Getting Started

© 2003 Brigitte A. Thompson

It is important to establish a system of recordkeeping that works for you. Some things need to be recorded daily others can be done weekly or monthly. It is imperative that you get into the habit of saving and recording everything related to your daycare business. You will need to keep written documentation to account for everything that goes into and out of your bank.

The income taxes you pay are based on your net profit. This profit is determined by totaling your gross profit (actual money received) and reducing it by your expenses (all cash/check deductions). The more deductions you have, the lower your net profit and the lower your income tax liability becomes.

One of the first things an IRS auditor should do is create a cash analysis and compare this to the income and expenses reported on your tax return. Obviously, if you received any non-taxable income, it is to your benefit to note that information in your records. Otherwise, the IRS will need an explanation of where that money came from and after a few years have passed, it may be hard to recall this information.

It is a good idea to itemize every deposit you make right in your check register and record every check or bank withdrawal as well.

It cannot be mentioned enough: SAVE ALL RECEIPTS. Without the receipt, you really do not have a justifiable business deduction. There are many legitimate expenses related to the operation of a daycare business and many of them are overlooked. In order to hang on to your money, you need to learn about and utilize all of the deductions applicable to your business.

Brigitte A. Thompson is the President of Datamaster Accounting & Publishing Services, LLC and author of several recordkeeping books for daycare providers. To find out more about her books please visit " target="_blank">http://www.DaycareRecordkeeping.com.

All information is based on the current federal tax laws of the United States. Since these laws are subject to change, neither the author nor Metrodaycare.com assume liability for modifications that occur after the creation of this work. Every effort has been made to ensure this information is as accurate and complete as possible. These articles contain general information for businesses and are offered as an overview of the law.

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