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Daycare and Taxes All things related to Taxes and running a Daycare post here. Topics of tax exemptions, forms, filings, tax write offs, IRS etc.

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Old 09-24-2016, 05:45 PM
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Default Start Up Deductions

Hello! First time poster, long time lurker. I've learned a lot from this site, and so glad it exists! Most of my questions have already been asked and answered by others, so I haven't had to post yet.

This one is tax-related. I've already met with a tax specialist and paid for an hour consultation but still don't have a clear answer. Ugh! So, here I am.

I've been trying to get licensed in MN for over a year. Licensing is now requiring that I install a safety fence. Average quote is $5k. In additional, there is a large diseased tree on the property line that needs to be removed prior to the fence install, estimated at $2k. I have another expensive exterior repair project estimated at $25k, and I've also made the usual daycare start-up investments (application, classes, furniture, toys, supplies, etc.) estimated at $2.5k.

Based on how slow licensing has been, I probably won't be up and running until next year. So does that mean I can only deduct/depreciate these expenses next year, when I have daycare income? Is it possible (and if so, advisable?) to deduct/depreciate some of these expenses this year? I won't have daycare income this year, but I do have other taxable income that I'd like to shelter (employed part of the year, laid-off/received severance, now on unemployment). I know the answer to this question is based on the value of my house (cost basis is ~$200k) and T/S %.

Advice or recommendation for a competent tax advisor would be greatly appreciated!
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  #2  
Old 09-24-2016, 09:41 PM
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Default start up expenses

Quote:
Originally Posted by StarMama01 View Post
Hello! First time poster, long time lurker. I've learned a lot from this site, and so glad it exists! Most of my questions have already been asked and answered by others, so I haven't had to post yet.

This one is tax-related. I've already met with a tax specialist and paid for an hour consultation but still don't have a clear answer. Ugh! So, here I am.

I've been trying to get licensed in MN for over a year. Licensing is now requiring that I install a safety fence. Average quote is $5k. In additional, there is a large diseased tree on the property line that needs to be removed prior to the fence install, estimated at $2k. I have another expensive exterior repair project estimated at $25k, and I've also made the usual daycare start-up investments (application, classes, furniture, toys, supplies, etc.) estimated at $2.5k.

Based on how slow licensing has been, I probably won't be up and running until next year. So does that mean I can only deduct/depreciate these expenses next year, when I have daycare income? Is it possible (and if so, advisable?) to deduct/depreciate some of these expenses this year? I won't have daycare income this year, but I do have other taxable income that I'd like to shelter (employed part of the year, laid-off/received severance, now on unemployment). I know the answer to this question is based on the value of my house (cost basis is ~$200k) and T/S %.

Advice or recommendation for a competent tax advisor would be greatly appreciated!
You can only start deducting expenses for your child care business in 2016 if you are in business in 2016. You are in business in 2016 if you are ready to care for children in 2016 and tell others you are ready. You can care for children from one family and not be licensed. However, if you do care for one family you won't make much money and won't be able to offset much of your expenses. You are better off waiting til 2017 to care for children and deduct these expenses. To get access to a family child care tax preparer directory you need to be a member of the National Association for Family Child Care. Otherwise, ask other providers who use tax preparers if theirs is good.
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  #3  
Old 09-26-2016, 11:07 AM
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Thanks Tom!

Just for clarification, would the deduction/loss just apply to daycare income or all income? Like, what if my total income was 50,000, but only 5,000 was from daycare and my first year daycare expenses were 5,000 or more?
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Old 09-26-2016, 11:11 AM
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Originally Posted by StarMama01 View Post
Hello! First time poster, long time lurker. I've learned a lot from this site, and so glad it exists! Most of my questions have already been asked and answered by others, so I haven't had to post yet.

This one is tax-related. I've already met with a tax specialist and paid for an hour consultation but still don't have a clear answer. Ugh! So, here I am.

I've been trying to get licensed in MN for over a year. Licensing is now requiring that I install a safety fence. Average quote is $5k. In additional, there is a large diseased tree on the property line that needs to be removed prior to the fence install, estimated at $2k. I have another expensive exterior repair project estimated at $25k, and I've also made the usual daycare start-up investments (application, classes, furniture, toys, supplies, etc.) estimated at $2.5k.

Based on how slow licensing has been, I probably won't be up and running until next year. So does that mean I can only deduct/depreciate these expenses next year, when I have daycare income? Is it possible (and if so, advisable?) to deduct/depreciate some of these expenses this year? I won't have daycare income this year, but I do have other taxable income that I'd like to shelter (employed part of the year, laid-off/received severance, now on unemployment). I know the answer to this question is based on the value of my house (cost basis is ~$200k) and T/S %.

Advice or recommendation for a competent tax advisor would be greatly appreciated!
Welcome to the forum!

I am also in MN... I'm curious as to why it's taken more than a year to become licensed? The licensing process in MN is usually very easy and very swift...

