Tax Tip Number Three

Hello again! It is time for this week's tax tip for child care providers! I hope these tax tips have been helpful to you! This week I want to address business expenses, specifically expenses related to running a business out of your home. As a daycare provider you probably use a significant portion of your home in some way to support your child care business. Because of that you have a lot of deductions you can take on your business taxes that you may not have thought about. For examples, did you know that you can deduct a portion of your electric bills? Since a portion of your electricity is used to support your business, you can claim this portion as a business expense. You will need to apply the time/space formula to your total electric bill for the entire year in order to find out what percentage you can claim as a business expense. For more information on the time/space formula scroll down to my article regarding important tax deductions for child care providers. You can also deduct a portion of your natural gas or propane bills (or whatever you use to heat your house), your cable TV or satellite TV bills, your garbage service and/or recycling bills, and services performed on your home. All of these would again have to have the time/space formula applied to them in order to find out how much you can claim as a business expense. Also, if you use yor computer for child care, specifically your internet service, a portion of your internet service provider fees is also deductible. All of these expenses are increased because you have extra people in your home for child care, so all of these expenses can be partially deducted for your business. If you have a phone line that is specifically used for your business, that expense is 100% deductible. Take the time to gather some information on your utility bills, etc. and apply the time/space formula to them. Then pass that information along to your accountant. These savings can really add up! For more information on tax savings for small businesses, check out this great info! Click Here!

Potty Training

One huge issue child care providers face is the battle of potty training the youngsters in our care. Everyone has their own ideas about the best method for potty training. This can lead to confusion for the child and frustration in you and the parents. My first recommendation is to communicate openly with parents regarding potty training. When you feel a child is ready to potty train request a meeting with the parents to discuss the issue. Sometimes the parents will approach you first. In either case, sit down with the parents and talk about both their expectations and yours. That way you are all on the same page getting started. Know what to look for in deciding if a child is ready to potty train. Are they interested in the potty? Do they ask questions about going potty? Do they want to sit on the toilet? Do they dislike having a wet or messy diaper? If most or all of these are exhibited by the child, you can probably get started with potty training. One note of caution: if the child becomes resistant to the training, you need to back off! If you keep pushing a child to potty train when he or she doesn't want to, it is going to be nearly impossible to train the child at this time. Remember that each child is different with potty training as they are with everything! One really good, down to earth guide to potty training that I have found is called "Potty Training in 1 to 3 Days". Now, I can't guarantee that this guide will bring about results in 1 to 3 days, but the tips and information in it are very good and truly can make potty training much easier! Check it out and good luck! Click Here!

