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Daycare and Taxes>Beyond Overwhelmed
Krysta 01:44 PM 07-13-2015
I am new to being licensed and I am incredibly overwhelmed with the tax preparation and process. I have done a great amount of research and everything I have read says to set aside at least 30% of my income for taxes but that is a crazy amount for me. I cannot afford to put the 30% aside. I understand there are many deductions in fact I have so many I could claim a loss but my husband and I are trying to refinance our home in two years and I need to show a gain and a decent gain at that. There are so many things that are claimed that we have already paid for from previous years and I don't believe should be taken off of my income those things would be used and paid for with or without kids in my home including my house payment and utilities. I guess I am just freaking out and I am in a catch 22 I either claim everything or I choose not to and show a profit and pay out the butt in taxes. is there a way to meet in the middle I really need to show a profit but I just cant afford 30%. Please help
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Thriftylady 01:51 PM 07-13-2015
Well utilities will increase, as you have more people in the home, and you can claim a partial amount on that. Remember also they will look in house financing at your bank account and how your balance runs. I forget how long out they do that. As far as holding out 30%, I have never had to pay any in. I have my hubby put just himself as a deduction on his paperwork and that has always covered us along with the deductions of daycare stuff. For the financing, if you taxes show you made a good salary, but your bank account doesn't show that, it will also look bad KWIM? We purchased a house when I had daycare in Kansas and financed us for more than we could even think of affording.
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Krysta 02:31 PM 07-13-2015
Thank you that is good to hear. So you don't make quarterly payments at all? Unfortunately the market out here is crazy I am in Colorado. My father in law had to co-sign with my husband until I could show two years of taxes filed. My lender says I will need to show $10,000-$20,000 in profit to be able to refinance and get my father in law off and me on. I make much more than that but if I do the 30% I would have to take $215 every week away from my income and I just can't afford that. Do you know if the Medicaid and social security tax is on adjusted gross or net amount that alone is 13.3% which is a lot that itself is $107 a week which also seems crazy high.
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Michael 02:40 PM 07-13-2015
Do you prepare you own tax returns of pay someone? Tax law is very complicated and a good accountant could save you a lot of money that you may not otherwise be aware of.
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Thriftylady 02:44 PM 07-13-2015
I have never had to do a quarterly payment myself. But everyone's situation is different. I also do my own returns that are somewhat complicated with daycare and since my DH now drives a semi that adds a whole new level. I can't bring myself to pay someone to do my returns, but I have some accounting training so it isn't as scary to me.

If you have to make quarterly payments or not depends on how much you make. But if you are not going to deduct any expenses, it will be more likely. It might be wise with all of your questions to go see a tax accountant and sit down for an hour and talk it over. Write down all your questions, take your last couple years returns, your utility bills and such and see what they suggest. It may be very well worth the hour you pay for.
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Krysta 02:44 PM 07-13-2015
I have Always done my own but will most likely hire someone this time, I however still want to understand what I am looking at piror to someone preparing my taxes
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Thriftylady 02:45 PM 07-13-2015
OH and some tax prep fees are deductible.
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TomCopeland 09:41 AM 07-14-2015
Originally Posted by Krysta:
Thank you that is good to hear. So you don't make quarterly payments at all? Unfortunately the market out here is crazy I am in Colorado. My father in law had to co-sign with my husband until I could show two years of taxes filed. My lender says I will need to show $10,000-$20,000 in profit to be able to refinance and get my father in law off and me on. I make much more than that but if I do the 30% I would have to take $215 every week away from my income and I just can't afford that. Do you know if the Medicaid and social security tax is on adjusted gross or net amount that alone is 13.3% which is a lot that itself is $107 a week which also seems crazy high.
Setting aside 30% of your income for federal taxes is too high a number. You will owe 15.3% Social Security/Medicare taxes on your profit (net income, not gross income), plus federal and state income taxes. You may or may not owe quarterly estimated taxes because it's based on what you and your husband pay in throughout the year. So, if your husband has enough withheld from his taxes, you won't have to pay quarterly. I would use 20% of your gross income as a conservative number that you would owe in federal taxes. If you have a lot of deductions, use 15% instead.
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Controlled Chaos 12:26 PM 07-14-2015
I hired an accountant this year, I did it myself 3 years, but it got too be so stressful and I hired an assistant...I pay my accountant $200 quarterly and an additional $200 at tax time to do my family's taxes along with the business. I have a separate bank account for business and personal. He does payroll for me and my employee, he did all the work for me to be an LLC. It is worth it for me, so I am not stressing over it. I am really good at budgeting but that is as far as my accountant skills go. I needed help!

Good luck!
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