Toys And Materials....Too Much?

[melskids]

i just finished adding up my deductions, and holy cow, i spent ALOT on toys!!!! granted, they are changing to a star quality rating, and expect me to have all of the things i purchased, so its not like i didnt really need it. so what i'm wondering is, i have just over 20,000 in income. is it too much to expect $2400 in toy purchases to sound O.K.? thats not even including curriculum, or the toy shelves i bought!!!!

[kendallina]

I think that's extremely reasonable! Especially considering what you said about the star quality rating and that you really need those supplies. I don't think that's unreasonable at all. :)

[AmandasFCC]

LOL ummmm ..... I have over 20,000 in deductions for 2010 so no I don't think that's too much lol

[melskids]

LOL ummmm ..... I have over 20,000 in deductions for 2010 so no I don't think that's too much lol

holy cow! i hope someday i'll make enough $$ to have that many deductions!!!!:D

i get a little nervous cause the deductons look like so much, i dont want to cause the IRS to question me, you know? but you dont realize just how much you spend until you add it all up. i spent another $600 just on plastic totes, tubs, bins, and a nice wood shelf for toys, just to organize everything.

[TomCopeland]

No, your toy expenses are not too much. Keep records about your star quality rating. That helps support your deduction. Don't worry about this if you have the receipts or other records to back up your deductions.

[melskids]

thanks Tom!

yes, i keep all my receipts for everything!! when all is said and done, it just looks like i spent SO MUCH!!! which, i did...lol:rolleyes:

[E Daycare]

What happens if what I end up deducting total from the house to the toys to the car exceeds what I made last year because I was preparing for the business but didnt get a client till half way in the year? It seems like I have a lot to deduct and might have purchased what income I made to a "T" if not beyond? Im a avid receipt saver and saved ALL of them this year as well as wrote down everything in my keeper and kept track of all mileage etc...

Will the IRS get on me because say I only made $4000.00 but with everything I wrote down to write off will be the $4000.00 or more?

Excuse me if this sounds all "duhh" as I have NO CLUE what will go on or what is going on. I just knew to keep receipts and write everything I did from the laundry to trips to the zoo down.

[kendallina]

What happens if what I end up deducting total from the house to the toys to the car exceeds what I made last year because I was preparing for the business but didnt get a client till half way in the year? It seems like I have a lot to deduct and might have purchased what income I made to a "T" if not beyond? Im a avid receipt saver and saved ALL of them this year as well as wrote down everything in my keeper and kept track of all mileage etc...

Will the IRS get on me because say I only made $4000.00 but with everything I wrote down to write off will be the $4000.00 or more?

Excuse me if this sounds all "duhh" as I have NO CLUE what will go on or what is going on. I just knew to keep receipts and write everything I did from the laundry to trips to the zoo down.

I think it's well understood that people might/will take a loss their first year or two or three in business. This is just my own opinion, but I think it's fine if you have to take a loss this year...

[TomCopeland]

I wouldn't worry about showing a loss in your first year. It's reasonable. When you are filling out Form 8829 and claiming house expenses, you won't be able to create a loss or increase a loss because of these house expenses. Therefore, the form will tell you to carry over some of these house expenses into 2011 where you may be able to deduct them.

[Abigail]

You dont realize just how much you spend until you add it all up. I spent another $600 just on plastic totes, tubs, bins, and a nice wood shelf for toys, just to organize everything.

It's great that you're organized and purchasing nice items. What is the star quality rating people are talking about?

Will the IRS get on me because say I only made $4000.00 but with everything I wrote down to write off will be the $4000.00 or more?

I wouldn't be concerned because it's a smaller dollar amount for income. I would have red flags if you earned $20,000 and spent $30,000 Get what I mean? I hope you can get more enrolled so you can increase your income.

[E Daycare]

I wouldn't be concerned because it's a smaller dollar amount for income. I would have red flags if you earned $20,000 and spent $30,000 Get what I mean? I hope you can get more enrolled so you can increase your income.

Id LOVE to make anywhere near 20k. Or 10k for that matter lol. I get what you're saying though. So far the year looks promising as I have one full timer (but is on a discount because of the yada yada "cant afford your full rate" bologna) and a part timer. So I *gasp* stand to pull in maybe 10k this year! Bling bling.

[Abigail]

Id LOVE to make anywhere near 20k. Or 10k for that matter lol. I get what you're saying though. So far the year looks promising as I have one full timer (but is on a discount because of the yada yada "cant afford your full rate" bologna) and a part timer. So I *gasp* stand to pull in maybe 10k this year! Bling bling.

I completely understand. In general (not child care field), but every year I have been slowly increasing my income but this year I'm going to take a big hit because I quit a long-term job and couldn't find anything decent. So now I'm working a new job along with a part time daycare job so we have a good work history to get a home loan so I can start daycare. At least 2010 is over and I'm working a regular 30+ hours from here on out. Well, until we buy a house then I'll start daycare right away! :)

[llove530]

What if every year is a loss?

[TomCopeland]

IRS rules say that if you show a loss three or more years out of every five years you are more likely to be audited because the IRS may think that you are not trying to make a profit and therefore deny some of your deductions. I have seen providers get into trouble with the IRS because they had large losses (thousands of dollars) year after year. Try to show a profit three of every five years to reduce your chances of an audit.

[cillybean83]

I only made $5095 in 2010 and my deductions were $3600 or so...I was freaking out because after my deductions, mileage, and meals I had LOST $500, so I thought that uncle sam was going to come lock me up and call me a crook, but I was assured that the IRS expects you to take a loss during the first 2-3 years and that my loss is very much within the acceptable range given how little i earned

i'm still scared of the tax man though

[melskids]

It's great that you're organized and purchasing nice items. What is the star quality rating people are talking about?






here, in NY, from what i understand so far, is we are going to have a star rating, from 1 to 5, like a hotel or resteraunt. we get points based on education, our program, etc. the more points we have, the more stars we get. its supposed to show parents/prospective clients which programs are of higher quality. there are some things i dont like about the changes being made, but overall, i guess its going to be a good thing. its been alot of work though!!!

[TSDaycare]

My first year I took a $13000 loss! I think it's crazy but very valid-I worked a full time job until Sept, then started daycare and only had 3 children until January. I had been preparing to open a daycare since Feb of that year though-and used all my start up costs as deductions, there were some things we needed to do to our home that were required by licensing which were a little pricey-but those were 100% write-offs because they were "required", plus all my utilities,mileage,etc.

[Unregistered]

We are doing are taxes as well. Its my first year in daycare and I sarted in june 2010. I brought in 4500 and took a loss at 25,000. I assume it is ok because its my first year and doing all my inventory from coach to blinds to my diaper bag. Does bring in 10,000 back seem to less or to much for the first year. We have alot of space and electronics used in daycare.

[TomCopeland]

A loss of $25,000 on $4,500 of income is a lot, even though it was your first year. It's true that most providers do have start up expenses that can create a loss. Because you have a loss you weren't entitled to claim any house expenses on Form 8829, but you can roll them over to 2011. As long as you kept good records of these expenses you can defend yourself.

[llove530]

What is you only make a profit of $163?

[TomCopeland]

In general, a small profit attracts less attention. However, you should not be worrying about an audit. Instead, claim all reasonable expenses that you have receipts for and sleep well.

[llove530]

So what are the odds of an audit when someone makes so little money to begin with??

[TomCopeland]

In general, self employed people run the risk of an audit about 2% of the time. I can't say if this goes up or down as your profit goes up or down.