The start up rule

How to Handle Expenses Before Your Business Begins: The Start-Up Rule

By Tom Copeland, posted with permission

Let’s say before your family child care business began you bought a computer, a dining room chair, a toy and a smoke detector.

What are the rules to follow in deducting these items?

The answer depends on the cost of an item and whether or not you bought it to help you start your business.

Items Purchased to Help Start Your Business

Items costing less than $2,500
If you bought an item for less than $2,500 to help you start your business, it’s considered a start-up expense. Examples include advertising, children’s books, business name registration fees, first aid kit, supplies, training workshop fees, and so on.

Basically, if you are buying small items to help you to get ready to open your business, it’s a start up expense. 

You can deduct up to $5,000 of start-up expenses in the year your business begins. For example, let’s say a provider buys $1,000 worth of small toys (none costing more than $100 each), $50 for a child development workshop, $80 for storage boxes, and $300 in arts and craft supplies in the summer of 2015. If she starts her business in July 2016 she will be able to deduct the full $1,430 on her 2016 tax return. This assumes she is using all of these items 100% for her business. Start-up expenses in excess of $5,000 must be amortized over 180 months (15 years).

If you did not use the item at all until your business began, deduct the purchase price. But what happens if you personally use any of these items before your business began? In this case, you must estimate the fair market value of the items at the time you business did begin before you deduct it.

For example, if you personally used the storage boxes ($80) in December 2015, you would estimate their value in July 2016 once you began using them in your business. Perhaps they would be worth $50 by then. If you use the storage boxes for both business and personal use once your business begins, multiply the $50 by your Time-Space Percentage to determine your business deduction.

If you put the storage boxes in your basement and only began using them for your business in July 2016, you would deduct the full $80.

Items costing more than $2,500

If you buy items that cost more than $2,500 (computer, swing set, washer, dryer, furniture, etc.), you must depreciate them. Depreciation means you claim a portion of the cost as a deduction over a number of years.

Most household items are depreciated over seven years. For details on depreciation rules, see my article “The Categories of Depreciation.”

It doesn’t matter if you bought these items to help you start your business or not. In most cases you will have to depreciate them. (See my article that describes an exception to this rule.)

If you bought the item before your business began, use the value of the item when it is first used in your business.

Items Not Purchased For Your Business

Family child care providers will have a house full of furniture, appliances and hundreds of household items at the time their business begins. You are entitled to depreciate all of these items once they are used in your business. You must depreciate them, even if their original cost was less than $500.

If you purchase an item after your business begins that costs $2,500 or more, you must follow the regular depreciation rules.

You will gain a lot of business deductions if you do a household inventory of all items in your home before your business begins. See my article on how to do this.

Summary

Confused? Here’s a summary:

Items purchased before your business began to help you start your business
* Cost less than $2,500 – deduct in one year (start-up expenses limited to $5,000)
Example: $40 toy purchased in 2015 and first used in 2016 when business begins. Deduct in 2016.
* Cost more than $2,500 – depreciate
Example: $3,000 swing set purchased and used personally in 2013. Used for business and personal use in 2016. Estimated value when first used for business: $2,000. Depreciate using your Time-Space Percentage on $2,000 in 2016.

Items Not Purchased For Your Business
Estimate the value of the item at the time it is first used in your business and depreciate it. Apply your Time-Space Percentage if it’s used by your family and your business.
Example: $50 rocking chair and $400 freezer used both for business and personal use. Multiply by your Time-Space Percentage and depreciate both.

Although this is a relatively complicated issue, claiming start-up expenses and other deductions for items purchased before you started your business is well worth your time.

Tom Copeland – www.tomcopelandblog.com

Mistakes of your tax return.

Don’t Make These Mistakes on Your Tax Return

By Tom Copeland. Posted with his permission

Tax preparers can make mistakes.

Many mistakes are the result of not understanding the unique tax rules affecting family child care providers.

This is the time of year I hear from providers who have met with their tax preparer and have questions about whether their tax return has been done correctly.

Here are some of these mistakes:

Not entering hours on Form 8829 Expenses for Business Use of Your Home

One tax preparer counted all of a provider’s space as “exclusive” use space on line 1 of this form. As a result, he entered no hours on line 4. This would have been the correct way to fill out this form if it was any business other than family child care. All family child care providers must enter the hours they work in their home on line 4.

