* Not deducting car loan interest
* Counting time spent shopping
* Not depreciating items owned before the business began
* Claiming 100% of household supplies
I've been reviewing the tax returns of family child care providers who are members of The Child Care Business Partnership. If you join (or renew) the Partnership before March 1, 2015 I will review your Minute Menu Kids Pro tax reports and/or your tax return for free!
Car loan interest: Many providers who are self employed fail to deduct the business portion of their car loan interest, even when using the standard mileage rate to claim car expenses.
Time percent: You cannot count hours spent on business activities outside of your home (shopping, attending training workshops, meetings in other provider's homes, etc.). This is because your Time-Space % is used for house expenses and when you are away from your home, even when it's for a business purpose, you are not using your home.
Property depreciation: Every Minute Menu report and tax return I looked at failed to claim depreciation on household items owned by the provider before she started her business. This is a big deduction that you should not overlook. See my article "Conduct a Household Inventory To Save Money."
Household supplies: Many providers try to deduct 100% of their household supplies (toilet paper, paper towels, cleaning products, laundry detergent, etc.). Since these items are also used personally you must apply your Time-Space % before deducting them. If you buy these items separately for your business and personal use, keep receipts for all business and personal purchases.
Depreciation: A number of providers entered items that cost less than $500 into the depreciation section of Minute Menu Kids Pro. You do not have to depreciate items costing less than $500. See my article on this topic. Entering a $400 table or couch into Minute Menu Kids Pro can be confusing because you are likely to choose the expense category of "Furniture/Appliances." But, any items entered there will be treated as something to depreciate. Instead, enter items costing less than $500 under "Household Items."
Nobody ever said preparing a family child care tax return is easy. Try to avoid these common mistakes.
To get your free review of your tax return and/or Minute Menu yearly reports, join or renew The Child Care Business Partnership. The annual $15 fee is tax deductible and I'll refund it if I can't save you at least $15 in taxes! Members of the Partnership also get access to nineteen instructional videos on how to use Minute Menu Kids Pro software more effectively.
Tom Copeland - www.tomcopelandblog.com
Image credit: blogs.angloinfo.com
My 2014 Family Child Care Tax Workbook and Organizer offers line-by-line instructions on how to fill out all of your federal tax forms.