax deduction.

Read on for the contribution limits for tax years 2007 through 2009.

Posted on 2008-05-28 17:00:04

I am an Enrolled Agent in private practice since 1995 in Fremont, California. My first job out of college was as a software engineer, followed by some years when I stayed at home with my two sons. I am now a self-employed tax professional working with family child care providers all over California from my home office in the San Francisco Bay Area.

Enrolled Agents have been tested and licensed by the Department of the Treasury. We prepare tax returns and also represent taxpayers before the Internal Revenue Service. If you receive a notice or are audited by the IRS, my Enrolled Agent credential allows me to work directly with IRS personnel on your behalf to resolve things in the best possible way for you.

I specialize in working with family child care providers because I enjoy it and because people in your profession have a need for specialized care. Most tax professionals (even experienced ones) are unfamiliar with the nuances of day care taxes. I see many tax returns with both large and small errors that cause the provider to pay more tax than she should or leave her in a risky position in case of an audit. In the beginning, I started out with a number of child care providers as clients. Now I restrict new business to family child care providers only.

Please read on for some pointers that will help you get off on the right foot with your record keeping and be ready for tax time.

Posted on 2008-05-06 00:10:37

Posted on 2008-03-25 23:39:16

This is a quick missive on the subject of those federal tax rebates due to the Economic Stimulus Act of 2008. These "stimulus payments," as the Internal Revenue Service refers to them, will go out through the late spring and summer.

You must file a 2007 federal income tax return. Otherwise, no rebate.

Be sure to pass this information on to folks you know whose income is so low that they don't normally file a tax return. They should probably do so this year. Seniors receiving social security benefits should definitely file a tax return, even if it's not otherwise required.

Posted on 2008-02-17 01:47:09

If you're a child care provider and other home business owner, you may not think you hired any independent contractors, but what about your lawn service? Your window washer? Your handy man? The guy who shovels your driveway? Etc?

These folks usually don't provide services directly to your business, but if you are taking a home office deduction, they do indirectly. You deduct a percentage of what you pay them on your tax return. I recommend that you give a 1099-MISC to any home service provider you paid at least $600 to over the course of the year.

Posted on 2008-02-02 23:31:05

The fact of the matter is that there are not nearly enough tax professionals out there specializing in child care taxes. Not enough to meet the demand for sure. If you are a child care provider looking for help at tax time, this can be very frustrating.

I work with child care providers all over my home state of California, so if you also call California home, feel free to contact me. I am located in the San Francisco Bay Area city of Fremont and I have family child care clients up and down the state, from Santa Rosa to Stockton, from Paso Robles to Bakersfield, from Los Angeles to Orange County.

Many people are initially surprised at the idea of working with a tax person located many miles away, but it is amazingly easy. In fact, I never see a good number of my local clients! They find it much easier to send me their information via US mail, fax or email.

This article was written to help out-of-state child care providers, as well as California providers who prefer to find a tax professional in their local area.

Posted on 2008-01-31 16:36:55

There seems to be a constant barrage of bogus emails nowadays which appear to come from the Internal Revenue Service (and eBay and Bank of American and you-name-it, I know!). Exercise extreme caution should you receive an email which looks like an official IRS communication. It is all to easy to click on a link without thinking first, so beware. No matter how official looking, the email is probably bogus and intent on tricking you into providing personal and financial information that can be used to gain access to your bank or credit card accounts. Do not give out any personal information or click on the links contained in these messages.

Recipients of the scam e-mail can help the IRS shut down this scheme by forwarding the e-mail to an electronic mail box, phishing@irs.gov, using instructions found in How to Protect Yourself from Suspicious E-Mails or Phishing Schemes. This mail box was established to receive copies of possibly fraudulent e-mails involving misuse of the IRS name, logo or Web site for investigation. Recipients of questionable e-mails claiming to come from the IRS may also call Treasury Inspector General for Tax Administration (TIGTA)'s toll-free hotline at 1-800-366-4484.

The IRS has come across numerous schemes in which e-mails claim to come from the IRS. More information on these schemes may be found at www.irs.gov by entering the term "phishing" in the search box.

Posted on 2007-11-19 19:14:19

October 2007

If a parent leaves owing you money, you cannot deduct this as a business expense. You can't deduct what you don't get, but your taxable income for the year will be lower.

