Daycare As A Home Business - Don"t Let The IRS Take Advantage Of You
Brave souls...
Anyone who would spend their day voluntarily with small children is a truly brave soul in my book.
And I'm awed by people who make a business out of it.
But what does the IRS think of daycare businesses? The IRS likes to think of daycares as they think of other small businesses; potential cash cows.
You can't trust anyone...
Many daycares are owned by partners and as an IRS-Hitman I saw my share of one partner running off with the money, leaving the other owner with a sizable tax debt.
Granted the tax debt would be assessed on the business so technically you and your former partner would both be liable for the debt.
But since they're gone with the money, you have to take care of the IRS tax debt to keep the daycare running and there's no way you can pay the IRS and pay for the running of your business now that most of the money is gone.
So what can you do? Use your hardship...
You can lower the amount of debt that you owe to the IRS because of your unfortunate circumstance.
If your business is the victim of theft or embezzlement you can get the IRS to remove any penalties assessed on the debt.
But since the penalties only cover between 20-30% of the debt you would still need to find another way such as a payment plan to take care of the rest of your IRS tax debt.
Looking ahead...
But let's see what you can do to prevent future tax debts.
There are a number of deductions you can claim when you run a home based business.
Not only can you deduct the usual business expenses such as materials, equipment, etc...
there are some specific costs that are unique to home based daycare businesses.
Getting the most out of your house...
Since you use your home as your primary place of business you can claim part of your mortgage, utilities, even food as business expenses.
But how much do you know how to claim? It's pretty simple, so let me give you the formula...
you may need a measuring tape.
To figure out how much of your rent or utilities that you can claim as deductions on your taxes take the square footage of your house that you use for the daycare activities and divide by the total square footage of your home and that will give you the percentage you can claim.
For example, you have a 1500 square foot home.
You use half of it, 750 square feet, for your daycare.
So you would divide 750 by 1500 to get 50%.
That means you can claim 50% of your mortgage and utilities as business deductions.
And that can be pretty helpful when trying to avoid the IRS collectors.
Now you have the smoking gun...
Use it!
Anyone who would spend their day voluntarily with small children is a truly brave soul in my book.
And I'm awed by people who make a business out of it.
But what does the IRS think of daycare businesses? The IRS likes to think of daycares as they think of other small businesses; potential cash cows.
You can't trust anyone...
Many daycares are owned by partners and as an IRS-Hitman I saw my share of one partner running off with the money, leaving the other owner with a sizable tax debt.
Granted the tax debt would be assessed on the business so technically you and your former partner would both be liable for the debt.
But since they're gone with the money, you have to take care of the IRS tax debt to keep the daycare running and there's no way you can pay the IRS and pay for the running of your business now that most of the money is gone.
So what can you do? Use your hardship...
You can lower the amount of debt that you owe to the IRS because of your unfortunate circumstance.
If your business is the victim of theft or embezzlement you can get the IRS to remove any penalties assessed on the debt.
But since the penalties only cover between 20-30% of the debt you would still need to find another way such as a payment plan to take care of the rest of your IRS tax debt.
Looking ahead...
But let's see what you can do to prevent future tax debts.
There are a number of deductions you can claim when you run a home based business.
Not only can you deduct the usual business expenses such as materials, equipment, etc...
there are some specific costs that are unique to home based daycare businesses.
Getting the most out of your house...
Since you use your home as your primary place of business you can claim part of your mortgage, utilities, even food as business expenses.
But how much do you know how to claim? It's pretty simple, so let me give you the formula...
you may need a measuring tape.
To figure out how much of your rent or utilities that you can claim as deductions on your taxes take the square footage of your house that you use for the daycare activities and divide by the total square footage of your home and that will give you the percentage you can claim.
For example, you have a 1500 square foot home.
You use half of it, 750 square feet, for your daycare.
So you would divide 750 by 1500 to get 50%.
That means you can claim 50% of your mortgage and utilities as business deductions.
And that can be pretty helpful when trying to avoid the IRS collectors.
Now you have the smoking gun...
Use it!
Source...