2006 was my first year as a home daycare provider. I tried to save all my receipts and such for tax deductions. I came up with over $5000 in deductions, but still ended up paying $2300 in taxes. Everyone I talk to says that is nearly impossible. I didn't claim any mileage deductions though, but I don't drive for daycare much. Would it still be worh it to claim the few miles? Does anyone have any ideas how I can reduce what I end up paying in taxes? Am I missing something? Any ideas would be greatly appreciated. I love my job and would hate to have to quit.
2007-02-28 07:15:02 · 4 answers · asked by sassypants_911 2 in Business & Finance ➔ Taxes ➔ United States
Here's the IRS publication for having a home daycare: http://www.irs.gov/publications/p587/index.html
It starts to discuss a home daycare on page 11.
2007-02-28 07:20:12 · answer #1 · answered by peachygurl86 2 · 0⤊ 0⤋
Sounds like you're talking to folks who don't know anything about Self Employment income. You have to pay the SE tax at 15.3% of the net profit from your business activity. That's even before you start looking at income taxes.
It's not possible to say whether your return was correctly prepared or not without seeing it, but having to pay only $2,300 may even be a bit low unless you qualify for the EIC at the maximum rate.
Mileage is worth 44.5 cents per mile. If you're in a 25% tax braket, that's worth about $7 on SE tax and $11 on income tax for each 100 miles driven. If you have 2,000 miles, suddenly you're talking real money.
You can reduce your tax bite by keeping accurate records of all expenses agains the business income. You can also start making contributions to an IRA. Beyond that there's not a lot that you can do to cut your tax bill. However, you can cut the pain into manageable bites by making the required quarterly estimated tax payments on Form 1040ES. You'll avoid the penalties and interest for underpayment of tax as well.
2007-02-28 15:26:56 · answer #2 · answered by Bostonian In MO 7 · 3⤊ 0⤋
See if you can file an amended tax return, if you havent already paid in, and if you have maybe you can get a refund.You need to take all your receipts to a professional tax accountant who knows how to look for deductions.
2007-02-28 15:20:46 · answer #3 · answered by dynamite136 3 · 0⤊ 2⤋
deduct the mileage, a small deduction beats no deduction.
and, you probably dont want to hear this, but if you have
a net income then you gotta pay uncle sam. that's the american way.
2007-02-28 15:29:41 · answer #4 · answered by RichManPoorMan 2 · 1⤊ 0⤋