Not subtracting the value of land when depreciating the home

All family child care providers should depreciate their home on Form 8829. Line 36 is where to put the purchase price and line 37 is where to put the value of the land at the time of the purchase. Make sure there is a number on line 37.

Claiming 100% of household items such as supplies, as well as toys, repairs, etc.

Although providers can deduct a portion of hundreds of household items, they can’t deduct 100% of such items unless they are used 100% for your business. For shared business and personal expenses, use your Time-Space Percentage. When you are giving your tax preparer amounts that you spent on various items, be sure to indicate whether the amounts are 100% business or shared.

Not deducting items you are entitled to deduct

Yesterday a provider told me she was considering buying a generator for her home because the power goes off several times a year. Her tax preparer said she wouldn’t be able to deduct it. A generator is clearly an “ordinary and necessary” expense for a family child care provider. You can’t run your business without electricity and you don’t want food to spoil!

Recommending that providers not join the Food Program because they will end up paying more in taxes

This is terrible advice that I keep hearing about. Yes, your taxes will be higher if you join the Food Program, but you will have more money in your pocket after you pay these taxes. If parents paid you more money your taxes would also go up, but I doubt that you would refuse the money.

Depreciating items costing less than $2,500

A new IRS rule allows you to deduct in one year any item costing less than $2,500, rather than depreciating it. See my article on this.

Defend yourself

Don’t give up simply because your tax preparer says something you don’t agree with. Ask him/her to show you an IRS document that supports their position. See my article: Do You Know What is On Your Tax Return?”

The Child Care Business Partnership

I am learning about these tax preparer mistakes while helping members of The Child Care Business Partnership. One of the member benefits is that I can review a provider’s Minute Menu records and tax return where I regularly find these errors. Once identified, the provider can get them corrected and save money. To learn more about the benefits of membership, click here.

Tom Copeland – www.tomcopelandblog.com

Image credit: https://www.flickr.com/photos/fortrucker/

Social security taxes

How Do I Pay Social Security Taxes?

By Tom Copeland.

Posted with permission.

As a self-employed business, family child care providers must pay 15.3% Social Security/Medicare taxes on their business profit.

The amount of this tax is calculated on IRS Schedule SE Self-Employment Tax.* Take the profit from your Schedule C, line 31, and enter it on line 2 of Schedule SE. Once you calculate your Social Security/Medicare tax on line 5, transfer the tax to your Form 1040, line 57.

You should then enter the amount from Schedule SE, line 6 (which is half your Social Security/Medicare tax) to Form 1040, line 27. This will help reduce your federal income tax.

You do not pay Social Security/Medicare taxes separately. Instead, they are included on your Form 1040 and added to your federal income tax.

To avoid paying a penalty for not paying in at least 90% of the taxes your family owes each quarter of the year, either have your spouse withhold enough in taxes to cover your Social Security/Medicare and income taxes, or you must file quarterly estimated taxes, using IRS Schedule ES Estimated Taxes.

Watch Out

You want to be sure that you file Schedule SE each year to report your Social Security/Medicare taxes. This form is used by the Social Security office to determine your Social Security benefits. I strongly recommend checking the Social Security website each year to make sure that your earnings are reported on your annual Social Security statement.

I once spoke with a provider who told me she made a profit, but there was no reported earnings on her Social Security statement for the past two years. This could only mean that her tax preparer didn’t file Schedule SE or there was an error within the Social Security office. You want to fix any such problems now, rather than finding out later when you receive a lower Social Security benefit than you are entitled to.

Tom Copeland – www.tomcopelandblog.com

IRS: Tips to protect yourself from scammers

Esenciales de Noticias Noticias en Español Consejos Tributarios del Cuidado de Salud Oficina de Prensa Fraudes Tributarios Alrededor de la Nación Temas de Interés IRS.gov/Español   Consejos Tributarios Centro Multimediático Hojas de Datos Recursos del IRS Medios Sociales y el IRS Contacto de Mi Oficina Local Formularios y Publicaciones Defensor del Contribuyente Los Derechos del Contribuyente