A "bad debt" is only deductible if you previously reported the money as income. So if you reported as income $100 that a parent paid to you in December and then the check bounced in January, you could deduct the expense in January.

www.redleafinstitute.org

Posted on 2007-10-04 01:11:10

RNI's October 2007 Newslink Newsletter

A large percentage of sole proprietors underestimated their income and overestimated their business deductions, resulting in over $93 billion dollars in unpaid taxes for 2001.

This is the conclusion of a July 2007 report, "Tax Gap: A Strategy for Reducing the Gap Should Income Options for Addressing Sole Proprietor Noncompliance" issued by the Government Accounting Office for the US Senate.

This fact is probably behind the increase in IRS audits of family child care providers and is likely to continue.

Posted on 2007-10-04 01:06:41

It is easiest to apply for an Employer Identification Number (EIN) using a just launched IRS website interview-style online EIN application. The new process is quicker, with fewer questions, and a simpler format than the old Form SS-4 EIN application. For more information, read my companion Get an EIN blog entry.

You can also get an EIN over the phone by calling the IRS at 1-800-829-4933.

If you prefer, you can still fax or send in a paper application using the old Form SS-4.

You will receive your EIN immediately if applying online or by phone. Receive your EIN within four business days for faxed applications and within 4-5 weeks for mailed applications.

Posted on 2007-10-04 00:50:04

Are you a daycare provider considering incorporating your business for increased liability protection? If so, please review the following two-part discussion of this topic by Tom Copeland of the Resources for Child Caring. Once you do, I think you see that the increased costs to you, and especially the loss of your home-related expenses as a deduction on Form 8829, Expenses for Business Use of Your Home, are huge drawbacks. If you decide to proceed with incorporation, get the advice of a tax professional and a legal professional well versed in the business of family child care.

Posted on 2007-09-28 14:47:43

National Association of Tax Professionals (NATP) Appleton, WI – With children and teachers back in school, the National Association of Tax Professionals (NATP) reminds educators, parents, and students that the IRS has various education-related deductions and credits that can benefit them when filing their 2007 federal income tax return.

Posted on 2007-09-24 22:30:04

This document lists the information that I ask my day care clients to provide at tax time:

Click here to download - Child_Care_Tax_Return_Checklist.pdf


Last updated 28 January 2009

Posted on 2007-09-11 22:12:46

Self-employed business owners, including family child care providers, need an Employer Identification Number (EIN) if they have employees.

Child care providers, with or without employees, have another reason to obtain an Employer Identification Number: IDENTITY THEFT PREVENTION. Parents will often request your tax id number for the purpose to claiming the federal Dependent Care Credit on their income tax return. It is much safer to give them an EIN, rather than revealing your social security number.

Not a daycare provider? Do you provide other services as a sole proprietor? Anyone ever ask for your social security number or give you a W-9, Request for Taxpayer Identification Number, to fill out? You, too, should protect your social security number and get an Employer Identification Number. Give your EIN to clients to use in preparing their 1099-MISC forms at the end of the year.

Posted on 2007-09-08 20:44:03

August 2007

Although there are hundreds of items that a family child care provider (or other small business owner) can claim as a business expense, not everything is deductible. Here are some items that are considered personal expenses by the IRS and may not be deducted:

* parking or speeding tickets
* the cost of the first phone line into your home
* the cost of personal clothing (children's clothing would be deductible)
* pet care (it may be possible to deduct expenses for animals other than a dog or cat if you can show how they help children learn)
* assessments on your property tax statement (for sidewalks, sewers, or other land improvements)
* mortgage insurance
* the purchase of land

www.redleafinstitute.org

Posted on 2007-08-03 21:40:03

National Association of Tax Professionals (NATP) Appleton, WI – If you wait tables, bus tables, park cars, tend bar, serve cocktails, deliver food, or entertain, and you received $20 or more in tips in any one month – you must report all your tips to your employer. This includes cash tips, charge-card tips, and any tips you get from other employees, minus what you ‘tip out’ or share with colleagues. The IRS requires that federal income tax, social security, Medicare taxes, and, in some cases, state income tax be withheld from income earned through tips.

Posted on 2007-08-03 18:11:56

National Association of Tax Professionals (NATP) Appleton, WI – National Association of Tax Professionals (NATP) Appleton, WI – What is more exasperating than having to pay taxes? Understanding the constantly changing legislation affecting them! Yet, not fully understanding rights and how provisions work together costs taxpayers significantly every year. A mid-year tax review with an expert will help you. Here is why. Following are some common areas fraught with complex rules that cause taxpayers to miss valuable opportunities to leverage their options and lower their tax bills. Financial advisors and tax preparers are experts in these areas so you don’t need to be. Call your tax advisor for your mid-year review soon to discuss your financial plans and learn how you can save on your next tax return.

