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Old 02-09-2013, 05:19 PM
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Default Is Daycare Even Worth It?

Well I went to my tax guy today. And I am so angry at this moment. I made 36,000 in income, and had 26,000 in deductions, So I was left with 10,000 that needed to be taxed. Needless to say with filing my joint return with my husband we now owe 11,000 to the IRS! I had my tax guy completely pull my daycare off our taxes and If I didn't run my daycare, we would have gotten back 14,000! It was like putting salt on my wounds. This year I had to upgrade all of my baby equipment. So next year my deductions won't even be as much as it is this year. Im at the point is daycare even worth all of the trouble? When I could work outside of the home, and pay normal taxes, and not even have to worry about buying everything for the daycare. I am so bummed at the moment, I just don't even know what to do. My husband and I have some serious talking to do about weather or not to shut the daycare down.

Last edited by Michael; 02-09-2013 at 06:58 PM.
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Old 02-09-2013, 05:54 PM
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Originally Posted by LittleCrawfishCC View Post
Well I went to my tax guy today. And I am so angry at this moment. I made 36,000 in income, and had 26,000 in deductions, So I was left with 10,000 that needed to be taxed. Needless to say with filing my joint return with my husband we now owe 11,000 to the IRS! I had my tax guy completely pull my daycare off our taxes and If I didn't run my daycare, we would have gotten back 14,000! It was like putting salt on my wounds. This year I had to upgrade all of my baby equpiemtn. So next year my deductions won't even be as much as it is this year. Im at the point is daycare even worth all of the trouble? When I could work outside of the home, and pay normal taxes, and not even have to worry about buying everything for the daycare. I am so bummed at the moment, I just don't even know what to do. My husband and I have some serious talking to do about weather or not to shut the daycare down.
That really doesn't sound right, id ask Tom, post this under taxes
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Old 02-09-2013, 06:17 PM
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I can't believe that's correct. Unless I'm missing something $10,000 in income wouldn't raise your taxes by $25,000.
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Old 02-09-2013, 06:19 PM
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Are you sure this tax person is familar with daycare businesses? Our business is much different than other businesses in terms of deductions for home use, etc.
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Old 02-09-2013, 06:21 PM
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Is this your first year doing daycare?
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Old 02-09-2013, 06:24 PM
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Those numbers sound really REALLY wrong!! $14000 tax refund vs $11k tax bill?! That is just flat out wrong.

He did something wrong. Try going onto Turbo Tax Small business and play around with it...you don't pay if you don't file with them and it is really easy to use.
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Old 02-09-2013, 06:25 PM
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And, as a mod, I'm moving this over to the tax forum so Tom Copeland can see it
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Old 02-09-2013, 06:53 PM
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That sounds really wrong!
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Old 02-09-2013, 07:00 PM
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Quote:
Originally Posted by SilverSabre25 View Post
And, as a mod, I'm moving this over to the tax forum so Tom Copeland can see it
Important that you ask Tom directly at the February 12th Webinar that also Covers the New IRS Rule on House Expenses.

http://daycare.com/forum/announcement.php?f=8
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Old 02-09-2013, 07:55 PM
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OP that totally sucks

We just had our taxes done and this will be the first time we owe in 26 years of me doing daycare.... We have to pay $8000.

Last year, I made $70,000 and my husband's pension is taxed and it pays my portion of taxes. In the past, we have always broke even or got $ back...not a whole lot, but maybe a $1000. Last year we got $7000 back, because we had put solar on our home and got a big tax credit for that, which helped us out a lot.

I totally sympathize with you.

Last edited by mom2many; 02-09-2013 at 07:56 PM. Reason: add info
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Old 02-09-2013, 09:16 PM
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That doesn't make too much sense to me..if you only made a profit of $10000 (this is the amount you are paying buisneas taxes on) how can you owe more money ($11,000) than you actually made..this sounds
Wrong to me as well.
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Old 02-10-2013, 06:18 AM
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I have been doing taxes for a long time. The IRS doesn't care what you gross. The only thing they look at on a Schedule C is what you net (the $10,000)
There is no scenario out there where your Husband's amount stays the same, and $10,000 makes a $24,000 difference in what you get back/owe.
It just isn't feasible.
Take your stuff to another tax preparer if you don't feel comfortable doing it yourself.
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Old 02-10-2013, 06:49 AM
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The only thing I know is that my husband didn't work much this year, and this is my first full year of daycare. I have been going to this guy for 13 years. We spent 3 hours going over everything. The only thing I can even think of is his taxes did not cover my daycare, unless there is more income that is being taxed on my side, I have yet to even pick up my paperwork from yesterday.
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Old 02-10-2013, 06:51 AM
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And this really scares me for next year, because I had to revamp a lot of things that I won't have to do next year which means that I will have more taxable income. I have went after every piece of deduction that I can think of besides the deduction for items in my home, because I don't want yay problems when we decide to sell
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Old 02-10-2013, 06:52 AM
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Is there a possibility that with my husband income and my income that we got put into a higher tax bracket? We do file joint
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Old 02-10-2013, 06:53 AM
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You can't owe more in taxes than what you make. You are only taxed on the profit of your business; that profit is added to the taxable income of your spouse. So together you would be taxes on $80K before other deductions such as mortgage interest, etc. or the standard deduction.

Bottom line, there is no way that your daycare income increased your taxes by that much. Find another tax preparer.

