July 8, 2011

Dear Friend,

If you are among my extension clients still needing to file your 2010 income tax return, please know that I am working to complete your work as soon as possible. I appreciate your patience. There have been some complex issues this year.

I am not taking any new clients for 2010 tax preparation, but any child care providers looking ahead to 2011 can follow these steps to get on my mailing list for next year.

Monday, August 8th is a hard deadline for extension clients

Most extension clients know that I have a deadline for turning in 2010 tax information. In case this is news to anyone, I am extending the deadline one week. Please provide your complete 2010 tax information no later than August 8. If this deadline is not met, I will be unable to prepare your income tax return and there will be no refund of any deposit already paid.

I am grateful for your business and your trust. If you have any questions, be sure to let me know.

All the best,

Summertime is Fix Up Time

What's deductible?

A family child care provider asks:

> I would like to do some carpet replacement and painting this summer. How much is deductible?

Make Those Estimated Tax Payments!

Avoid a vicious cycle of owing tax (& penalties) every year

Many family child care providers are confronted with an unwelcome tax bill when filing their annual income tax return. Daycare business profits can ratchet your taxes up quickly, because you're paying both income tax and self-employment tax. Self-employment tax covers your contributions to social security and Medicare and comes to 14.13% of your profit. (See my Family Child Care Tax Return Overview handout for more information regarding how your income is taxed.) Your income tax rate will vary and will be higher if your spouse has some significant wages or other taxable income. On the other hand, married providers often have the advantage of tax withholding through their spouse's paycheck, which sometimes covers the family's entire tax bill.

Most child care providers with a profitable business need to make estimated tax payments of anywhere from a few hundred to several thousand dollars every quarter (4 times per year). As a self-employed person myself, I know how hard it is to write those checks! But if you don't make quarterly payments, you may soon find yourself in a vicious cycle of owing.....owing the taxes and owing penalties.

This is a mid-year tax and office news update. To receive tax news on a more timely basis,
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Twitter never seemed that useful,
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Pesticides = Poison

Children are more at risk than adults

Summer is here and kids are having fun outside. Ever think about pesticide use on your property?

A friend in the know clued me in a long time ago that toxins in pesticides are extremely damaging to humans. This is because bugs and humans have similar nervous systems. Who knew?

Effective July 1, the IRS raised the standard mileage rate for business driving from 51 cents per mile to 55.5 cents per mile. Medical and moving rates also went up for the second half of 2011.

California Requirement: High income businesses must pay "use tax" online

Don't ignore BOE letters

Does your California business bring in $100,000 or more in annual income? If so, this makes you a Qualified Purchaser under a new program from the State Board of Equalization (the BOE). I regularly see a few child care providers and other sole proprietors who have income (before expenses) at this level. If you are not sure, look to see how much income you reported on your Schedule C, Line 1.

Businesses falling into the Qualified Purchaser category are required to register with the BOE for the purpose of paying use tax, which is another flavor of sales tax. It has been on the books for a long time, but is only recently being enforced. You may owe use tax if you buy supplies online from out-of-state vendors. If such vendors don't collect California sales tax, it is up to you to pay the use tax directly to the state. The use tax rate is the same as your local sales tax rate.

Qualified Purchasers must file a use tax return every April (same due date as your income tax return). This is done electronically through the BOE website. A tax return must be filed EVEN IF YOU OWE NO USE TAX.