5 CHAPTER ONE The Basics of Record Keeping Chapter Summary This chapter addresses the importance of good record keeping for your busi- ness and summarizes the key rules that you should follow in tracking your business income and expenses. There are many good reasons to keep complete, accurate, and ongoing records for your child care business: You’re in business to earn money. Good financial records will tell you at a glance how • you’re doing. Without them, you may not know. Parents are likely to ask you for an account of the payments they have made to you to use • in preparing their own income taxes. The IRS considers you to be a businessperson selling the service of child care; this means • that (except in a few rare cases) you must file a federal income tax return. Good records will help you figure the correct amount of tax that you owe—no more, and no less—and decrease the likelihood that your return will be challenged by the IRS. Because the information that you need to record is so closely tied to paying your taxes, this book is organized by the tasks that you will need to do to fill out your tax forms. The goal of this book is to explain what you need to know about record keeping in a simple way, not to try to cover every possible detail. If your income and expense situation is unusual or com- plex, you may need additional information from the IRS or a tax professional. Record-Keeping Systems Since the IRS doesn’t require you to follow any particular record-keeping system, you can choose to record your business information using The Redleaf Calendar-Keeper or any other system that works for you. Here are some of the options for record-keeping systems: FCCRKG8-FourthPages.indd 5 3/10/10 9:21:00 AM