Having daycare business is not only makes you have to be responsible to maintain children health, safety and development but also the tax responsibility. It is simply because any small amount that you collect from your daycare business has to be reported yearly on tax return. Of course, the type of tax form will be vary depend on the type of daycare business you are involving into.
Understanding the suitable tax form for your daycare type is not only makes you easier to input the required data but also make you easier to choose the item that possible to deduct from your tax list. Here are the list of daycare business and the matched tax form for it:
You are working as daycare provider employees
If you are daycare employee then your employer will make a report of your annual earning and income taxes on W-2 form. When you get the W-2 then you will need to complete the information in 1040 form. If you usually use your own vehicle to work in daycare then you also possible to deduct your oil and gas expense based on IRS standard mileage rate. However, when you decide to use the mileage deduction then you also have to fulfill the form of 2106 and 2106-EZ.
You are own and operate your daycare by yourself
If you are the only daycare provider in your business then you have to prepare for daycare income and expense on schedule C-EZ report. Besides that, you need to prepare the Schedule SE to count the daycare self employment tax amount in your net profit in Schedule C. The self employment tax covers up the Social Security and Medicare taxes. You are possible to deduct about half of your self employment tax on 1040 form by attaching Schedules C and SE.
Having daycare service at your own home
Having home daycare business make you possible to deduct some of your expense by preparing form 8829. The conclusion of deduction should be reported in Schedule C and mentioned as business expense. However, you cannot apply this report method if you are not using your home area regularly or do not have authorization from your state law. Normally, the house expense like rent cost and utility is the one that can be deduct. Calculate by percentage on your home square footage for daycare service and the number of hours.
Having corporate daycare center
If you have daycare business through corporation then you should prepare for C or S corporation form. C corporation form is a series of separate taxpayers, report income and expense on form 1120 while S corporation is not treated as separate taxpayers. Prepare the form 1120S and Schedule K-1s for each shareholder. Schedule K-1 is needed to report the share of daycare business earning to reporting your personal tax return.