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Chapter OR Basics of DOUBLE TAP TO ZOOM WITH PHONE One: The TABLET Record Keeping Rebates Sometimes you may receive a rebate for items that you purchase for your business. For example, you might use a newspaper coupon that reduces the price of the item by 10%, or a rebate coupon that is redeemed by mail. In either case, your business deduction must be based on the price of the item after the rebate is taken into account. For example, let’s say that you spend $80 to buy a toy that is used by both your business and your family. After purchasing the toy, you send in a manufacturer’s rebate coupon that is worth $10, so the final cost to you is actually $70. If your Time-Space percentage is 40%, your business deduction for this item would be $28 ($70 x .40). Organize Your Receipts There are many different ways to organize your records, and it’s important to find the meth- od that works best for you and makes it easiest to keep your records up-to-date. Here are some suggestions that other family child care providers have found to be helpful. Many people like to file their records by month. However, if you put all your January receipts in one file, and all your February receipts in another file, and so on, you’ll have to search through 12 files in order to find out how much you spent on utilities for the year. So it’s usually better to organize your receipts by category rather than by month—put all your utility bills in one file, all your receipts for supplies in another file, and so on. If you want, you can organize your receipts by month within the file for each category. You have a lot of leeway in deciding how to organize your records into categories. The Redleaf Calendar-Keeper identifies certain categories on its expense pages each month, and also leaves room for you to create your own categories. Chapter 5 divides business expenses into the categories that are listed on Schedule C. You can use this as a guide, or you can arrange your items into almost any categories that you wish. But in the end, all your business expenses will eventually appear somewhere on Schedule C. Another idea is that whenever you come home after shopping, mark all the receipts and put them into a “holding” envelope or file folder. Then at the end of the week or month, transfer all the receipts you have collected there into the appropriate file folders according to the category of expense. You may wonder how to file a receipt that contains more than one expense category. In the end it doesn’t matter what category you label an expense, since all your expenses will eventually be added together on Schedule C. There is no penalty for not putting your expenses on the proper line of the tax return. The only exception to this rule are the expenses associated with your home (property tax, mortgage interest, house insurance, house repairs, rent, house depreciation, casualty losses, and home improvements), which you need to first list on Form 8829, and then transfer to Schedule C. (For more information, see the latest edition of the Family Child Care Tax Workbook and Organizer.) Some providers put these “mixed” receipts into the business category that is associated with the majority of the items on the receipt. For example, let’s say that you go shopping at a COPYRIGHTED MATERIAL 23