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Posts tagged ‘Taxes’

Getting Organized To Issue Tax Information To Parents

I’ve been preparing and issuing yearly Child Care Payment totals for parents since 1999 and I have found that it is vital that I keep track of parent payments to assure that parents are issued accurate totals for their tax return.

In 2011, two parents questioned the payment totals that I issued to them (for 2010 childcare payments) and I thought that was impossible, because I was using Quickbooks to keep track of my weekly parent payments.

Moreover, I discovered, that I failed to record several payments in my payment receipt book, which resulted in two payments not being entered into the computer. I  praised those parents for doing such a great job on keeping track of their childcare payments and thanked them for bringing the tax error to my attention.

In fact, I was so grateful for the error, because it inspired me to be more diligent about recording payments that I receive from parents.

Tom Copeland writes a great blog for Child Care Providers and I strongly suggest that you check out his blog post titled: A Family Child Care provider asks:Is it income if I don’t report it?

As I was preparing to issue Child Care Payment totals for 2011, I was reminded again of the importance of keeping track of parent payments and how time-consuming the process is.

According to Tom Copeland, “In any situation, however, money you receive from parents for child care is taxable income and must be reported on IRS Form 1040 Schedule C. If you fail to report all of your income there are several ways you can get caught:

* A parent who previously agreed not to claim the child care tax credit may decide later to go ahead and claim the credit when she realizes how much it can be (the maximum is $1,050 for one child).”

Furthermore, be sure to give parents a notice that indicates the following information:

  • Your Tax Id number
  • The Name and address of your business
  • The amount that the parent paid you for childcare services
  • The name of the child or children that you cared for
  • Your phone number
  • It’s also a good idea to add the following words on the Tax Letter Please keep with your “Tax Year” Records

The IRS does not look for any form in particular from you to issue to parents, however, the parent will need the information above to claim a child and dependent tax credit.

My final tip to you is to have a back-up system for keeping track of childcare payments and this includes:

  • Creating a back-up file on a flash drive
  • Keep a copy of the written payment receipts issued to parents
  • Have payments stored in your computerized financial software for easy access

Have you prepared your tax statements or letters to issue to parents for 2011 yet? If so, how was the process for you? I look forward to your comments and tax payment ideas.

With your Child Care Business in Mind,

Shiketa

Are You ready to expand your business? Frustrated with the level that you are on?  Check out the Going to Another Level, 21-Day Mastermind e-Club.

Category:

Business Management, Family Child Care, Record Keeping, Taxes

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Payroll and Tax Mistakes to Avoid – by Benita Tyler

 When it comes to classifying the people who work for you it is important to know how to properly classify payments for payroll and keep your company in tax compliance. Here are a few things that will help you when it comes to reporting payroll at tax time.

 Employees

  1. An employee may be hired to work in your company on a full or part-time basis. You set their work hours, provide workspace and resources to carry out their assignment and have direct control over how they should perform the work. Assistants, teachers, and food service workers are examples of employees in a child care business.
  2. Having employees on staff means that you will be responsible for meeting Federal, State and Local reporting requirements. A payroll provider or accountant can assist in setting up income tax withholdings, completing payroll and filing payroll tax forms.
  3. Be sure to issue Form W-2 Income Tax Withholding to your employees at year-end. This document summarizes the gross earnings and income taxes that were taken out each pay period. File copies with the IRS, State, and local tax authorities, if applicable.

 

Contractors

  1. A contractor is hired to work on a project by project basis that has a start and an end date. Contractors provide their own tools and set their work hours. Most are business owners who have other clients in addition to the work they do for you. Some examples of contractors are art, dance, or language instructors that provide special classes for your business.
  2. When hiring contractors have them complete a form W-9 Request for Taxpayer Certification and Identification Number. This will provide the information that you will need for tax reporting.
  3. Issue a Form 1099-Miscellaneous Income to summarize the total of contractor payments for the year. Mail a copy to your contractors and tax authorities.

 

Payroll Deduction 

The employer payroll taxes that you incur are tax deductible. Be sure to provide the amounts to your accountant so that they can include them when filing your income tax return.

 To learn more about income tax reporting requirements for employers, check out Publication 15, Circular E, Employer’s Tax Guide here.

 About the Guest Writer: 


 

 

 

Benita Tyler

The Financial Messenger. President of TBS USA Accounting and Tax Advisors

Creator of the Position to Prosper System™
btyler@tbsusa.com
(313) 377-1080

To receive your FREE Tax Organizer and advice on tax issues and growing profits, visit http://www.tbsusa.com/

Category:

Administration, Taxes

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