Daycare Tax Tips

Family Child Care Taxes - Frequently Asked Questions

FAQ regarding Alison's tax & payroll services

These Frequently Asked Questions pertain mainly to income tax preparation services.

New income tax clients must be California family child care providers doing in-home day care. Please read the FAQs below and check out my blog post for prospective income tax clients. There you will learn whether or not I am currently taking new tax preparation clients.

Please keep in mind that we have a hard-and-fast tax document submission deadline of March 15.

If you are hiring, please visit our FCC Payroll page and check out the steps for starting up payroll service. We always welcome new payroll clients.

If you are a new child care provider or fairly new, I suggest that you read My Letter to New Family Child Care Providers.

No office appointments except under special circumstances.

All income tax clients are asked to mail in or drop off their tax documents. There is a locked drop box by my front door. Important: Keep copies of any important papers you send to me.

I sometimes meet with clients in my office, but only if there is pressing need. Since instituting the mail-in/drop-off policy, my work flow and efficiently have improved a great deal. I will communicate via email or over the phone and will certainly answer and ask any questions that come up.

I cannot help anyone who misses the March 15 submission deadline. I am very strict about this.

Clients who submit their tax documents by March 1 qualify for a $50 tax preparation fee discount.

Are we a good match to work together?

You must be a regular email user. Email is my main mode of client communication. As I prepare your tax return, you can expect to go through some rounds of questions via email. This is true whether you come in for an office appointment or send in your tax information.

Make sure you are in sync with my approach. I believe in finding every valid tax deduction and avoiding anything against the rules. If you like to push the envelope and take questionable deductions, we are not a good match. I try to prepare the most audit-proof tax returns possible, meaning that if you are audited, you should not have to worry. I am very thorough and ask a lot of questions...probably some that no other tax preparer has asked you. I like to prepare accurate tax returns.

Don't expect miracles. Many new clients believe that coming to me will allow them to claim deductions they have been missing. Often times this is the case. Other times, however, I find deductions on day care tax returns that are overstated or not allowed and must be discontinued. Thus, you could come to me and find yourself paying more tax, instead of less, but I think you will sleep better at night.

Child care providers hiring assistants must be willing to set up proper payroll. If you are currently treating your workers as independent contractors, I will set you up to treat them as employees going forward. It is also possible to go back and file employee paperwork for the prior year, if you want to.

Depreciation schedules from your prior year tax return must generally be provided if this is not your first child care tax return. They definitely must be provided if you own your home. Contact your previous tax preparer now to request this information, if you can't find it. Many tax preparers don't print the depreciation detail with the client's copy of the tax return.

I will ask you to send me a copy of your prior year tax return for review. Before I commit to working with a new client, there are sometimes issues we need to discuss.

What are your fees for income tax preparation?

I cannot quote an exact tax preparation fee at the outset. I will give you an estimated fee range, but even that could change once I start reviewing your tax information and preparing your tax return. The actual fee will be calculated when work is completed.

To give you some idea of our fees for income tax preparation, homeowner family child care providers usually pay between $650 and $750. Renting providers usually pay between $600 and $700. A NONREFUNDABLE deposit of $400 will be required when you submit your paperwork.

The normal submission deadline is March 15, but you can save $50 off your tax preparation fee by submitting your tax documents by March 1st.

These are rough fee estimates and on the high side. They take into account only the forms needed to report your child care business income and expenses, plus home expenses, and your spouse's wages (if you are married). This also includes calculating estimated tax payments for the coming year, if necessary. The fee covers preparation of both your Federal and California income tax returns.

Your estimated fee (and nonrefundable deposit) will be higher than indicated previously if you (or your spouse) have other issues affecting your tax return. This can include a second business, rental property, sales of stock or stock options, employee stock purchase plan (ESPP) stock, dependent care and other credits, noncash charitable contributions exceeding $500, alternative minimum tax, limited partnerships, home purchase/sale, foreclosure, etc.

If additional complexities emerge once I start working on your tax return, some additional deposit may be necessary. The balance of your tax preparation fee will be due and payable when the completed tax return is presented.

New child care providers (usually those in the first year of business) who decide to do a household inventory can expect an increase in the tax preparation fee. The amount of the increase will depend on the number of household furnishings you want to deduct through depreciation. Your tax savings over the next several years should more than cover the higher fee that first year. Each inventory item will add roughly $1 to your tax preparation fee.

Please contact me in advance, if you have questions or concerns about the potential fee. Once I meet with you and/or start work, your deposit cannot be refunded. Once the tax return is completed, the remainder of your fee will be due.

What is an Enrolled Agent?

An Enrolled Agent (EA) is a federally-authorized tax practitioner who has technical expertise in the field of taxation and who is empowered by the U.S. Department of the Treasury to represent taxpayers before all administrative levels of the Internal Revenue Service (IRS) for audits, collections, and appeals. This means that with your written permission, I can interact directly with the IRS to resolve any problems that come up. I became an Enrolled Agent in 1989 when I passed a difficult two-day test administered by the IRS covering all areas of taxation.

Where are you located?

I work from my home office in Fremont, California. Fremont is an East Bay city in the San Francisco Bay Area about halfway between Oakland and San Jose. I am located on the northern end of town, near the intersection of Decoto Road and Fremont Blvd. Thus, I am near to Newark, Union City, Ardenwood and the Dumbarton Bridge. (For security reasons, and because I do not take drop-in business, my address is not shown on the website.)

