Income from a daycare business is taxable.
A daycare business owner must file taxes every year. All income earned by the business must be reported, but daycare-related expenses can be deducted to reduce the owner's income and tax liability. The daycare business might even be entitled to a tax refund. With well-organized records and expense receipts, filing taxes for the business should be a straightforward process.
Instructions
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1. File IRS Form 1040 if you are a sole proprietor, meaning you own the business by yourself. You will have to attach Schedule C or Schedule C-EZ to report the profits and losses from your business as well as Schedule SE, which is used to report self-employment tax. Other forms and schedules may be required depending on the specifics of your daycare business.
2. File Form 1065 if your daycare business is structured as a partnership rather than a sole proprietorship. If you had employees working for you at any time during the year, you will have to file additional tax forms and pay applicable federal and state payroll taxes on those individuals. A partnership may be required to file other forms as well, depending on the day-to-day activities of the business.
3. File IRS Form 1120 if your daycare business is structured as a corporation. If your business is an S corporation, you'll file Form 1120S and any applicable schedules. You will probably have to file a personal income tax return as well.
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4. Report all of the income received by the daycare business, including child care payments from parents and other fees the business may have charged. If the daycare sold tickets to a carnival or talent showcase, you'll need to report the income from those activities as well. Include any funding you received from local, state or federal programs as reimbursements or subsidies.
5. Calculate and deduct daycare-related business expenses on your tax return. You can include what you paid to operate your business including wages, rent and utilities for your premises, furnishings, meals, paper products, toys, art supplies and various other business expenses.
6. Add the cost of repairs and maintenance on the building that houses your daycare facility to your expenses. This can include the costs of repairing or replacing doors and windows, repainting daycare areas and purchasing cleaning supplies.
7. Claim a tax deduction for business use of your home if you operated the daycare in your residence. According to the IRS, a daycare may qualify for this deduction if the owner's home was the primary site of its operations. You can also deduct expenses for a room or rooms used for the business that you also used for other purposes when the daycare was closed.
8. Deduct IRS-allowed expenses for a vehicle used solely for daycare purposes or pro rate and deduct a portion of the costs attributed to your use of the vehicle for business purposes. For example, if you used a car to transport children, shop for daycare supplies or attend meetings related to the business, you may be able to deduct certain costs for these uses.
9. Add insurance and licensing fees to your deductible expenses if you paid them in the tax year for which you are filing.
10. Finish filling out the tax return according to the instructions provided with the form. Sign and date the return and mail it with your check, if you owe taxes.
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