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Daycare and Taxes>Technically Opened In June But Been Preparing Since January...
E Daycare 11:27 AM 01-18-2011
So I planned on opening my daycare asap last year but didnt get my first dck until June. I advertised starting the beginning of April as I wanted to make sure I had all the supplies needed for care. Since I didnt have tons of money I started buying everything in January and every month after to slowly build up everything I would need. Ive kept all my receipts since the beginning of the year and wrote everything down in my calendar keeper. I saw this mentioned in a previous thread:

Originally Posted by TomCopeland:
In general, expenses you incurred before your business begins, that are for your business, can be claimed after your business begins.
So does this mean that everything I bought from January- the end of May can be claimed or will be marked as null and void? Since all my receipts are marked with prior to my 1st client date and I marked it down in my keeper for that correct month all that stuff will still be honored? Most of everything I have for my daycare had to be bought before I had a client so I thought that naturally I would be able to write all my stuff off seeing how it was for my business. Then I got scared seeing how I didn't actually gain a client till half way into the year. Most of my big business expenses were made before my 1st client so Id like to get some of it back if possible.

This is all new to me and VERY overwhelming! I went through all my receipts again today and couldn't believe how much I actually purchased over the length of the year for this small business.

It actually seems like I bought more paper towels than anything. lol

Also I was still working at my "real" job for all of January and all of February while I was also purchasing things for my business. Will that affect me being able to write stuff off I bought in January and February?
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DCMomOf3 11:50 AM 01-18-2011
I would think what you bought in 2010 in preparation for opening would count as valid expenses but any deprecation wouldn't start until day one of your having clients.
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E Daycare 11:52 AM 01-18-2011
Ahhh ok, that makes sense now. Man there is so much to figure out with something that can be so small. In my case it is very small as I only had 2 kids last year.
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lil angels 12:17 PM 01-18-2011
you can claim everything that had to do with getting started. When you go in to get your taxes done they will also ask for the value of many things in your house so be prepared for that like you appliances furniture and so on. Keep receipts for stuff like garden hoses because you water your lawn to keep up curb appeal for your business and the kids run through the sprinkler. Things like shovels so you can keep things safe and clean for parents and kids coming in. It is a lot really work hard on finding a good tax person that specializes in Daycare taxes that will make a big difference. Try make spread sheets now so that you can put all your receipts into catagories and keep them entered now so that at the end of the year you don't need to spend hrs and hrs working on it.
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TomCopeland 10:32 AM 01-19-2011
DCMomof3 and lil angels are correct! Expenses under $100 you incur to get your business going and are purchased before your business begins get deducted just as if they were purchased after your business began. Expenses over $100 that you incur before your business began get depreciated once your business begins. So, you won't lose any of your expenses.
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Abigail 11:39 AM 01-19-2011
Do you have to be "open for business" even if you don't have a client in order to claim the pre-purchased items for the business? I've already started buying things half a year ago here and there. I have purchased about 100 books second-hand for .69 each (Buy four, get a fifth free) but don't have receipts for them. I was guessing I would do the first-year thing and just place a value on the books at like .50 each because that it what I would get for them if I tried to sell them myself. Is that okay to do? I also purchased things from the dollar store like a calendar and wall pictures for the daycare room which are all new (I opened them, but they're in daycare storage bins untouched and I don't have any kids at home to use any of my things). I did pay over $25 to laminate the dollar store calendar pieces and don't have my receipt for that either. Since I can't open until next year when I move I was assuming that old receipts wouldn't be good since it's been half a year already and still a year before I can move and be open for business. Lastly, I also purchased a kidney shaped table with 10 chairs for $200 off craigslist in October. Should I contact those people (if I can find them) and ask for them to mail me a receipt? I also guessed that I would be able to get that $200 easily if I resold it because they're very expensive to begin with. What are your thoughts on these three things Tom?
1. lots of book without receipts.
2. laminating dollar store items without receipts.
3. purchasing kidney shaped table/chairs

Do I need to be purchasing things the year I plan to open to use receipts like I think? I get a good deal on everything so if I use the start up rule then I just value all the items at what I could sell them at, correct? Then, I would break about even. thanks.
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E Daycare 12:12 PM 01-19-2011
Thanks for the help! I linked a lot of this to my hubby too so it helps answer a lot of our questions. We are going with a tax person that has childcare background too. Im not sweating it anymore haha
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TomCopeland 02:00 PM 01-19-2011
Let's lay this out: Your business begins when you are ready to care for children and are telling others that you are ready. It doesn't have anything to do with when you start caring for children or are licensed.

Here's the possible scenarios:
1) You bought something before your business began that was purchased to get ready for the business and cost less than $100 per item - claim up to $5,000 of these items in the year your business begins.
2) You bought something before your business began that was purchased to get ready for the business and cost more than $100 per item - start depreciating it when your business begins.
3) You bought something before your business began that wasn't purchased with your business in mind but you start using for your business once your business begins - start depreciating it based on its value at the time your business began.

Claim your books and laminate items in the year your business begins. Depreciate your chairs and table in the year your business begins. Since you don't have receipts - take pictures of these items (line up all the books and take one picture). You may want to track down the Craigslist person and get them to sign a statement saying they sold it to you for cash.

If you don't use these items until your business begins - use the price you paid for them when deducting them. If you do use these items personally before your business begins, use the value of the items at the time your business does begin.
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Abigail 11:46 PM 01-19-2011
So really I just need to worry about getting a receipt from the one who sold me the table and ten chairs or else I would just claim what it would be worth second-hand? I know I could sell it for the same price of what I paid, so wouldn't it be easier to just use what the item is valued at and depreciate it once my daycare is open for business instead of trying to track down who sold it to me on craigslist? If I paid .69 for each book should I count all my books total and multiply to find how much I've spent on them or do I have to assign a lower-resell value since I purchased them at .69 each?
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TomCopeland 08:12 AM 01-20-2011
Originally Posted by Abigail:
So really I just need to worry about getting a receipt from the one who sold me the table and ten chairs or else I would just claim what it would be worth second-hand? I know I could sell it for the same price of what I paid, so wouldn't it be easier to just use what the item is valued at and depreciate it once my daycare is open for business instead of trying to track down who sold it to me on craigslist? If I paid .69 for each book should I count all my books total and multiply to find how much I've spent on them or do I have to assign a lower-resell value since I purchased them at .69 each?
Re: get receipt - Yes. You still want to try to get the signature from the craigslist person if you can. If you can't, take a picture and write a note explaining how you got it. Multiply $.69 by all the books.
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