Category Archives: Child Care Provider Tax Information

When Chores Don’t Count

There are definitely tax benefits to hiring your own children (or spouse), however, the IRS will scrutinize family child care providers who do.

Why? Because providers “may be tempted to gain a tax benefit without following the proper rules”.¹  Rules?  What Rules? Continue reading

Are You Deducting All of Your Outdoor Expenses?

In Tom Copeland’s “Taking Care of Business”, he touches on what qualifies as outdoor deductions for child care provider businesses.  Bottom line?  Deduct all the expenses that are designated as “ordinary and necessary” to your business, especially if it is used 100% for your business.   But what about those expenses that are used for business and personal purposes?  They may be deductible, in part, so download our Time-Space Percentage Crib Sheet so you can keep track of those receipts!  Download Crib Sheet here.

Track Your Hours – Even When Children Aren’t Present

Many of you maintain good records tracking your hours when children are present,  but how good are you tracking your hours – when children aren’t present?  There are chores/tasks you perform, maybe on a daily basis, after or before the children arrive.  Those hours are important.  They add up.  It only applies to chores/tasks performed on location.  You can’t count the hours spent doing general housekeeping.  One good way to determine what you should count is to ask yourself – “would I be doing this, if I weren’t in business?”  If the answer is “no” … then count it.  Don’t count washing your cars, mowing the lawn, cleaning the oven, etc.

To download a copy of our Daily Chore/Task Checklist, please visit

Claiming the Child and Dependent Care Tax Credit

The Child and Dependent Care Credit can help offset some of the costs you pay for the care of your child, a dependent or a spouse. Here are 10 facts the IRS wants you to know about the tax credit for child and dependent care expenses.  Visit our Child Care Tax Specialists website for the article and other information for child care providers.

IRS Voluntary Classification Settlement Program — Temporary Eligibility Expansion

Child care providers who have treated their workers as independent contractors instead of employees need to make changes immediately.  The IRS has announced an expansion to their Voluntary Classification Settlement Program that enables providers to reclassify their workers, and avoid stiff penalties and fines.  This Temporary Eligibility Expansion is effective through June 30, 2013.  For more information and details, please visit our Child Care Tax Specialists blog.  

Seven Record Keeping and Tax Tips for the New Provider

Family child care providers are self-employed taxpayers who must report their business income and expenses to the IRS. It is important to become familiar with all of the IRS requirements for filing your taxes. Record keeping is essential in any business – but for child care providers, the devil is in the details. To help you prepare for this, Tom Copeland provides seven essentials to keep in mind.   Using these tips will help you to organize your records, claim the maximum legal deductions, and reduce your taxes.

The IRS Tax Court and Child Care Providers

Just finished reading about Time-Space Percentage client case of Tom Copeland’s. It is a great example of why recordkeeping is so important for child care providers.  The child care provider was audited – and determined – to owe $37,000.  After an unsuccessful appeal process, the provider contacted Tom Copeland.  Because the provider kept meticulous records, receipts, and other important documents, the case was revisited and settled for a fraction of the original determination.  Instead of $37,000 – the client ended up owing $4,466.  Get the full story here.


Hire Your Child or Your Husband?

According to Tom Copeland, “…the simple answer for a family child care provider is – only in a few unique situations.”   If you hire your own child who is age 18 or older or if you pay your husband to do work for your business you must treat them as an employee – and that means they pay taxes and you must withhold the right taxes, and may have to have worker’s compensation insurance.

That means withholding Social Security/Medicare taxes and withholding federal and state income taxes.  On top of that – if your child or husband is over age 21 you must also pay federal unemployment tax. While you can deduct these taxes as a business expense, your child or spouse must report their earnings as income on their IRS Form 1040, just as they would working for any company. Get the rest of the story here.