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Chapter OR Basics of DOUBLE TAP TO ZOOM WITH PHONE One: The TABLET Record Keeping • Look for ways to cut your business expenses. Use discount or co-op food stores. Ask par- ents to give you their old toys. Exchange ideas for reducing expenses with other family child care providers. Tracking Expenses The Importance of Keeping Good Records Do you love record keeping? Probably not. But you should look at it as your friend, because it will always help you—and the more you know about your friend, the more it will be able to help you. In fact, from a financial standpoint, the time that you spend on record keeping is probably worth a lot more to you than the time you spend caring for children. Let’s see how this works: You’ll be paying both federal income tax and Social Security tax on your business profit. In many states you will also owe state income taxes. Your combined tax rate is probably between 30% and 40%, which means that for every $10 of business receipts you record and claim on your tax return, you will save between $3 and $4 in taxes. If it takes you five minutes to record a $100 deduction in your records, you will be “earning” between $30 and $40 an hour for your record-keeping work. Although for most people record keeping isn’t fun, it doesn’t have to be a great bur- den, either. Try to set up a comfortable, convenient method for collecting your receipts and records. Put a box in your kitchen or entryway to remind you to deposit your receipts when you come home from the store. Set up a specific time each week to do your record keeping. Hire an accountant to help you set up a good record-keeping system. Make it your goal to do a better job this year than you did last year. However, also remember that you are just trying to reduce your taxes, not become an expert accountant. You will have three years to correct any mistakes by filing an amended tax return (see page 179). Save All Your Receipts Family child care is the business of caring for children in a home. Therefore, the cost of maintaining, cleaning, and repairing your home and the cost of all the household items you use in your business are at least partially deductible as business expenses. This means that you should save receipts for everything that is associated with your home, as well as for your business expenses. For example, your hammer, floor polish, lightbulbs, garage door opener, and broom are all probably used at some time in your business, so you need to save receipts for these items. You also need to keep complete records of any home improvements (new light fixtures, a new deck, remodeling, and so forth) that you make, since these expenses can also help reduce your taxes. If you’re not sure whether an item is deductible, always save the receipt anyway; you can sort out your deductible expenses at the end of the year. Some family child care providers just assume that they are using about 50% of their toilet paper purchases for their business every year, and so they only save their receipts every other time they purchase it. This isn’t COPYRIGHTED MATERIAL 19