Special Edition IRS tax advice 2015-18SP In this edition IRS urges the public to be alert for fraudulent calls The IRS continues to warn consumers to protect themselves against fraudulent phone calls of thieves trying to steal their money or identity. Imposters posing as the IRS to trick victims and get your money or personal information. Here are some tips to help you avoid becoming a victim of these scams: The scammers make unexpected calls. Thieves call taxpayers and tell them to be IRS officials. They require that the victim pay a bill of false tax. They defraud the victim demanding to send them cash, usually through a prepaid debit card or bank transfer. They also leave "urgent" messages returned the phone call through "robo-calls" (prerecorded voices), or through emails called phishing. Thieves callers try to scare their victims. Many phone scams use threats to intimidate and harass a victim to pay. They may even threaten to arrest, deport or revoke the license of their victims if they don´t receive the money. Scammers use a fake ID calls. Scammers often alter the caller ID to make it look as if the IRS or other agency is calling. Callers use titles IRS and false identification numbers that look legitimate. They can use the name, address and other personal information of the victim to the call ring official. The scammers always use new tricks. Some schemes provide an actual IRS address where they say the victim to mail a receipt of payment made. Others use emails containing a false document with the IRS phone number or email address to respond. These scams often use letterhead with the IRS logo in emails or mail they send to their victims. They use these strategies to look official. The scams have cost to the victims more than $ 23 million. The Treasury Inspector General for Tax Administration, or (TIGTA for its acronym in English), has received reports of about 736,000 contact scam since October 2013. Nearly 4,550 victims have altogether paid more than $ 23 million as a result of fraud.  The IRS does not: Will call and demand an immediate payment. The IRS will not call if you owe taxes without having sent an invoice by mail. Will require that you pay taxes without allow ask or appeal the amount due. Will required to pay their taxes in a certain way. For example, telling you pay with a debit card pre-paid. Will ask your credit card number or debit card through the phone Threatening to report you to the police or other agencies in order to arrest you for failure to pay.  If you don´t owe taxes or have no reason to think that:  Do not give any information. Hang up immediately. Contact the Treasury Inspector General for Tax Administration (TIGTA, for its acronym in English). Use the IRS website Impersonation Scam Reporting. You can also call the 800-366-4484. Report also the Federal Trade Commission about the incident. Use the Wizard option FTC Complaint in FTC.gov. Please add "IRS Telephone Scam" to the report comments.  If you know that you owe money, or think it:  Call the IRS at 800-829-1040. IRS representatives can help you.  The scammers phone calls first tried to defraud the elderly, new immigrants to the US and those who speak English as a second language. Now the thieves trying to scam everyone. They have defrauded people in every state in the nation.  Be alert to scams that use the IRS as a hook. Tax frauds can happen at any time of year, not only in the tax season. For more information, visit Tax Fraud / Problems Alert on IRS.gov.  Each and every one of the contributors have a set of fundamental rights that should know when dealing with the IRS. These are the Taxpayer Bill of Rights. Explore your rights and our obligations to protect on IRS.gov.  IRS YouTube Videos: • Tax Scams - Spanish | English | ESL IRS podcasts: ·         • Tax Scams - Spanish | English

DCFS informations

Eva Camacho asked us that we send this information:

 

• If you are sending your package to request a new license, send it to the office of Waukegan, 500 N Green Bay Rd, Waukegan IL 60085. Then, to renew, making changes, additional paperwork, send all to your office Elgin 595 S State St, Elgin IL 60123. Ph 847-888-7620. Fax 847-888-5583.

• If you receive a visit that will live for a while at home, tell DCFS that there is another person in your house, and you should take phishing, and fingerprints. If he are 18 years or older, you should use the green form.

• Have an assistant is optional. The assistant can take and collect children from school if he have a valid license and the car qualifies.

• The assistant must have updated CPR and First Aid.

• If a child under 18 years is helping you, you can never be left alone with children. For example,you cannot leave him in the yard with the kids while you're cooking at home. He has to be where you can see and hear them.

• The license form Child Support Certification only must be signed by the applicant and spouse, not children or assistant.

• In the green form of physical, DCFS only asks you tuberculosis test in the initial license. Therefore it is not necessary for DCFS, but the doctor may ask for it.

• People in the house who are 17 years or less do not present the green form, but the phishing when they go to school.

• The children phishing is valid for 2 years, the providers and members of the house phishing for 3.

• If your crib is before April 2011 you can only have it if the manufacturer has a certificate that meets current safety standards. Check safety standards https://www.cpsc.gov/cpsclist.aspx to see if your crib is considered safe.

• Keep next to the phone and in the medicine cabinet a list of emergency phone: Abuse number: 1-800-252-2873 or 1-800-25.  Local police and fire telephone: 911. And the telephone numbers of parents .