What area of the state are you in?
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Old 09-26-2016, 06:47 PM
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Hi Blackcat! I'm in Minneapolis/Hennepin County. It took 13 months after my application to even get a licensor assigned to me, and another two months for them to give me my list of corrections after the initial home visit. When she came for the home visit, she didn't think I needed a fence. She talked to her supervisor, and surprise! I need a fence. It's been a bit of a ruckus, but I'm persistent and determined to make this dream of mine happen!
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Old 09-28-2016, 11:29 AM
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Originally Posted by StarMama01 View Post
Thanks Tom!

Just for clarification, would the deduction/loss just apply to daycare income or all income? Like, what if my total income was 50,000, but only 5,000 was from daycare and my first year daycare expenses were 5,000 or more?
If you had a $1,000 loss because of your day care business, that would reduce your federal taxable income by $1,000.
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  #7  
Old 10-11-2016, 07:20 AM
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Originally Posted by StarMama01 View Post
Hello! First time poster, long time lurker.

Long time lurker, that's totally me too! I'm also in MN - Dakota County. Waiting for the next info meeting to get my application. The time it's taken for licensing to work with you makes me nervous

I'm also going to need a fence, outdoor renovating, etc... Hoping if I want to open in the winter, licensing will allow a temporary fence until the ground thaws and a permanent one can be installed.
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Old 10-11-2016, 07:27 AM
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Originally Posted by Max View Post

Long time lurker, that's totally me too! I'm also in MN - Dakota County. Waiting for the next info meeting to get my application. The time it's taken for licensing to work with you makes me nervous

I'm also going to need a fence, outdoor renovating, etc... Hoping if I want to open in the winter, licensing will allow a temporary fence until the ground thaws and a permanent one can be installed.
Wow! Im sorry it's taken you guys so long to be licensed.
Most counties used to be fairly quick.

One suggestion I do have is to make sure anything licensing is requiring you to do is actually required by the state or by your city zoning laws. We've had several discussions lately in a MN provider group I'm in about the misinformation being given out by licensors to new providers. If they say you have to have a fence, ask them to show you where in writing it states you must have a fence. There are some situations where a fence is required but there are some situations where the licensor simply "feels" a fence would be good to have but if it's not an actual state regulation, it can not prevent you from opening.

Our state is having issues with licensors interpreting things their own way in many areas so it's important you know the regulations just as well as the licensing office does. It will protect you to know this information.

Also, if your licensor IS requesting certain things (egress windows, handrails ect) and it IS a state requirement, there are start up grants available that you can apply for that will help you offset the costs.

Good luck! I'm sorry it's taking so long for licensing! I hope they are able to get your application and everything processed swiftly for you!

Welcome to the forum too!
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  #9  
Old 10-11-2016, 07:50 AM
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Originally Posted by Blackcat31 View Post
Wow! Im sorry it's taken you guys so long to be licensed.
Most counties used to be fairly quick.

One suggestion I do have is to make sure anything licensing is requiring you to do is actually required by the state or by your city zoning laws. We've had several discussions lately in a MN provider group I'm in about the misinformation being given out by licensors to new providers. If they say you have to have a fence, ask them to show you where in writing it states you must have a fence. There are some situations where a fence is required but there are some situations where the licensor simply "feels" a fence would be good to have but if it's not an actual state regulation, it can not prevent you from opening.

Our state is having issues with licensors interpreting things their own way in many areas so it's important you know the regulations just as well as the licensing office does. It will protect you to know this information.

Also, if your licensor IS requesting certain things (egress windows, handrails ect) and it IS a state requirement, there are start up grants available that you can apply for that will help you offset the costs.

Good luck! I'm sorry it's taking so long for licensing! I hope they are able to get your application and everything processed swiftly for you!

Welcome to the forum too!
Thank you!

To clarify, I haven't technically started the process yet since I haven't submitted the application. But I did speak with my licensor already on if a fence would be required and she seems to think so. I think even if it wasn't required, I would put one up anyways since I live off a busy road (50 mph) and I worry it would deter parents from enrolling. Side note - I have a very weird yard, where a fenced in back yard isn't a great option.

Any suggestions on MN provider groups to check out? Or do you know of any groups that are by city or county? I've searched a ton. I'm hoping to learn more about details/issues specific to my area.
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Old 10-11-2016, 08:14 AM
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Originally Posted by Max View Post
Thank you!

To clarify, I haven't technically started the process yet since I haven't submitted the application. But I did speak with my licensor already on if a fence would be required and she seems to think so. I think even if it wasn't required, I would put one up anyways since I live off a busy road (50 mph) and I worry it would deter parents from enrolling. Side note - I have a very weird yard, where a fenced in back yard isn't a great option.

Any suggestions on MN provider groups to check out? Or do you know of any groups that are by city or county? I've searched a ton. I'm hoping to learn more about details/issues specific to my area.
There is a super active and awesome MN provider group on Facebook (I think there is 900+ members) but the gal that runs the group won't approve join requests until you are actually licensed. Too much confidential stuff is discussed I guess... I don't know not my rules... but you can search MN Licensed Providers Only and request to join and see what happens.

