How Can Your Childcare Business Reduce Stress at Tax Time?

Tax time can be stressful for business owners. The unknown of what you might owe to the IRS or your state can create anxiety for months leading up to the tax filing deadline; however, there are things you can do to make it easier! If implemented, the following tips can help relieve the dreaded tax deadline that looms each spring.

1. Make sure you have a knowledgeable and reliable CPA, one that you have a good relationship with and who wants to strategize with you leading up to tax time. If you only talk to your tax professional at tax time, you lose the ability to strategize. By the time you're having the conversation, it’s too late to make most adjustments.

2. Make sure your accounting records are up to date right now! Bank accounts, credit cards, and loans should all be reconciled currently. If this is incomplete, let this serve as a reminder to complete these tasks immediately, otherwise

   you may face substantial stress when tax time rolls around.

3. Request a meeting with your tax professional immediately. If your accounting records are up to date, they should be able to give you a tax projection number. If they refuse to meet or are unable to provide you with a projection (yes, you'll need to provide some information to them - after all, it is a team effort), then it’s time to consider changing CPAs.

4. If you meet with your tax professional and they estimate a large amount of taxes will be owed, congratulations! That means your business has a profit! Your tax professional should work with you on strategic ways to lower your tax liability. Key information to ask them about (which may or may not apply to you based on your entity structure):

·        Reasonable compensation

·        Home office reimbursement

·        Mileage reimbursement

·        Estimated tax payments and implications

·        Taking a bonus at year end (if cash flow allows) and having all of it go towards your personal federal tax withholdings

·        Your tax basis and how it relates to owner distributions/draws

·        Make sure the correct boxes are checked on your W-4, if you have a spouse that works (not necessarily in the childcare business, it applies to any wages they earn)

If your childcare business is facing a loss, that doesn’t mean you won’t owe taxes. There are many factors that go into tax calculations, so it’s important that you are strategizing with your CPA!

5. If you’re reading this and know you need to find a new CPA, do not put this on the backburner any longer! You’re running out of time to establish a relationship before tax season. Talk to your family, peers, and friends to see if they have any recommendations. The good news is that in this day and age, you don’t need someone local! 

Join our email list here to receive a free copy of our year-end financial checklist. Following the checklist will ensure that you’re on the right track.

*This blog does not constitute tax advice; however, you can use this for reference when speaking with your CPA!