Important Tax Deductions for Home Daycare and Child Care Providers

Important Tax Deductions for Home Daycare and Child Care Providers

It’s tax time – are you ready? Chances are, if you started a home based child care business in 2007 you are feeling very overwhelmed about your taxes. I know that feeling! I ran a home daycare for nine years and tax season can be intimidating! Whether you are having a professional complete your taxes or you are doing them yourself, there are several things you need to know to help the process go more smoothly.
First let’s talk about the issue of professional tax preparers versus doing it yourself. Which method is better? I personally have used both methods. The first year I needed to file taxes for my home child care business, I attended a workshop put on by a local community college that dealt specifically with taxes for child care businesses. It was extremely helpful. I would suggest asking around to find out if there is something like that available in your area. You can check with other daycare providers, local community colleges, or child care organizations to see if someone can point you in the right direction. After attending the seminar, I decided to do the taxes myself that first year. I felt like I had a pretty good handle on the situation and professional tax preparers can be costly. I was able to get help from the IRS through their website www.irs.gov, and over the phone (see website for phone numbers). It takes some patience to get through to them because sometimes the hold time is lengthy, but when you do get through the help is outstanding! That first year I did my taxes the old fashioned way…on paper! I completed them on paper for a couple of years actually. A few years into my daycare business I chose to have a professional complete my taxes, mostly because of some items to be addressed in our personal taxes that we weren’t sure how to handle. I was relieved to find out that I had been doing a pretty good job with my business taxes! The accountant was able to find a few more deductions that I hadn’t been claiming that proved to be very helpful. After that year, I chose to go back to doing my own taxes, but I decided to use one of the tax software programs. They turned out to be easier than I thought they would be and the online question center was very helpful. I loved that I was able to file my taxes electronically, which significantly reduced my wait time to receive my refund. I continued to complete my taxes using computer software for the duration of my child care business years. Personally, I think that you can successfully complete your business taxes yourself, especially using tax software, and save yourself significant money. It might be beneficial to have a professional do it the first year so you are certain that you are taking all of the deductions you should take. After that, you can look back on the first year taxes as you complete them yourself to ensure that you are completing them correctly.
What sort of deductions should you be claiming? One of the biggest deductions you should be logging is your mileage. This is actually one of the deductions that I wasn’t claiming until I had a professional complete my taxes. I found out that I had been missing out on a huge tax savings by not keeping track of my mileage. I didn’t fully understand what mileage I could claim for my child care business. I thought I could only claim mileage for field trips or training classes. How very wrong I was! A home daycare provider can claim mileage for ANY trip in which child care business is conducted. This means that every trip to the grocery store to buy food for daycare, every trip to buy art supplies or toys, every trip to the bank to deposit child care income, is a business trip and you should be keeping track of your mileage! Mileage is deductible from your home to the location and back again. That being said, you need to be honest with your mileage calculations. If in one day you first travel to the bank to deposit checks and then you head to the grocery store to buy food before heading home, you can’t count mileage from home to the bank and from home to the grocery store. You need to calculate mileage from home to the bank, from the bank to the grocery store, and from the grocery store to your home to be fair. Just to give you an example of how large a deduction mileage can be…I live in a rural area, so a trip to the grocery store and back for me is about 30 miles. The bank is even further. In an average year, I was able to claim approximately 10,000 miles for a deduction for my child care business! This comes out to be a $3000-$4000 deduction! I know you are wondering what to do if you make a trip to the grocery store to buy both food for your business and food for your family. Can you claim that mileage? Absolutely! You are still there conducting daycare business, so that mileage is deductible! I know your next question is, “I didn’t keep track of my mileage for 2007, so do I lose out on that deduction?” Not necessarily. One method I use to calculate mileage is the receipt method. I am sure that you have been saving your receipts from trips to the store. You need them for tax purposes anyway (see next paragraph). You need to go back through your receipts and create a mileage log based on them. Count up how many times you went to each store and write it up, including the name, address, and reason for going to each store. Then you will need to logon to a website such as www.mapquest.com and choose the option for finding directions. Put in your starting address (usually your home) and the address of the store you went to. Then click on find directions. When the program lists the driving directions, it will also list the mileage. You will need to double the mileage, since the program only gives you mileage for the trip to the location, not for the return trip. Once you have the roundtrip mileage for a certain store, multiply the mileage by the number of times you went to that store for daycare business in 2007. Voila…you have a mileage log! You will need to calculate the number of times you went to the bank for childcare also, and use the same method as above for calculating the mileage. If you don’t save all of your deposit receipts, go back through your checkbook registers to find all of your deposits. Remember to include things like field trip mileage, or trips back and forth from the school if you pick up child care children from preschool or kindergarten. Using this method will give you a fairly accurate calculation of your mileage and can provide you with a huge tax deduction!
Another deduction that you should be claiming is the cost of food and supplies for child care. This is another huge tax deduction! There are two ways to handle food for child care. You can either shop separately for your daycare food than for food for your family, or you can shop for both at the same time and separate items for daycare later on your receipt. Personally, I didn’t shop separately for two reasons. First, if you shop for food that is to be used for your home daycare business, then that food can ONLY be used for your home child care business! That means that if your son or daughter wants to take a granola bar to school for snack and you purchased those for daycare, you are going to have to say no. I know that sounds extreme, but if you are claiming those items as strictly child care items, you need to keep them separated from food for your family. Secondly, it is really a pain in the neck to do separate shopping for your family and your business! It means either separate trips to the store, or at least separate shopping carts in the store! The advantage to shopping separately is that you can claim every penny spent on food for child care on your taxes. I chose to shop for my family and my business together and not to keep the food separated. It made things a lot easier in my house. However, it did make my record keeping for my business a little trickier. Once a month I had to go through my grocery receipts and mark off items that I knew were not used for child care, such as coffee or soda pop. Once I had eliminated those items from my receipt total, I then had to calculate which items on the receipt were food items, which were consumable items (like toilet paper) and which were non-consumable (like toys). I then calculated a total amount for that receipt of each of these categories and wrote it at the top of the receipt. Come tax time, I calculated a total amount spent for the year for each of these categories. Then, in order to fairly calculate a deduction for each of these categories based on how much was used for child care and how much was used for my family, I had to apply the time-space formula to each category. The time-space formula is an invaluable equation that allows you to fairly claim child care expenses based on how many hours out of the year you spend being a daycare provider. The equation is fairly simple. First, you need to calculate the approximate amount of space in your home that you use for your child care business. You need to include every space that is ever used for daycare. You need to include your primary child care room of course and your kitchen. But you also need to include the bathrooms that the kids use, the dining area if they eat or do crafts there, the laundry room since you will invariably be washing blankets, sheets, towels, etc. that were used for daycare, any rooms in which children nap, your home office if you use it to create forms and file business paperwork, and any other place the kids use. You need to exclude any rooms that the children in your care never use. Be fair in calculating the approximate percentage of your home that is used in your business. Once you have this percentage, you need to figure out the approximate number of hours you spent in 2007 performing duties related to your business. You, of course, need to figure out the number of hours per day that you actually care for children. You also need to take into consideration the approximate amount of time per day that you spend cleaning up from child care or getting ready for child care. Then you need to figure out exactly how many days you provided these services in 2007. You then multiply the number of hours per day by the number of days you provided care. That gives you the number of hours you spent in your business in 2007. Now you need to figure out the percentage of hours you spent in your business compared to the number of hours in a year. There are 8760 hours in a year. So, take the number of hours you spent doing daycare and divide it by 8760 and this will give you the percentage of time you spent doing child care in 2007. Finally, you need to multiply the percentage of time you spent doing daycare by the percentage of your home used for business to find a final percentage that you can claim for costs shared by your business and your family. This gives you your time-space percentage. Here is an example: Let’s say you decide that you use 80% of your home for your business. Now, you spend on average 10 hours per day on your business and you calculate that you spent 200 days being a child care provider in 2007. Multiply the 10 hours per day by the 200 days (10 X 200), to find that you spent 2000 hours providing child care services in 2007. Since there were a total of 8760 hours available in 2007, you will now divide your 2000 hours by 8760 hours (2000 divided by 8760) to find that you spent about 22.8% of your time being a daycare provider in 2007. You can round that up to 23%. For your final calculation, you need to multiply the amount of space used in your home by the amount of time spent doing daycare to find a final percentage that you can claim. In this case, you would multiply the percent usage of your home (80%) by the percent of time spent (23%) (80% X 23%) to get a final percentage of 18.4% or 18% since we would round down. This is the percentage of food, consumable items, utilities, and mortgage interest you will be able to claim for your child care business. The calculation takes a few minutes, but it saves a lot of headache in the end. Non-consumable items like toys or cookware are 100% deductible for your business.
If you have a professional complete your taxes, you will want to make sure to have all of your information with you at the initial meeting. This will save you from having to get information to him/her later and can actually save you money in tax preparation fees. My accountant charged me less because she had less work to do since I had done most of the information preparation done before I met with her. You will want to bring a sheet that shows the total amount of income for your business for 2007, a calculation of your time-space formula, a list of expenses (include a note about which ones should be multiplied by the time-space formula), a mileage log, and any other information relevant to the business (such as a tax id if you have one). Be prepared to back up all of this information with receipts if your accountant wants to see them. Don’t stress if you don’t have everything the accountant wants. You can get it to them later if necessary. If you don’t have everything in order the accountant will let you know, but it will cost you more since the accountant will have to spend more time in preparing your taxes. Be as prepared as you can and you will have much better, and cheaper, results!
This is just the tip of the iceberg when it comes to tax preparation for home child care businesses. This seems like an overwhelming amount of information, but there is actually a lot more. Don’t give up yet. There are a lot of resources for you to get more information, such as the IRS, an accountant, or a local organization. The best advice I can give a home daycare provider is to be incredibly organized. Keep all of your receipts, keep an accurate mileage log, keep an accurate receipt book recording income, and keep all of it readily available. If you follow this advice filing your taxes will be much easier!

