It’s that time of year. The time of year to file your tax returns. I don’t know why, but it is dreadful for me. It’s like worse than getting a cavity filled or a really bad migraine.
Record keeping is just not my thing. Numbers and adding? Not my forte either.
I even set goals, and set time aside throughout the year, to stay on top of entering receipts into my record keeping software. It works for a while, but then pretty soon I have a pile of “to be entered” receipts. Or a thread of e-mails from Amazon to go through, categorize, and decipher what category and where these items should go.
I recently attended an online webinar hosted by Tom Copeland. If you are a family childcare provider, or know someone who is, I would highly recommend checking out his blog.
He is a boat full of information and is so knowledgeable on the topic of childcare and what items should and shouldn’t be accounted for at tax time.
During the webinar, he explained that the stimulus checks are not taxable income, and yet if a provider received unemployment benefits, those are taxable income, as well as state and local grants being taxable.
I was always under the assumption that as a provider, I should save tax return documents and receipts for seven years. During the webinar, he stated to save receipts and tax returns for three years.
And then he got into the topic of pets. He said he has never won a case or argument where dog or cat food could be deducted, or even a kennel. The only thing he has found one could deduct, related to a dog or cat, was a leash for a dog, or vaccinations required by the Department of Health and Human Services (DHS). Yet, the cost of a rabbit, and rabbit food, because it can be considered as part of teaching, or enhancing a lesson, has been approved as a tax write-off.
One area that I’ve always overlooked, are toys that are given to my children as a gift whether it be for Christmas or birthdays. If the child solely plays with it themselves, and does not share it with the daycare children, it is not tax deductible. But if the toy gets intermixed with the other daycare toys, it then becomes a deductible item. Copeland recommended taking a screenshot or a picture of the item given to your child, and then finding the cost of the item online, so that there is a record of that.
One other area that is often overlooked, is the sales tax on purchases, which is a tax deduction.
Copeland expanded on his time-space percentage, and recommended for providers who do not have a second daycare house, to revisit how they classify the rooms used for “regular use,” which is 2-3 times per week, including your basement, garage or utility room.
Due to COVID-19, early childcare educators, have also spent additional hours cleaning, reading e-mails from DHS, staying up-to-date on COVID decision tree guidelines or maybe having additional conversations with families in regard to whether they should keep their child at home due to COVID exposure or symptoms, as well as hours closed due to a COVID exposure. Copeland recommended to find a calendar, and try to reconstruct as best as possible, the additional hours worked or closed due to COVID, as that would be a huge factor when filing taxes.
Copeland highly recommended early childhood educators to connect with their food program sponsors or representatives, and verify if their program is in the correct tier reimbursement category.
For more information, visit www.tomcopelandblog.com.