I do not live near Fremont. Can I still work with you?

Yes! I work with clients from all over California. I no longer meet with clients in my office, except in some special situations. Clients provide their tax information by US Mail, email, etc. We communicate via email primarily and also over the telephone.

Will you prepare all of my tax return or just the day care forms?

I will prepare your complete tax return, reporting all of your income and deductions and also those of your spouse, if you are married and filing together.

I am married. Do you do filings for married joint and the business?

Most married couples file jointly, though filing separately is also possible. Filing a joint tax return is the simplest way to go and usually results in the lowest tax. I produce a complete tax return, including the day care business forms, personal deductions, income for both you and your spouse, etc. If your spouse is also a self-employed sole proprietor, I can prepare those business tax forms as well.

Do you offer bookkeeping or payroll services?

Our FCC Payroll Service serves California child care providers and other small business owners. Refer to my Payroll Tax Guide to learn about employer tax responsibilities.

I do not offer bookkeeping services. Every day care provider should find a record-keeping method they are comfortable with and process expense receipts regularly (at least once per month). I recommend you consider using specialized software to help with your record keeping. I have also written up a step-by-step envelope record-keeping method for child care providers.

Do you e-file?

Yes, most all of my clients file their tax returns electronically. The cost of e-filing (both Federal and California) is included in my fee estimates above. There is no extra charge. Paper filing is available upon request.

Do you accept credit card payments?

Yes, we accept credit and debit card payments here in the office, over the phone, or though our Payments page.

When should I contact you for tax preparation?

Short answer: The sooner the better. I can only take a limited number of new clients each year. I generally finalize my client list during the summer or fall.

For further information, check out my blog post for prospective tax preparation clients.

What is your mailing address?

I do not post my address on the website due to the fact that I work at home and do not take drop-in customers. Please email me or call 800-616-1268 for the mailing address in Fremont, California.

How long will it take for my tax return to be completed?

Once I have all of your tax information in hand, I will initially go through a period of asking for additional information and clarifications. After that, it generally takes a couple of weeks or more to complete your tax return. Turnaround time is faster at the beginning of February and slower in March. The submission deadline for tax information is March 15. This is a hard deadline. If you don't submit by the deadline, I will not be available to prepare your income tax return.

A certain number of tax returns will have to be put on extension and completed after April 15. If you have special complications or you submit your tax information in March, an extension becomes more likely.

I work hard to stay in communication during the tax preparation process and you are welcome to request a status update at any point. I place a high priority on responsiveness, but at the same time, I take the time necessary to produce an accurate tax return showing the lowest possible tax.

Will my tax return be completed by April 15? Or will I need an extension?

If I have all of your tax information in hand by the March 1, I should be able to complete your tax return by the April 15 deadline. After that, it becomes less certain.

Sometimes there are complex issues that make it necessary to request an automatic extension of the filing deadline. One fairly common and time consuming issue with new clients is the need to catch up on prior year home depreciation, which I will normally work on during the off season.

When extensions are necessary, they are submitted electronically, based on your estimated income and deductions. If a tax balance due is expected, I will estimate how much federal and state tax you should pay by April 15 to avoid late payment penalties.

Extensions are very common these days. Some people wonder if their chances of audit go up when they go on extension, but this is not the case. Once on extension, your new filing deadline is October 15.

Will you file my tax return for me?

Unless you request to file a paper tax return, I will set you up for free electronic filing. Nothing gets filed, however, until you have first reviewed your completed tax return and signed the e-file authorization forms.

Do I get a copy of my tax return?

Very definitely, yes. I will provide you with a complete paper tax return copy for your records. In addition, you will receive an electronic PDF copy on CD.

Can you help me if I get audited?

Yes, because I am an Enrolled Agent, I can represent you in the case of an audit by the IRS or the California Franchise Tax Board. Audit representation is not covered by your tax preparation fee, however. I charge for these services based on my hourly rate.

How long have you been in business?

Since 1995.

How long have you preparing family child care tax returns?

I don't remember exactly, but it was soon after starting my business in 1995. My two young sons received part-time care from a wonderful child care provider who put me in touch with her provider association. From there, I began working with daycare provider clients.

What is your educational background?

I have a bachelor's degree in Computer Science from the University of California at Berkeley, where I graduated Phi Beta Kappa. I completed a year-long course in federal taxation at Ohlone College before taking and passing the Enrolled Agent exam in 1989. Every year, I take a minimum of 30 hours of continuing education tax courses.

What is your professional background?

Upon graduation from the University of California at Berkeley, I worked as a computer programmer for TRW and Xerox Corporation. When my children were young, I switched to the tax field due to my interest in tax matters and my desire to be self-employed and work from home.

Looking back, I realize that my first "real" job was a summer internship at the U.S. Bureau of Alcohol, Tobacco and Firearms (ATF) in San Francisco. Do you know what I did there? I audited tax returns from breweries, distilleries and wineries! My manager and co-workers were so happy with my work that they presented me with a U.S. Treasury Certificate of Award at the end of the summer. Between the ATF experience and the A+ I received in Accounting 101 at Berkeley (which I took "for fun"!), I probably should have considered a career in the tax field sooner.

I firmly believe that things happen for a reason, though. My computer science career and education put me right in the middle of the tech revolution. I was an early adopter of email and the world wide web as communication tools and am now able to efficiently utilize the new accounting and tax software offerings.

Last updated 30 January 2017

Posted on 0000-00-00 00:00:00