How to Prepare Your Child Care Center for Tax Season.
Ideally, you’ve been preparing for tax season all year long with sound practices and organization. Regardless of how prepared you are, here are some steps you should be taking to prepare for filing by the deadline.
- Organize Receipts
Childcare businesses require a great deal of supplies. From diapers and wipes to craft materials, you’ll find yourself purchasing goods regularly to power your business.
You need a sound practice for organizing your receipts. Many receipts in today’s businesses are digital and delivered via email. You can turn these emails into PDF files and store them securely in a folder on your computer or a cloud drive.
Many accounting software systems organize expenses for you if you use a company credit card. Then you can simply categorize the expense the next time you log into the system.
Paper receipts should have a location in the office where you place them. You should enter the value of those receipts into your accounting software. Take photos or scans of the receipts and place them in the same digital folder along with your online receipts for one central location where you store everything.
Avoid having multiple ledgers and locations for your accounting. You should centralize it all within childcare software to simplify sharing the information with your accountant during tax season.
- Settle Bad Debt or Overdue Bills
Overdue bills parents haven’t paid can harm your budgets quickly. It’s wise to use ACH or automatic credit card billing to avoid bad debt. Allowing parents to pay via check or other means that are not automated is often what leads to overdue bills or bad debt.
And when you don’t use automatic billing methods, it’s challenging to see what tuition bills are still outstanding to follow up on them. Moving to childcare software that simplifies this process even for flexible care arrangements like iCare Software’s flexible rate chart will reduce the time you invest in your tuition billing and make it simpler to check for outstanding bills to follow up automatically.
But if you didn’t use software with these tools this past year, you should review your outstanding accounts receivable and do what you can to settle these accounts. Those that you can’t settle you should document and share with your accountant for your tax preparation.
- Prepare Year-end Statements for Parents
Since childcare expenses are also something that parents can use within their tax filing; you need to issue year-end statements that outline the total annual tuition that parents paid the previous year.
The sooner you do this, the fewer emails, phone calls and in-person inquiries you’ll have to respond to from parents working on their tax filings. These year-end statements should include your EIN since parents will need that information when inputting this data into their tax filing.
- Reconcile Your Bank Accounts
Make sure that your books match what’s in your bank account. This means all receivables and payables are logged in your accounting system or ledger. Reconciling your bank account will speed up the process for your tax advisor and reduce the back and forth you have to do with them.
- Schedule a Meeting with Your Tax Advisor
The sooner you start discussing your tax filing with your advisor, the sooner you can file and complete the process so you can focus on educating children and delighting parents.
Get the process moving by meeting with your tax advisor. This can be a digital meeting where you discuss delivering all digital content necessary to complete the filing and ask questions about documentation required for deductions or new tax situations you’ve encountered this year.
- Review Child Care Accounting Practices and Prepare for Next Year
When you own a business, preparing for tax season never really ends. Even once you’ve filed your taxes for the previous year, you need to regroup, evaluate your procedures and start positioning yourself for the next year’s tax filing.
Talk to your accountant about opportunities or gaps within your accounting procedures that will make next year’s filing simpler. And evaluate your time in preparing all documentation necessary for finalizing your tax data.
With the right tools, you should spend little time documenting expenses and receivables. Childcare software makes this process simple and can do most of the work for you. Instead of spending hours every tuition billing cycle, you can do a quick review before issuing bills. Then the system tracks outstanding payments and helps you reduce bad debt with little time investment.
iCare Software automates childcare accounting to reduce administrative work and speed up accounting practices. Schedule a demo now to see how simple next year’s tax filing can be when you have the right tools to manage your finances.