I will ask if there are any groups for providers just starting but not yet licensed.... I think that could be a super helpful group if there is one. I will also ask about local groups... there are several Dakota county providers in the group so they'll definitely know! I will come back and post when someone replies...
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Old 10-11-2016, 09:16 AM
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MAX, Try this:

LOTS of great info about undergoing the licensing process. The gal said it's in Scott county but the info is fantastic and of course applies to all MN providers but totally worth taking! The gal that shared it with me said there were a lot of providers in the class that connected her with groups and organizations that offered support and assistance to newly licensed and those trying to get licensed.
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  #12  
Old 10-11-2016, 01:37 PM
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Originally Posted by Blackcat31 View Post
MAX, Try this:

LOTS of great info about undergoing the licensing process. The gal said it's in Scott county but the info is fantastic and of course applies to all MN providers but totally worth taking! The gal that shared it with me said there were a lot of providers in the class that connected her with groups and organizations that offered support and assistance to newly licensed and those trying to get licensed.
Thank you! I'll look into that asap
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Old 10-13-2016, 08:55 AM
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Hi Max! I can't imagine Dakota County licensing to take as long Hennepin County. There seems to be a "front door" process where applicants go to all the meetings, send all the paperwork, take all the classes and don't get assigned a licensor until all the background checks and recommendations come back. (Side note: 2 of 3 of my recommendations were "lost" in the mail, so I had to ask my people to rewrite and send them. I should've known better to ask for copies of the originals. Because, Hennepin County.) Basically, they didn't assign someone to me until I was ready for the home inspection. Even the licensor who did the home inspection is not going to be my long-term licensor. I'll get reassigned after I pass. It's really frustrating because I know every licensor will have a slightly (or radically) different perspective. Like Blackcat mentioned, there will be probably be inconsistencies and one licensor telling me something different than the other. I feel like I've challenged them on so many things already, even before I'm licensed. Maybe they're giving me a hard time because they think I'm a b*tch? Oh well, if the shoe fits.
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Old 10-13-2016, 09:35 AM
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Originally Posted by StarMama01 View Post
Hi Max! I can't imagine Dakota County licensing to take as long Hennepin County. There seems to be a "front door" process where applicants go to all the meetings, send all the paperwork, take all the classes and don't get assigned a licensor until all the background checks and recommendations come back. (Side note: 2 of 3 of my recommendations were "lost" in the mail, so I had to ask my people to rewrite and send them. I should've known better to ask for copies of the originals. Because, Hennepin County.) Basically, they didn't assign someone to me until I was ready for the home inspection. Even the licensor who did the home inspection is not going to be my long-term licensor. I'll get reassigned after I pass. It's really frustrating because I know every licensor will have a slightly (or radically) different perspective. Like Blackcat mentioned, there will be probably be inconsistencies and one licensor telling me something different than the other. I feel like I've challenged them on so many things already, even before I'm licensed. Maybe they're giving me a hard time because they think I'm a b*tch? Oh well, if the shoe fits.
"Where in writing does it say this?"

Memorize that ^^^ It will be your saving grace if you are cited or issued a CO for any violation of the regs.

I am very active in advocating for providers in our state on both a personal and government level. I participate in many committees, belong to a Child Care Task Force, a Community Voice group and several professional organizations relating to child care.

Misinterpreted regulations and incorrect CO and citations are HUGE right now and we are doing everything possible to correct this so that MN provider's are not being "forced" out of business by licensors that either don't know and understand the regulations or are simply power hungry and miss use that authority.

The above phrase is what has saved several providers lately for some really silly citations so if it's not clearly written in the regulations, ask where they found the rule.

We can't follow rules if they aren't provided before we operate and we can't follow rules if they aren't in writing and mean the same thing to everyone.
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Old 10-14-2016, 07:03 AM
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I feel like I've challenged them on so many things already, even before I'm licensed.
I'm the same way. I haven't necessarily challenged them (yet) but I already have been in touch with my licensor on certain requirements specific to my home. I'm big on following all the rules, being upfront, and doing what I'm supposed to, but I expect the same from the city/county too

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Misinterpreted regulations and incorrect CO and citations are HUGE right now
Thanks BC! If asking where it is in writing doesn't work... What would you recommend as the best next step?
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Old 10-14-2016, 07:23 AM
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Thanks BC! If asking where it is in writing doesn't work... What would you recommend as the best next step?
Then you can do what you feel is safe or acceptable and they can not write you up for it or punish you in any way.

If it's something that isn't a big deal its up to you.
For example: my licensor likes us to list our attendance in a certain way and since it's not a huge deal and doesn't take any additional work on my part (and actually reduces the time my licensor is here when she visits) so I comply but if she suddenly told me she would write me up for not having my attendance sheet in the order she wants, I'd fight it.

No way am I taking a citation or correction order for something that is't even a rule or regulation.

Having correction orders or citations on your record can bar you from many of the benefits of this profession. I think you lose your star ratings (Parent Aware) if you have anything on your record. I also think you may not be able to receive grants and scholarships either and your record is public so any parent looking up your license info can see it.
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