How to Pay Taxes on Day Care Income
Running your own day care business can be very rewarding, both on a professional and on a personal basis. But running a business of your own also requires a lot of planning, especially when it comes to taxes. It is important to plan your taxes year round instead of waiting until those taxes are due. This year round planning will help you minimize your taxes and keep more money in your business.
Other People Are Reading
Things You'll Need
- Business checking account
- Expense records
- Tax preparation software
- Income information
Instructions
-
-
1
Open a separate checking account just for your business. Do not use this account for anything other than depositing payments from the day care parents and paying your day care business expenses. Keeping a separate bank account make record keeping easier and can help you in the event of an audit.
-
2
Keep meticulous records detailing every expense associated with your day care business. Everything from snacks for the kids to safety fencing in the backyard is a potential deduction. Keep track of your expenses on a spreadsheet, and keep the actual receipts in a special envelope.
-
-
3
Track the income from your day care business using a spreadsheet, and keep copies of all invoices and records. These items will be very valuable in filling out your taxes.
-
4
Invest in a quality tax preparation software package designed for small business owners. Programs like the deluxe version of H&R Block @ Home Premium and Turbo Tax Premium include the forms small business owners need to file their taxes accurately.
-
5
Enter the income and expense information for your daycare business into the tax preparation software package. The program will calculate the amount of taxes due, and notify you if you are required to file quarterly tax returns going forward.
-
6
Consider opening a SEP-IRA or other individual retirement plan to minimize your taxes and save for your future. You can enter the IRA contribution you expect to make into the tax software to instantly see how much the contribution can save you.
-
7
Contact the revenue department in your state to determine whether or not your daycare business income is taxable in your state. You can find contact information for the state's revenue department in the blue pages of your phone book.
-
8
Download a copy of your state tax return from the revenue department's website or pick one up from your local library or legislative office. Run the numbers on the form to determine how much you owe the state in taxes.
-
1
References
- Photo Credit tax forms image by Chad McDermott from Fotolia.com