JMHO.
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Old 02-10-2013, 06:55 AM
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My husband made 130,000 this year
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Old 02-10-2013, 06:55 AM
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Quote:
Originally Posted by Angelsj View Post
I have been doing taxes for a long time. The IRS doesn't care what you gross. The only thing they look at on a Schedule C is what you net (the $10,000)
There is no scenario out there where your Husband's amount stays the same, and $10,000 makes a $24,000 difference in what you get back/owe.
It just isn't feasible.
Take your stuff to another tax preparer if you don't feel comfortable doing it yourself.

Completely agree!!!

Not only take this years to someone else but I'd take your filings from several years past and have someone new look at those as well!

DO NOT LET THIS PREPARER FILE UNTIL YOU GET ANOTHER PAIR OF EYES ON IT!!!!!
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Old 02-10-2013, 08:14 AM
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Originally Posted by Willow View Post
Completely agree!!!

Not only take this years to someone else but I'd take your filings from several years past and have someone new look at those as well!

DO NOT LET THIS PREPARER FILE UNTIL YOU GET ANOTHER PAIR OF EYES ON IT!!!!!
This!!!

It is so worth it to have someone else take a look. Like $11,000 worth it!!!!
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Old 02-10-2013, 08:35 AM
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Quote:
Originally Posted by LittleCrawfishCC View Post
Is there a possibility that with my husband income and my income that we got put into a higher tax bracket? We do file joint
It is possible you are in a higher tax bracket, but it still would never make that much of a difference.
There is a tax estimator here:
http://www.hrblock.com/free-tax-tips...estimator.html

It will not be exact, but you can drop in some of the major numbers, play with them and get an idea. I can't get you closer without knowing more about your number of dependents, or your hubby's income (your idea of "not much" is likely different from mine), but if this is what you are being told, I would also question earlier years of tax service.
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Old 02-10-2013, 08:37 AM
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$130,000 is not working as much? Seriously?

How many kids of your own can you claim?
How much federal tax has your husband paid in?
You can shoot estimates if you don't want to give out all the info, but even with several scenarios, including LOTS of tax paid in by your husband, and none, this is not possible. $10,000 worth of income just cannot make $24000 difference in the outcome. No matter how you slice it.
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Old 02-10-2013, 09:06 AM
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I just sent our paperwork to a friend of mine that also does taxes, and I'm waiting to hear from her.
My husband works in the oil field.
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Old 02-10-2013, 09:08 AM
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I know that is a lot to some people, but we have a lot of bills, plus we also take care of my grandmother and my mom, so even on his income and my income we still struggle.
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Old 02-10-2013, 09:32 AM
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Quote:
Originally Posted by LittleCrawfishCC View Post
I know that is a lot to some people, but we have a lot of bills, plus we also take care of my grandmother and my mom, so even on his income and my income we still struggle.
I wasn't judging your income. Just a little surprised. Most of the people I provide care for are in the low income range, so when you said "he didn't work much"...I was thinking 25,000 not $130,000.
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Old 02-10-2013, 09:51 AM
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The parents that I provide care for are pretty well off, most of them make between $70,000 + . We live in a pretty expensive area. The only reason we live here honestly, is because of the school district.
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Old 02-10-2013, 10:50 AM
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It's possible, depending on the exact numbers, that you got bumped into the 28% tax bracket, but that still wouldn't account for that much of a swing in taxes, since it's only 28% on the amount over $142,700 (assuming I'm interpreting that correctly - the IRS tends to confuse me )

Here are the tax brackets: http://taxes.about.com/od/Federal-In...2-Tax-Year.htm
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Old 02-10-2013, 11:38 AM
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Quote:
Originally Posted by LittleCrawfishCC View Post
Well I went to my tax guy today. And I am so angry at this moment. I made 36,000 in income, and had 26,000 in deductions, So I was left with 10,000 that needed to be taxed. Needless to say with filing my joint return with my husband we now owe 11,000 to the IRS! I had my tax guy completely pull my daycare off our taxes and If I didn't run my daycare, we would have gotten back 14,000! It was like putting salt on my wounds. This year I had to upgrade all of my baby equipment. So next year my deductions won't even be as much as it is this year. Im at the point is daycare even worth all of the trouble? When I could work outside of the home, and pay normal taxes, and not even have to worry about buying everything for the daycare. I am so bummed at the moment, I just don't even know what to do. My husband and I have some serious talking to do about weather or not to shut the daycare down.
As many providers have already stated, your number can't be true. If your profit was $10,000 you would owe $1,330 in Social Security taxes (13.3%) and federal and state income taxes. Since your husband made a lot, you're in the 25% tax bracket (joint income less than $142,000). So you will owe $2,500 in federal income taxes, plus state income taxes. No way will this total $11,000 in taxes because of your business. No way would get a $14,000 refund if you didn't do child care. There must be something else going on with your taxes.

Note: even though providers can end up paying 13% Social Security taxes and 25% or more in federal income taxes, you will always come out ahead financially by doing child care. (The only time you might not come out better is if your daycare income makes you ineligible for some tax credits that may exceed your profit). Even if you paid 50% taxes on your profit, you still end up with 50% of your profit left over.

Join me for a webinar “2012 Tax Changes: How to Avoid Mistakes on Your Tax Return” Tuesday, February 12th at 8:30-10:00pm Eastern Time. The cost is $25 (100% tax deductible!). To register: http://events.r20.constantcontact.co...&llr=yatrx4cab
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