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COPYRIGHTED MATERIAL 4 Family Child Care Tax Workbook and Organizer About the Math in This Book The calculations in this book use exact amounts so you can track how to do the calculations; however, the IRS allows you to round numbers to the nearest dollar, and we recommend that you do so on your tax forms. Here’s a reminder of how to round numbers correctly: If the cents portion of an amount is $0.49 or less, round down to the nearest dollar (for example, round $3.39 down to $3.00). If the cents portion of an amount is $0.50 or more, round up to the nearest dollar (for example, round $3.68 up to $4.00). In this book we also do a lot of multiplying by percentages. Here’s a reminder of how to do this: Let’s say that you want to multiply $500 by 30%. To multiply by a percentage, you need to move the decimal point two places to the left before you multi­ ply—in this case 30% becomes 0.30. Here’s the calculation: $500 × 0.30 = $150 To multiply $500 by 3%, you first need to convert 3% to 0.03. In this case, the calcu­ lation would be $500 × 0.03 = $15 Give This Book to Your Tax Preparer If you decide to complete the Tax Organizer and then hire a professional tax preparer to do your return, remind the preparer about tax rules that are unique to the family child care business. Unfortunately, some tax ­preparers don’t understand the nature of this busi­ ness and therefore can’t do an adequate job of interpreting the tax law in your favor. (For advice on selecting a tax preparer, see the Family Child Care Record-Keeping Guide.) It may make an important difference in your tax return if you give your tax preparer a copy of this book and draw his or her attention to the following ten points that are the founda­ tion of preparing a tax return for a family child care business. (For more information on any of these points, see the Record-Keeping Guide.) • The standard “ordinary and necessary” test for business expenses casts a wide net in the family child care business. Child care is the only home-based business that is allowed to use hundreds of common household items for both personal and business purposes. Such items include toothpaste, lightbulbs, toilet paper, garbage bags, a lawn mower, sheets, and towels. (See the Record-Keeping Guide for a list of more than a thousand allowable deductions.) • The standard for claiming a room in the home as business use is regular use, not exclusive use. The children in a provider’s care need not be present in a room for it to be used regularly for the business (storage, laundry, and so on). (See chapter 1.) • A garage (either attached to the home or detached) and basement should be included in the total square feet of the home when calculating the business use of the home. Most family child care providers use their garage and basement on a regular basis for their business because they have a laundry room, storage room, or furnace area there. They may store a car, bicycles, tools, lawn maintenance items, firewood, or other items used for business in these spaces. (See chapter 1.) COPYRIGHTED MATERIAL