• Immediately notify all changes and renovations in your home to DCFS.

• Put the radon test results with his license.

• Gurnee: there are areas where it is not allowed babysitting. Check with city codes before buying a home child care. If you are already caring, stay quiet, and  not ask.

• Keep your contract, the fire plan and safety plan. You can get it at http://thechildcarenetworkoflakecounty.blogspot.com/ blog but you need to adapt it.

• The contract must have the discipline policy, the emergency plan, including where to leave children, and consequences for being late.

• Each year you must renew your Gateways card.

• To renew it, don’t send copies of certificates of training, print the list of workouts, and send. However you need to keep a copy of the training that has not been given by INCCRRA.

If you need help with Gateways, call 309-557-1818 English, 309-834-1230 Leticia, in Spanish. Or go with Belem Estrada 847-263-8324; she will charge you $ 25 per hour that occupy.

DCFS form for children day care

En esta página le ofrecemos los enlaces a los formularios de DCFS publicados en este blog

On this page we link to DCFS forms published in this blog

1.    Formulario para iniciar el proceso de renovación de la licencia

Form needed to begin your renewal process

http://thechildcarenetworkoflakecounty.blogspot.com/2015/09/a.html

2.    Solicitud para guardería en el hogar

http://thechildcarenetworkoflakecounty.blogspot.com/2015/09/formulario-dcfs-de-solicitud-para.html

3.    Background check roster

Registro de verificación de antecedentes

http://thechildcarenetworkoflakecounty.blogspot.com/2015/09/background-check-roster-registro-de.html

4.    Certificación de inspección para productos peligrosos para niños

http://thechildcarenetworkoflakecounty.blogspot.com/2015/09/certificacion-de-inspeccion-para.html

5.    Medical report on an adult in a child care facilty

http://thechildcarenetworkoflakecounty.blogspot.com/2015/09/medical-report-on-adult-in-child-care.html

6. Certificate oh child health examination

http://thechildcarenetworkoflakecounty.blogspot.com/2015/09/certificate-of-child-health-examanation.html

6.    Certificación como delator bajo mandato de la ley

http://thechildcarenetworkoflakecounty.blogspot.com/2015/09/certificacion-como-delator-bajo-mandato.html

7.    Authorization for background check for child care.

http://thechildcarenetworkoflakecounty.blogspot.com/2015/09/authorization-for-background-check-for.html

8.    Autorización para verificaciónde antecedents para cuidados de menores de edad.

http://thechildcarenetworkoflakecounty.blogspot.com/2015/09/autorizacion-para-verificacion-de.html

9.    Acknowledgement of mandated reporter status

http://thechildcarenetworkoflakecounty.blogspot.com/2015/09/acknowledgement-of-mandated-reporter.html

10. Certificación de sustento a un niño

http://thechildcarenetworkoflakecounty.blogspot.com/2015/09/certificacion-de-sustento-un-nino.html

11. Home day care fire safety checklist.

http://thechildcarenetworkoflakecounty.blogspot.com/2015/09/home-day-care-fire-safety-checklist.html

TRADUCTIONS OF TITLES

TRADUCTIONS OF TITLES

I'm Fernando, the translator of this blog. Angel, the creator of the blog, and I want the information on these pages can reach all those who need to know something about the problems and possibilities of the child care business. So, all articles are published in English and Spanish. My job is to make these translations both from English to Spanish and Spanish to English.

I am Spanish; I am graduated in Sciences of the Information, with the title of English-Spanish translator. Years ago I'm living in Latin America, so I strive to provide easy to understand translation of all Spanish speakers countries. You are those who can judge whether my work is good.

I also offer another service: to help those who need to legalize or authenticate academic degrees, diplomas and certificates of qualifications in order to be recognized in the United States. For this, a recognized and legalized translation, with as similar as possible to the original format, including original signatures and photos, are needed. This is what we offer, so that your degree or diploma, gained through work and effort, helps you to have a good job in the United States.

If you are interested, please contact Angel angel1492@comcast.net, 847-494-1668, which is responsible for sending me the translations, review and certify it when I'm done. The price that we ask is only $ 15 a page of the document. Not much, and worth. Latinos in the United States must assert ourselves and show that we have our studies and we are qualified professionals.

I add finally that also speak the French language, and I can also to make translations from French.

I encourage you to not let your title grow old; please contact us to now begin the process to obtain the recognition.

Fernando Olmedo, focalerta@yahoo.es