PAYING YOUR CHILDREN
There have been some changes in the law due to the Reconstruction of 1996. YOU can pay any, or all, of your children to work for you. Even a child as young as three can perform duties in a daycare and be "paid" for them. Older children can perform more traditional office duties.
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TIME SPACE PERCENTAGE
Accurately figuring your Time/Space will save you money! One dollar saved now is worth more than $1 saved next year because of inflation. But you have to have a method. Don't just pick 50% or any other percentage. Why? Because you can't defend your method in an audit. It's arbitrary based on no reasoning. In an audit you have to be able to say, "I did this because of this and after this calculation, the total was this." That's very important! The method you use must be logical, reasonable, obvious, and simple!
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KEEP ALL RECIEPTS
Y'all need to keep ALL receipts for EVERYTHING, including personal expenses like haircuts. Personal receipts should be stuck in a manila envelope somewhere. You don't have to categorize or total them.
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EMPLOYER IDENTIFICATION NUMBER
Taxpayers can now call a single toll-free telephone number (866) 816- 2065 to get an Employer Identification Number (EIN). IRS customer service representatives in three IRS Service Centers will respond to taxpayer calls Monday through Friday from 7:30 a.m.- 5:30 p.m. local time.
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DAYCARE EXPENSE CATEGORIES
In each category, list everything separately under sub headings to the main heading. If you have any doubt where something fits, list it under OTHER and let your accountant decide, or ask me. Generally list each category that you perceive separately. It's better to have 100 small categories than 1 category called Miscellaneous. The IRS figures that if IBM doesn't need a miscellaneous category - neither does anyone else. They HATE the word miscellaneous! Avoid it!
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ORGANIZING RECIEPTS
I've been consulting with my staff about the best way to organize your receipts so you can deal with them in the most efficient manner at the end of the year. Here are the best suggestions from my wonderful staff.
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BANK STATEMENTS
I just spoke to a client who was audited last month. One thing the auditor wanted to see was BANK STATEMENTS. I have never mentioned keeping bank statements along with all receipts because it never occurred to me. I thought everyone already did that.
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HOW MUCH DID I MAKE?
I am often asked this question. Since a client asked me for a breakdown for her husband recently, I figured it was the perfect time to make a formal post of an explanation. The amounts, and line sources are from the clients' real tax return.The names have been changed to protect the privacy of the clients. We will call the clients Luke and Laura. What appears on your Federal Tax Return is NOT what you made in your daycare! That is your TAXABLE INCOME. They are not the same thing at all. You might want to pull your copy of last year's return so you can follow along.
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RECONSTRUCTING AUTO MILEAGE
It's a real pain to write down your odometer reading every time you move your car, isn't it? Well, you don't have to do that. In order to deduct percentage of actual expenses the standard mileage you must have two figures:
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