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Daycare and Taxes>Showing A Loss Each Year
Unregistered 03:19 PM 02-01-2011
My question is what if you do show a loss each year?? I've did daycare for 10 years and have showen a loss I think for almost all 10 years, because I spend so much money each year- and all of my home expenses and such- what do you do- just not claim all your deductions so you show a profit- that really doesn't make sense to me- how ofter do they aduit a small daycare home provider- I save all my receipts and cancelled checks each year so I have everything so show if I did get aduited - I just don't want my tax preparer to show a loss each year on my taxes if it's going to cause a problem- also we actually don't show an overall loss between my husband and I just if you look at my daycare taxes then there is a loss - does that make sense-

Thanks
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Unregistered 05:09 AM 02-02-2011
Would someone please respond to my questions???????
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DCMomOf3 06:14 AM 02-02-2011
If you aren't getting answers there is a chance we don't know, I know I have no idea. If you could show some patience someone who does have an answer may respond.
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kendallina 07:02 AM 02-02-2011
I remember Tom saying something about how after more than a couple of years of a loss the IRS may seek for you to prove that you are trying in good faith to make a profit...I'm sure he'll respond when he gets a chance.
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cillybean83 07:41 AM 02-02-2011
a loss is acceptable and almost expect in the first year or 2, after that you should be showing a profit, and if you don't show a profit for 3 out of 5 years, you will more than likely be audited.
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KEG123 07:44 AM 02-02-2011
Originally Posted by cillybean83:
a loss is acceptable and almost expect in the first year or 2, after that you should be showing a profit, and if you don't show a profit for 3 out of 5 years, you will more than likely be audited.
I think I read in one of Tom's books that if there is no profit shown after 5 years that you would be then considered a hobby and maybe you can't claim expenses on taxes??? I'm sure he'll chime in once he notices this thread!
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TomCopeland 03:19 PM 02-02-2011
Just got into a hotel after driving 6 hours north from the Bay Area to Eureka, CA.

The IRS assumes you are a business trying to make a profit if you show a profit three out of every five years. If you don't do this you could attract some attention from the IRS. They may think that you are operating a hobby, not a business and deny some of your deductions. However, I've never seen an auditor actually say that a provider is running a hobby. However, they can deny deductions when you are showing a loss by saying you aren't trying to make a profit.

If you do show a loss you cannot claim house expenses (property taxes, mortgage interest, utilities, house insurance, house repairs, and house depreciation).

My advice would be that if you have been showing losses for a number of years try to reduce your expenses and show a smaller loss each year if possible.
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Tags:irs, profit loss, red flag, showing a loss, tom copeland
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