How to File Taxes for a Daycare Business Owner
When you own a small-business and are a sole proprietor, the Internal Revenue Service allows you to simplify the process by filing your personal and business income taxes together. Owners of a daycare file similarly to any other small-business owners -- using Form 1040 and Schedule C. Using Schedule C, you can write off all of your business expenses, which reduces your net income and tax you owe the IRS. To file your income taxes, you must have records of all income and expenses received from all sources, including your business and personal financial affairs.
Obtain Form 1040, Schedule C, Schedule SE, and the corresponding instructions from the IRS website.
Report all income earned from the day care in the “Income” section of Schedule C. Complete the section to determine your gross income from the daycare.
Enter your business expenses in the “Expenses” section of Schedule C. Include the cost of advertising, insurance, mortgage payments or rent, office expenses, supplies, utilities, and any other items required to run the day care. You can also include the cost of toys, furniture and crafting supplies. If you ran the daycare out of your home, you can also deduct a percentage of your home expenses on Schedule C. For more information, refer to Publication 587.
Add your business expenses and any expenses for the business use of your home, if applicable.
Subtract your total expenses from your net income to determine your net profit or loss.
Report your net profit or loss in the line labeled “Business Income or Loss” on Form 1040, which is Line 12 as of the 2012 tax year.
Complete Schedule SE to determine your self-employment tax. Self-employment tax is used by the IRS to cover your Social Security and Medicare taxes.
Enter the amount of your self-employment tax in the line labeled “Self-Employment Tax” on Form 1040, which is Line 56 as of the 2012 tax year.
Complete Form 1040 to determine the amount of your tax or refund. Attach Schedule C and Schedule SE to Form 1040 to your taxes if you are filing through the mail. If you are filing electronically, retain the forms for your records.
If your daycare is a partnership, you must complete Form 1064 instead of Form 1040. If you hire employees, you can also claim the employee wages in the Expense section of Schedule C. Although sole proprietors are not required to obtain an EIN, if you have employees, you must complete Form W-2 for each employee and submit a copy of each W-2 and Form W-3 to the Social Security Administration. If your clients claim the Child and Dependent Care Credit, you must complete Form W-10 for each client. This form provides your clients with your Taxpayer Identification Number or Social Security Number to claim the credit.