Home Day Care Resources

[SensibleandHourly]

Hello Community, 

I've started working with my first ever home day care client and was hoping to get some great advice on the best resources for that situation from the community, especially what home expenses are legitimate since they have typically filed a Schedule C. Also, their former tax advisor allowed them to pay themselves (husband and wife) two hours each day to clean their house after the children left for the day, and then write that 'compensated' time off as an expense. Curious if that is common?  Thank you!! 

[IRonMaN]

"and then write that 'compensated' time off as an expense"

That's fine as long as they also picked it up as income elsewhere on the return ------------------------ which I'm guessing they didn't.  It's a left pocket to the right pocket deal.  If they take a deduction for their time on one business, they need to pick it up as income on another business.  However, they can't just magically take a deduction on their return for their own time.

[qbteachmt]

"Also, their former tax advisor allowed them to pay themselves (husband and wife) two hours each day to clean their house after the children left for the day, and then write that 'compensated' time off as an expense. Curious if that is common?"

Yes, it is Common that people filing Sched C try to include their draw as if that is Payroll and as if that is expense. Is it right? No. Nothing they "pay themselves" for is Expense. Or, one of them is on payroll and this really is a Sole Proprietorship? Because SP is never "on payroll."

Did you google:

Daycare business tax reporting

[SensibleandHourly]

Ah, thank you! That makes sense.

[SensibleandHourly]

Thank you. I have been going through Publication 587, but google results can be either really helpful, or less than the best, shall we say. 😉

[TaxGuyBill · Accepted solution]

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@SensibleandHourly wrote:

Also, their former tax advisor allowed them to pay themselves (husband and wife) two hours each day to clean their house after the children left for the day, and then write that 'compensated' time off as an expense.

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They can't claim it as an expense, but they CAN claim those hours as part of their Time/Space percentage for their home office hours.

This book by Tom Copeland is an great resource for what is deductible (but it is aimed at the daycare provider, not necessarily the tax preparer).  Realistically, A LOT is deductible.  In some cases, almost everything.

https://www.amazon.com/gp/product/1605543977/ref=as_li_tl?ie=UTF8&camp=1789&creative=9325&creativeAS...

I do a lot of daycare tax returns, so if you have any questions, let me know.

[SensibleandHourly]

Thank you very much. I will read what I can this weekend, and I've also ordered the book. 

I really appreciate the offer to field more questions as you have experience with these types of returns. 

Have a great weekend! 

Dawn

[George4Tacks]

https://whereimaginationgrows.com/home-daycare-tax-deductions/ seems fairly thorough. 

[qbteachmt]

Are they licensed? In my State, the licensed providers take continuing ed classes, and my QuickBooks class qualified for that. You'd be surprised how much they learn from someone who can explain what is and is not business expense.

[SensibleandHourly]

The business is licensed, I'll have to ask about that. 

Thank you!

Dawn 

[SensibleandHourly]

Hello, 

A few more questions...... is a phone call a possibility at all? I understand if it isn't, but if you did have a few minutes that would be amazing. Thank you either way! 

[TaxGuyBill]

If you can figure out how to send me a "private message" on this forum, I can send you my information there.

[SensibleandHourly]

Hello,

Well, I thought I found the area to direct message, drafted the message, found you as a contact, hit send, and then for some reason the system denied the ability to send. So, I'm going to just throw my phone number out here, and hope that you have time to call at some point. 😉Thank you if you can, and I understand if you can't. Have a wonderful Thanksgiving.

[TaxGuyBill]

I just left you a voicemail with my information. So you can delete your phone number now if you want to.