Establish a reputation for providing high quality child care - people will be willing to pay more for your services. Most of the income you receive from your child care business will show up on other people's tax returns. Parents use these figures to determine their allowable child care credits. This may make your income very visible to the Internal Revenue Service - more so than other types of income. Therefore, you should be very careful to report all receipts from your business.
Accurate records are vitally important.
You must keep records on all aspects of your business in case you ever have an IRS audit. To justify food expenses, the IRS may look at grocery receipts, copies of menus, and children's attendance records. Check on current rate for IRS mileage deduction and multiply by number of child care business miles driven for the year for your deduction. The tax deductions will be calculated over a period of years for both direct and indirect expenses. For more information, contact the Internal Revenue Service or pick up the following tax forms and publications at your local library.