To help you keep track of all of these records, check out this great daycare software! Click Here! Remember to check back here weekly for more tax tips for daycare providers!

Tax Tip Number Two

It is time for tax tip number two! My tax tip for this week is about how to report daycare totals to parents. You are required by law to furnish each family with a report that shows how much they paid you in child care expenses for a year. You also need to supply each family with your legal name, your business name if you have one, your address, your phone number, and your tax ID number or social security number, whichever you are using. The easiest way I have found to do this is to provide each family with a W-10. This is an IRS form that you can download from the website www.irs.gov. Once you get onto the website, use the search function and type in w-10. It will only pull up one option. Click on the W-10 and download it. Then you can print it out. This form is used to supply your information to your families. However, it does not include a place to put the amount paid to you. What I did was to modify the form. This form does not have to be filed with a family's taxes, so it is ok if it is not an original form and it is ok to change the format. I looked at the form W-10 and made my own version using my word processing program. I made sure my version contained all of the information required on the original form. Then, instead of including the lengthy directions included at the bottom of the original form, I created a section that listed the name of the family I was supplying the form to, the children's names, the family's address and phone number, the amount charged to them for daycare that year, and the amount they paid for daycare that year. Then I printed out multiple copies of my new form and filled one out for each family. Don't forget to provide these forms to the families of ALL of the children you cared for in that year, including families that may have left you earlier in the year. Refer to your receipt book to make sure you include all families and to calculate totals. I always included a short letter with each form letting the parents know what the form was and that they did not need to file the actual form with their taxes. Rather they should keep it with a copy of their taxes to reference in the future if needed. My parents loved receiving an official form that contained all of the information they needed for their taxes!