Posted on 2007-08-01 15:14:41

National Association of Tax Professionals (NATP) Appleton, WI – Fraud perpetrators have found the perfect means to intimidate taxpayers into filling out legitimate-looking, but phony, Internal Revenue Service (IRS) forms – using the threat of government action or loss of tax refunds if you don’t respond. In the latest e-mail scam, consumers have received a “Tax Avoidance Investigation” e-mail claiming to come from the IRS’ “Fraud Department” in which the recipient is asked to complete an “investigation form,” for which there is a link contained in the e-mail. It is believed that clicking on the link may activate a Trojan Horse that has the potential to take over a person’s computer hard drive and allow someone to have remote access to the computer.

Posted on 2007-08-01 15:04:27

July 2007

One of the most important records to track throughout the year is the number of meals and snacks that you serve the children in your care. If you are on the Food Program, keep a copy of your monthly claim form. But you should also be recording on a daily basis the additional meals and snacks you serve for which you are not reimbursed by the Food Program. Such snacks do not have to be nutritious, and you don’t need to keep a menu. Keeping an accurate count of meals and snacks will make a big difference when you deduct food expenses on your tax return using the Standard Meal Allowance. If you serve one un-reimbursed snack to one child per day, this is equal to $150 in food deductions for the year.

www.redleafinstitute.org

Posted on 2007-07-06 17:45:10

Most family child care providers use a full service payroll company to generate paychecks, W-2s, and quarterly payroll tax returns, as well as making payroll tax deposits. Payroll service fees generally depend on the number of employees. Using a payroll company is the best way to go for most small business owners. It can be a headache to deal with the many payroll tax forms yourself (federal and state), especially since the penalties are high when you miss a deadline.

If you feel you have the time, as well as a knack for detail-oriented number crunching and remembering deadlines, you may want to handle all or some of the payroll tax work yourself. If you engage a payroll service, you should still know enough about payroll taxes to be able to review your payroll tax returns and oversee the service you receive. This Payroll Tax Guide serves both of these purposes.

And remember, child care workers are almost always employees, so there's no getting around setting up payroll and doing things properly.

Visit the IRS website to see the criteria for distinguishing between an employee and an independent contractor. Even a very short-time or part-time worker can be an employee.

Posted on 2007-07-06 03:15:04

Tom Copeland describes this method in detail in a Resources for Child Caring article. Payroll taxes include taxes paid by the employer (half of Social Security and Medicare, CA unemployment insurance, and the CA employer training tax) and taxes normally paid by the employee (the other half of Social Security and Medicare and California State Disability). Employers using this method choose to pay the employee's taxes as well as their own.

This method simplifies things on payday because you no longer have to calculate or withhold Social Security, Medicare or SDI when writing out paychecks. You write each paycheck for the employee's full hourly wages, without deductions. Then you wait and pay the taxes yourself when you file your quarterly payroll tax returns (assuming you are a quarterly payer). You will pay somewhat more in taxes, but you may save time and/or payroll service fees. The tax amounts are usually not large for small employers.

Posted on 2007-07-06 03:10:37

Posted on 2007-07-05 00:08:34

July 2007

Now is a good time to review your record keeping practices since we are in the middle of the year. Your goal is to have a receipt for every item you use in your business: supplies, cleaning supplies, toys, furniture, household items such as toilet paper, light bulbs, detergent, etc.

If you don’t have a receipt for all purchases, take a photograph of the item and write a note describing where you bought it and how much it cost. Estimate if you have to. Save any cancelled check or credit card statement as well. Make a note on the receipt as to whether the item was used 100% for your business or was used partly for business and partly for personal purposes.

Your ability to sort out these two categories on your receipts will make a big difference come tax season because the more items you identify as 100% business instead of shared, the lower your taxes will be.

For details, see the Family Child Care Record Keeping Guide.

www.redleafinstitute.org

Posted on 2007-06-20 17:30:43

National Association of Tax Professionals (NATP) Appleton, WI – With the arrival of summer, many of you are packing up and heading to your vacation homes. For some, the time you are not there is an opportunity to make some extra income by renting out your property. The National Association of Tax Professionals (NATP) reminds you that if you receive income from renting your vacation home to others, you may deduct certain expenses. These expenses, which may include interest, taxes, casualty losses, maintenance, utilities, insurance, and depreciation, will reduce the amount of rental income that is taxed.

