Originally Posted by vlouie574:
I thought that way also until I realize many accountants/tax preparers/CPAs don't have an understanding of how home daycare tax preparation works. I've had multiple S corps and LLCs in the past, mostly in retail so I have a good understanding of how S corps work and what I can write off. But it's also a PITA and more costly especially if you've never had a corporation before. But I also knew that my taxes weren't being prepared correctly nor taking advantages of certain deductions home daycares have.
This is what I did. I ended up buying Tom Copeland's books (Tax Workbook & Organizer and Tax Companion.) These to me are the home daycare bibles. Every line of the tax paperwork is broken down in plain english. All the special rules, benefits and deductions that home daycares are allowed by the IRS as a sole prop or single LLC but wouldn't be allowed as a S-Corp. A couple quick examples are The Standard Meal Allowance Rule or Calculating Your Own Time-Space Percentage. Once you understand how it works your going to be like geez why didn't i get these books before.
So why buy the books when you can search all this stuff for "free" on this forum. Because it's not all there. And it gets confusing because different people will give different opinions. With Tom's books I was able to do a mock up of my taxes and bring it in to a tax preparer and tell him/her what I wanted to have deducted instead of me asking them what I could deduct. And when the preparer questioned me on some of the deductions (let's go back to the meal allowance and time-space calculation) I pull out Tom's book and go straight to The Standard Meal Allowance Rule and tell him that I choose to use this method instead of keeping receipts and how i'm keeping track of it. And then i'll go to the part of the book that explains the Exclusive Use Room Rule for the time-space percentage that allows me to take advantage of a much higher percentage explain how I got it and what I need to attach to the tax forms. The person doing the taxes are only going to do what's legal but they're not going to know all the rules. And you can't just tell him "well I read on the internet you can do such and such." You'll need to show proof and facts.
So if you own one home daycare or plan on starting one, I'd say stick to a being a sole proprietor.
I agree with you about becoming knowledgeable about our business from all angles including taxes. Interestingly, I read Tom's books many, many years ago when I started my business and they were very helpful. I need to get current versions of them.
Finding an accountant, and a lawyer, who know the home daycare business and its nuances, tax rules etc is the most challenging part of all of this. It is like looking for a needle in a haystack.