Setting Daycare Hours

One thing that can really make or break your home child care business is your hours of operation. There are two things to consider when establishing a schedule: your family's schedule and the needs of your clients. First and foremost you need to consider the schedule of your family. Do you need to take kids to school or pick kids up from school? Do your children have after school activities that you need to get them to or attend? If so, you will need to consider how to do this with daycare kids around. You will either need to really limit your daycare hours, or you will need to bring the child care kids with you on these errands. Also take into consideration your children's homework and your family's dinnertime. You need to be able to create as normal of a life as possible for your family while still running your business. The second consideration is the needs of your clients. I live in a rural community and most of my daycare parents had to travel 40+ miles to get to work. Therefore, I needed to open my business early (at 6:30 am) and close my business a little later (at 6:00 p.m.) to accomodate travel time. If you live in a city, chances are that most parents work fairly close by and you may be able to get by with shorter hours. But consider that parents work all sorts of jobs, some with weird hours, and you need to decide which ones you can accomodate. It is a tough juggling act, but with a little planning and research you will make the right choice. For more information on this subject, check ezine.com in a few days for my new article about daycare hours.

Tax Tip for Home Child Care Providers

Tax time can be stressful for home daycare providers, because there is so much information to gather. I will be publishing one tax tip each week through April 15, to try to make this process as painless as possible. Also, look for my new article, "Important Tax Deductions for Home Daycare and Child Care Providers" to be published in the next couple of days on EZineArticles.com. It contains a detailed look at two important tax deductions that you definitely need to claim as a child care provider.
My tax tip for this week is to organize your receipts by month. Before I became a child care provider I didn't save my receipts unless I had paid by credit card or there was a possibility that I might need to return something. I certainly never saved my grocery receipts. But I received good advice from another provider when I got started - NEVER throw away a store receipt! I began by just stuffing all of my receipts into a large envelope and never looked at them again until tax time. While this works, it makes tax time very time consuming! I recommend creating an envelope for each month. As you get receipts just put them in the correct envelope. Then, at the end of each month, take 30 minutes and tally the receipts for that month.
Write the totals on the front of each envelope. (For category suggestions and how to tally receipts, see the above mentioned article.) If you keep up with this process tax time will be a breeze! If you want to be even more organized with your receipts, check out this cool daycare management software! Click Here! Remember to check back here weekly for more tax tips for daycare providers!

Craft Projects to do with Little Ones

One of the best things to do on a cold or wet day is to pull out the craft basket and make something fun! Kids absolutely love crafts and they actually learn a lot from making things. They learn cooperation and sharing and they work on fine and gross motor skills. They also get to use the creative half of their brain and they are allowed to express themselves however they want. Parents love these craft projects too, because they know their children are doing more than just sitting around all day and it gives them something to display at home. But let's face it, not all of us can pull a craft project out of our hats a couple of times a month! Since I am a former elementary school teacher, I had many craft project books from my teaching days. There are many good ones out there that have easy to make ideas that don't require a lot of supplies. One of my favorites is Craft Projects for Little Kids. It has projects tailored to little ones that are easy to make, cute, and inexpensive. Check out the link below to find out more information, or visit your local book store to find a resource that is right for you! Have fun!
Click Here!

Top Four Things You Shouldn't Do When Starting or Running a Home Daycare Business

