Are you a childcare provider gearing up for tax season? We've got you covered! In this post, we'll walk you through the six essential steps to help you confidently navigate the tax filing process.

From gathering the necessary documents to choosing the right filing status and filling out the required tax forms, we'll provide you with practical guidance.

1. Gather Documents and Information

Aside from the usual documents you need such as personal information, there are specific documents and records that you’ll need to prepare as a childcare business. These can include:

• Previous Tax Returns

• Supply Receipts

• Operational Expenses

• Accounting Documents

It is also important to note the state and federal income tax regulations that your childcare business may be subject to. This will help ensure proper compliance, reporting, and documentation of your tax obligations.

2. Choose a Filing Status

As a childcare provider, you’ll typically file your taxes as either a self-employed individual or an employee. Your filing status depends on your employment situation and whether or not you have any other sources of income.

3. Calculate Your Taxable Income

If you’re a self-employed childcare provider, you can detract some expenses from your gross income. Here are just some of the deductions you can take:

• Mileage Expenses for business-related travel

• Childcare-related expenses like supplies, utilities, and rent

• Marketing Expenses

• Meals and Snacks

Take a look at this help center article to see how you can quickly generate a tax statement through Playground.

There are also credits you can claim, depending on your eligibility such as the Child and Dependent Care Credit and the Retirement Plans Startup Costs Tax Credit. The Employee Retention Tax Credit is still in place, meaning you may be eligible for a government tax credit for any employees you may have. Check out our ERTC guide here.

4. Fill Out the Necessary Tax Forms

Your filing status determines what forms you need to complete. Some examples of these forms are:

• Form 1040: the standard individual income tax return form used by taxpayers to report their annual income to the Internal Revenue Service (IRS) in the United States. It is used to determine the taxpayer's tax liability or refund for the year. It’s accompanied by various schedules and attachments, depending on the taxpayer's specific situation and income sources.

• Schedule C: for sole proprietors and self-employed individuals to report their business income and expenses. It is a crucial part of the tax return for those who operate a business as a sole proprietorship or as an independent contractor. Schedule C is where you report your business's revenue, deduct eligible business expenses, and calculate the net profit or loss for the year.

• Schedule SE: for self-employed individuals to calculate and report their self-employment tax. Schedule SE helps determine the amount of self-employment tax owed based on the net income from self-employment.

5. Review and File Your Tax Return

Before submitting your tax return, make sure to carefully review it to ensure it’s accurate. Check that all income, deductions, and credits are correctly reported. It may be worthwhile to hire a Certified Public Accountant to assist with your returns or give it a final look over.

In addition to manually preparing and filing your tax returns, another option to consider is user-friendly tax-filing software such as TurboTax, which provides step-by-step guidance and automates the process, making it more convenient and efficient. These tools not only help you accurately calculate your taxes but also ensure that you claim all eligible deductions and credits, maximizing your potential refund.

Filing Options:

1. E-File: Electronically file your tax return for faster processing and quicker refunds.

2. Paper Filing: If you prefer to physically file your tax returns, print the necessary forms and mail them to your state’s IRS mailing address.

Not ready to file your taxes?

Request an extension by filling out Form 4868 by April 15. While an extension gives you more time to file your return, it does not give you extra time to pay any taxes owed.

6. Pay Any Taxes Owed

After you complete your tax return, you may owe taxes. It’s important to pay them before your filing deadline (usually April 15). Failing to pay on time can result in severe penalties and interest.

Tax Tips for Childcare Providers:

• Keep Detailed Records: Maintain organized records of all relevant documents, receipts, and financial statements. This will make it easier to prepare your taxes and provide supporting documentation if required.

• Make Estimated Tax Payments: Self-employed childcare providers may be required to make estimated tax payments throughout the year. They’re used to pay both income tax and self-employment tax and can help you avoid underpayment penalties.

• Consult a Tax Professional: Taxes can be complex, especially for self-employed individuals. To ensure you maximize your deductions and credits while staying compliant with tax laws, consider working with a tax professional.

Tax laws are always changing, so it’s important to stay informed and consult a tax professional if you have any specific questions or concerns. As a childcare provider, you can navigate the tax filing process with aplomb in 2024 by following these steps and keeping thorough records.

Check out our Complete 2023 Child Care Tax Return Guide PDF for extensive explanations on forms, deductions, filing, and more.