Posted on 2007-06-19 22:27:01

Find the most up-to-date information at on IRS Hybrid Cars and Alternative Motor Vehicles page.

The Energy Policy Act of 2005 replaced the clean-fuel burning deduction with a tax credit. A tax credit is subtracted directly from the total amount of federal tax owed, thus reducing or even eliminating the taxpayer’s tax obligation. The tax credit for hybrid vehicles applies to vehicles purchased or placed in service on or after January 1, 2006.

Posted on 0000-00-00 00:00:00

May 2007

If you buy items at a garage sale, you need to keep an adequate record to deduct it as a business expense.

There are several things you can do: Bring along a sales book for the homeowner to sign. Make out a note of the transaction which states the date, place, item purchased, and amount paid. Take pictures of the items.

If you are hosting your own garage sale, you probably will not have any tax consequences. If you sell items at a loss that you only used personally, you don't have to report the income received. If you sell items at a loss that you used in your business, you could report the business loss as a tax deduction, or not report anything at all. It's unlikely that you'll sell any item at a profit, but if you do, you must report it as income on Schedule D. (Note from Alison: I'm not so sure that you are unlikely to sell an item at a profit. It's all profit if you sell something you have previously deducted or depreciated as a business expense.)

For details, see the Family Child Care Tax Workbook and Organizer at RedleafPress.org.

www.redleafinstitute.org

Posted on 0000-00-00 00:00:00

The Internal Revenue Service once again warned taxpayers that identity thieves are not above posing as the IRS in order to trick people into revealing private personal or financial information. Commissioner Everson warned, "Don't be fooled by these shameless scam artists. The IRS doesn't send unsolicited e-mail."

Should you receive a fake IRS e-mail, the IRS asks that you refrain from opening any attachments and forward the message to the following e-mail address: phishing@irs.gov. Those of you interested in the full IRS press release on this topic, please click here. And thanks to a sharp-eyed EA, you may view an actual fraudster e-mail here.

Courtesy of the National Association of Enrolled Agents e@lert newsletter for April 7, 2007.

Posted on 0000-00-00 00:00:00

Due to recent legislation, the IRS is tightening up rules for charitable contributions. Please read below and learn how to protect your deductions.

Posted on 0000-00-00 00:00:00

National Association of Tax Professionals (NATP) Appleton, WI – Because having a family member with special needs can be costly, it is particularly important that these families take advantage of all the tax deductions and credits to which they are entitled. Unfortunately, many taxpayers who qualify for these tax breaks are unaware and fail to claim them. Lesser-known tax breaks are hard to keep up with, and even tax preparers who may have limited exposure to these situations can miss them. As a taxpayer, it’s important to be informed.

Posted on 0000-00-00 00:00:00

Update 7 November 2008: This article was originally posted in December 2006, but teachers have reason to rejoice again. October legislation has extended the teachers' classroom expense deduction retroactive to the start of 2008 and through 2009.

National Association of Tax Professionals (NATP) Appleton, WI – In a victory for teachers who frequently spend their own money on behalf of their students, Congress, in last-minute legislative action before year-end, approved an extension of the $250 tax deduction for teachers who incur expenses out of their own pockets during the 2006 and 2007 tax years. The president added his signature on December 20, 2006.

Posted on 0000-00-00 00:00:00

NATP Information Release Summary:

--Over half the population now employs the services of a tax preparer; a direct outcome of ever-increasing complexity of tax legislation.

--“Over-the-counter” tax software is only as good as the numbers entered and the understanding of the individual doing the input.

--Tax preparers study year-round to keep up-to-date on the changes, investing significant amounts of time and money.

--To determine what kind of tax preparations services are right for you, here are several things to consider.

--Know the differences between types of preparers (brief descriptions).

--Check references.

--Always be certain that the preparer signs the return.

--Link to receive a free brochure. http://www.natptax.com/2005findataxprobrochure.pdf

Members of the National Association of Tax Professionals (NATP) work at offices that assist over 11 million taxpayers with tax preparation and planning. The average NATP member has been in the tax business for over 20 years and holds a tax/financial designation and/or a college degree. NATP has nearly 18,000 members nationwide. Members include individual tax preparers, enrolled agents, certified public accountants, accountants, attorneys, and financial planners.