I’m sure this sounds like an unusual title! But there are several things that you should know that you shouldn’t do when starting and running a home daycare. I ran a very successful home childcare business for nine years, so these tips come from the voice of experience!
The first “don’t” of home daycare is don’t take on every family that calls looking for care for their children. I know is it tempting when you are first starting or you have a vacancy that you really need to fill to accept children from any and every call that comes in. What you need to remember is that you will have to spend many hours a day with these children and you will have to deal with the parents on a daily basis. You absolutely must have a face-to-face interview with every family (including children) before you agree to take them on. This will allow you to get a feel for the children’s behavior and the personality of the parents. If you have reservations after meeting them, you should probably turn them down so it doesn’t lead to a difficult situation later on. It is necessary to actually like and enjoy the children and families you work with in order to run a successful home daycare.
The second thing you should NOT do in starting and running your childcare business is do not allow parents to run the show! This is your business and you are in charge. If you let them some parents will try to dictate everything from your daily schedule to the format of your contract! Only you can decide how to best structure your business and you need to be firm with parents about this. It is certainly going to happen (trust me) that parents will make special requests. It is up to you to decide which ones to honor and which to refuse. Don’t worry about losing clients because you can’t or won’t honor a request they have made. The way you run your business should complement your personality, lifestyle, and the needs of your family. So you need to make business decisions with those things in mind. If a parent chooses to go elsewhere for care because you can’t or won’t honor a special request, then it is probably best that they do.
A Third no-no in running a successful childcare business is structuring every minute of the day. Most children come to daycare looking to have fun. I have found that the children prefer large chunks of time set aside for unstructured playtime. They want to be able to choose which toys to use and what activity to do. The best thing for you to do is provide them with a wide variety of activities and toys and allow them to make choices of what to do and when. I am not saying that you shouldn’t have a daily schedule. You need to provide a consistent schedule so children know what to expect. But within that schedule allow at least a couple of large time chunks for unstructured playtime.
The final thing you shouldn’t do is you should NOT let your home daycare run your life. This is very important! If you are able, it is best to have a designated daycare area. That leaves the rest of your house to be, well, your home. If you can’t designate a daycare area, you need to be firm with the children you care for regarding rules for clean-up and areas in which they are allowed to play. If you have children of your own it is essential that they don’t feel that everything of theirs is also used for daycare. Let your children choose a few special items that cannot be used by the daycare. Also, make sure your daycare children clean up everything before they go. Otherwise you and your family spend your family time doing daycare clean-up. Be firm with parents regarding pickup time and write a stiff financial penalty into your contract for late pickup. You need to end your daycare day at the same time each day, just like you would in a 9-5 job. Don’t let daycare take over your home or your family time.
Home childcare can be a rewarding profession or it can be a nightmare. By keeping in mind and following through with these four ways NOT to run a home daycare, it is much more likely that you will create a successful and fulfilling business.

Subscribe to my feed.

Hello everyone! Just wanted to remind you (in case you are new to blogging) that you can scroll to the bottom of the page and choose the option to subscribe to this feed. What that means is that each time a new update is posted on this site it will automatically be sent to your computer so you don't have to keep checking back. It is quick and easy and will save you a lot of valuable time!

Childcare Information Management

Managing all of the information for a childcare business can be a real headache! I used to keep paper files on all of my kiddos that contained contracts, enrollment forms, medical forms, immunization records, emergency forms, and on and on! When you add in information like the food programs and tax records it can be a nightmare! I have finally found a daycare management software that I love and that truly made my life easier when it came to record keeping. It allowed me to store most of my information electronically, saving me lots of space! It also allowed me to easily make changes to contact information, etc. without requiring new forms each time. That saved me a lot of time and hassle! One caution about storing information electronically, ALWAYS MAKE A BACKUP COPY OF YOUR DATA! That way in case of computer problems you don't lose all of your data! Also, you should really keep relevant contact information at your immediate fingertips, so if you arene't a person that has your computer on and ready all day you may want to keep a list of contact information either with your calendar or with your sign-in book so you have it ready in a moment's notice. I highly recommend this daycare management software and I'm sure you will find it as useful as I have! Just click the link below to check it out! Good luck!

Click Here!>

Plan a Party Day!

Hello everyone! One thing I loved to do with the children in my care was to plan a party day. The kids loved the change of pace and so did I! Check out this link below to find a fantastic party planning package that can help with party games for all ages! I love this product and I am sure you will too!

Click Here!

Welcome!

Welcome to my blog! My name is Eileen Michalczyk. I am the mother of four gifted children, a former elementary school teacher, and a former home daycare owner. I currently run a successful marketing business from my home. I have a wealth of knowledge to share with you on how to run a successful home daycare. I personally opened my home childcare business in 1998 and just closed my doors in the summer of 2007. Home daycare allowed me to be at home with my own children while still making an income. It can be a great profession if you structure it correctly and carefully and remember that you are in charge! Keep coming back to visit as new content will be added regularly, and look for my web-published articles. Links will be available for them soon! I also have an e-book in the works that will be a complete guide to running a successful home childcare and will come with a complete kit of the forms you will need to get started. Check back on this blog in the next few weeks for a date of publication. Best of luck!

Eileen Michalczyk