xiv Family Child Care Tax Workbook and Organizer
Using Tax Software
• Enter your business expenses (advertising, supplies) after applying your Time-Space
percentage or actual business-use percentage.
• Be sure to keep records of how you calculated your business-use percentage (if you
will not be using your Time-Space percentage).
• Read chapter 3 for a clear explanation of depreciation rules and how to use them.
Unless you know a lot about depreciation, it is easy to make a mistake claiming
• Before filing your return, compare Form 8829, Form 4562, and Schedule C with the
numbers you entered into the Tax Workbook and the Tax Organizer to see if all your
deductions are properly reported. Sometimes it’s easy to lose track of a deduction that
you enter into a software program.
I reviewed the Basic version of TurboTax (www.turbotax.intuit.com). There are also more
expensive versions: Deluxe, Premier, and Home & Business. In addition to the drawbacks
cited above, here are some additional things to watch for:
• Be aware that the Q&A section can be somewhat helpful, but not always.
• The software asks for the percentage of time you used your home for business without
adequately explaining how to calculate this number. Make sure to divide the hours
you worked in your home (including the work hours when children were not present)
by the 8,760 hours in the year (or the 8,784 hours in a leap year).
• Regarding the number of hours you worked in the year, the software’s explanation of
how to determine this number is similar to the one in IRS Publication 587 Business
Use of Your Home. Unfortunately, neither the software nor the IRS publication is
very helpful because they don’t ask you to include the number of hours you worked
in your home on business activities when the child care children were not present
(activities such as cleaning, activity preparation, record keeping, and so on).
• If you received a Form 1099 from your Food Program sponsor, fill out the section on
Form 1099. Otherwise, enter your Food Program reimbursements as other income.
• Using TurboTax to record your depreciation can be complicated, and you should pay
close attention to the instructions. This section is called Business Assets, and you
should note the following:
o If you depreciate a computer, the software will ask, “Was this asset used exclu
sively for business at your regular place of business?” You can answer yes only if
you used the computer in a room that was used 100% for your business.
o One screen will ask you about the nature of the asset you are depreciating.
TurboTax lists a variety of depreciation categories without telling you what depre
ciation rule applies to each category. Here is an explanation of the most likely cat
egories you might use (DB = declining balance method):
A. Computer and peripheral equipment = 5-year 200% DB
B. Video, photo, phone equipment = 7-year 200% DB
C. Cellular phone, similar telecom equipment = 7-year 200% DB
D. Typewriter, calculator, copier = 5-year 200% DB
E. Office furniture/fixtures = 7-year 200% DB
F. Rental appliances = 5-year 200% DB