Child Care Business ... Ask TaxMama ... March 26, 2004

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Tax Information With A Mother's Touch

Published by Eva Rosenberg, MBA, EA
Volume 6, Issue 252 March 26, 2004


	Things to Do or Know in March
	Child Care Business
	Tax Sites from the Leebow Letter


	Are Your Taxes Being Prepared Off-Shore?


	Mornin', My Little Tax Deduction

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Child Care Business

» From: North Haverhill, NH

Dear TaxMama:

I am planning to care for children in my home after the birth of my first child in October. I am wondering about how to figure out how much money I need to put aside from my earnings for taxes.

How does one go about figuring this out?

Thanks in advance.

Christina

Hi Christina,

I hope everything's going well for you and your baby. That's a great way to be able to stay at home with your child and still earn a living.

The answer is going to be different for each person. Much of it will depend on how much your husband earns and how much investment income you will have. Those things will define your tax bracket.

However, as a rule of thumb?

Put aside 15.3% of your monthly profits (income less actual expenses) for self-employment taxes (social security and medicare).
NH has no personal income tax, so that's one less worry.
For IRS taxes, put aside at least 15% - more if you're in a higher bracket.

How to pay it? You have three choices:

Increase your husband's withholding to cover the taxes you'll expect to owe. Some husband's won't like that because it appears to decrease their spending money. So, give him the difference.
Make estimated payments. Here's how.

or
Pay it on April 15th, 2005. Since this is an increase in your household's taxable income, you can keep the money until April and still avoid the penalties. In the meantime, be sure to put it into savings, so you still have it come April. And with the great rates of return being offered these days, you might even earn a whopping 1% or 2% if you're lucky.

But, if you're planning to refinance, or apply for loans, it looks good to have the savings.

One last thing you might want to know.

Pick up a copy of The Home Daycare Complete Recordkeeping System by Brigette A. Thompson

Amazon.com is showing it with a companion book containing Child Care Contracts by Tom Copeland - great idea! Get both for about $30 and you'll be in great shape with all the administrative details.

Good luck!

Eva Rosenberg
Your TaxMama

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