Learn more at www.natptax.com.

Posted on 0000-00-00 00:00:00

This information was released by Tom Copeland at Resources for Child Caring in April 2007:

When the IRS audited family child care provider Kay Gillock last fall, there were two main issues in dispute: how much space in her home did she use in her business, and how many hours did she work in her home. Kay claimed she used 98.87% of the space in her home and worked 84.8 hours per week (50.3%). When the auditor issued his report that allowed only 57.31% of her space and 44.4% of her time, Kay fought back--and won.

The way that Kay responded to the IRS report is a textbook example of how to make a case to the IRS in an audit. With Kay's permission we have made the IRS report, her response to the report, and the IRS letter that conceded these two issues available on our Web site as a downloadable PDF. Family child care providers can learn much from these documents on how to prepare their own audit defenses.

Posted on 0000-00-00 00:00:00

December 2006

Can you deduct expenses for your dog or cat? The short answer is "no." The IRS views dogs and cats as too personal to be deducted as a business expense. In over 20 years of representing providers in IRS audits, I have never won a deduction for the upkeep of either a dog or cat.

You can deduct the cost of keeping a dog away from the children (fence or leash). In addition, you can deduct the cost of immunization of these pets, but only if your local community does not already require such immunizations for all pet owners.

You could also deduct the cost of some pets (fish, gerbils, birds, etc.) if you can show that these animals are used as part of the education program with the children in your care. Keep records showing how children are learning because of their interaction with these animals.

www.redleafinstitute.org

Posted on 0000-00-00 00:00:00

National Association of Tax Professionals (NATP) Appleton, WI - Imagine the delight of a young teacher working to complete her master's degree who found out that by filing the 1040 long form tax return instead of the short form, she could receive a $3,000 refund. It's only one example of how itemizing deductions can pay off. When it comes to tax deductions, little things mean a lot. For those who assume they won't qualify, think again. If you keep careful records of your expenses, you may have a delightful surprise coming, just like this young client of NATP tax preparer, Louise Gritmon.

Posted on 0000-00-00 00:00:00

Posted on 0000-00-00 00:00:00

Posted on 0000-00-00 00:00:00

Posted on 0000-00-00 00:00:00

Posted on 0000-00-00 00:00:00

Posted on 0000-00-00 00:00:00

These rates also apply to Paid Family Leave (PFL).

The SDI rate for 2009 is 1.1% (0.011). The taxable wage limit for 2009 is $90,669 for each employee per calendar year. The maximum amount to withhold for 2009 is $997.36.

The SDI rate for 2008 is 0.8% (0.008). The taxable wage limit for 2008 is $86,698 for each employee per calendar year. The maximum amount to withhold for 2008 is 693.58.

The SDI rate for 2007 is 0.6% (0.006). The taxable wage limit for 2007 is $83,389 for each employee per calendar year. The maximum amount to withhold for 2007 is $500.33.

The SDI rate for 2006 is 0.8% (0.008). The taxable wage limit for 2006 is $79,418 for each employee per calendar year. The maximum amount to withhold for 2006 is $635.34.

Last updated 2 January 2009

Posted on 0000-00-00 00:00:00

National Association of Tax Professionals (NATP) Appleton, WI - What do you get when you team up two unethical CPAs with a millionaire who wants to believe he is exempt from paying taxes? BIG TROUBLE. So go the allegations about actor Wesley Snipes and his tax advisors, Eddie Ray Kahn and Douglas Rosile are just the latest in a long string of schemers attempting tax evasion. Obviously, they should have spent a little more time reading old Dick Tracy comics in which Tracy repeated the FBI slogan, "Crime Does Not Pay."

Posted on 0000-00-00 00:00:00

From RNI's March 2007 Newslink Newsletter:

Although it might seem at first to be a simple matter, the question of whether or not a family child care provider can deduct professional development classes or professional credentials is actually quite complicated.

Posted on 0000-00-00 00:00:00

Everyone who itemizes their deductions should be aware of changes to the charitable tax deduction rules included in the Pension Protection Act of 2006, signed by President Bush in August. I have long thought of charitable giving as one of the last remaining write-offs my clients could count on, but no more. You will have to work harder for your charitable deductions starting immediately.

Posted on 0000-00-00 00:00:00

Posted on 0000-00-00 00:00:00