By Gary Romano, Civitas Strategies, LLC
Finding affordable, effective tax preparation has long been a challenge for child care providers. As a result, they often pay more in taxes than they should. To address this issue, Wisconsin Early Education Shared Services (WEESSN), a program of Wisconsin Childhood Association (WECA), is partnering with Civitas Strategies Early Start (CSES) to create a revolutionary new set of tax guides specifically for child care businesses.
Both entities bring their core strengths to address this challenge: WEESSN staff come to their roles in the shared services network with deep experience as either center directors or family child care providers. This lived experience informs their perspective on what works for today’s child care providers. Civitas is now overseeing Tom Copeland’s blog and working with providers in several states on child care finance and tax considerations. The new guides are the product of a budding relationship between these two child care sector powerhouses. The guides focus on helping providers use the three largest online tax preparation software brands to address specific child care business scenarios.
Don’t leave money on the table
Child care providers face many economic stressors on their business. Even in the best of times, they operate on razor-thin margins. Emerging from the pandemic, providers are experiencing the effects of inflation compounded by a tight labor market. Therefore, it’s more important than ever to maximize revenue – and keep more of the money they earn.
The child care sector is aware of the challenge of finding affordable, informed tax preparation, but it’s been difficult to address. Many attempts have been made to educate professional tax preparers on the nuances of the child care industry but expanding to meet the actual need has been arduous, and turnover among trained tax preparers perpetuates these issues.
The problem runs deep, especially for family child care providers: In one study, Luminary Evaluation Group analyzed 60 child care businesses’ 2019 federal tax returns and found 83 percent of child care providers operating out of their own homes did not claim the business use of their home at all, meaning they ended up paying more in taxes than they needed to. In some cases, providers did not claim any expenses on their tax returns. Others claimed certain business expenses that can drastically increase the chances of an expensive and time-consuming Internal Revenue Service (IRS) audit. Frequently, several common deductions were miscategorized or improperly calculated, raising the likelihood of an automated audit alert.
One option specific to this field that hasn’t been fully explored in the past is online tax preparation software, which is relatively inexpensive compared to other forms of tax preparation. It is easily accessible and can be downloaded or purchased from a local Walmart, Target, or other local discount store. The IRS believes online tax programs are more accurate, so electronically prepared returns are audited at a lower rate. Additionally, tax preparers who use online tax preparation software often have more accurate, positive outcomes.
The challenge with using online tax preparation software products is that they are made for a multitude of businesses, which can be confusing for child care providers. These newly developed tax guides give child care providers the specific knowledge they need to provide accurate information about their business and understand where to enter data into the software. These guides are not large or laborious tools – they remove a key barrier for providers in using these efficient, cost-effective online methods of tax preparation.
These tools are being offered completely free to child care providers across the nation because we know there are hundreds of thousands of child care providers who can benefit immediately. To get started, here are links to provisional versions of the guides:
Once the tax software is released for the 2022 tax year, the guides will be updated with screenshots and videos instructing child care providers which areas they need focus on to ensure they have exactly what they need to prepare their child care business’ taxes effectively, accurately, and confidently. WECA and CSES are excited to offer this innovative support to the early care and education community and are encouraged by the autonomy, assurance, and financial benefits this guidance provides.
Focused on what’s possible for the future of early care and education when we all work together, Wisconsin Early Education Shared Services Network (WEESSN) offers an ever-growing variety of resources and benefits to providers for FREE. It supports Wisconsin’s regulated child care programs with tools and strategies to make their jobs easier, more efficient, and less stressful.
WEESSN provides free access to an enrollment management system, hiring platform, discounted savings program, professional development that earns Wisconsin Registry credit, and an online shared resources collection with more than 2,600 items, including customizable forms, templates, and policies so providers don’t have to recreate the wheel. It offers three tiers of engagement, with increasing levels of coaching and support. Learn more here and, if you aren’t already a member of WEESSN, join now to tap into the support offered by a shared services network.
WEESSN is a program of Wisconsin Early Childhood Association (WECA), which works to strengthen early care and education and the early childhood workforce in Wisconsin through key programs, professional development opportunities, advocacy, membership, and research. Learn more here.
About Civitas Strategies Early Start (CSES)
Civitas works with states, funders, and community leaders who desire to build stronger child care businesses. They understand that child care businesses are constantly dealing with changing circumstances, and provide customized, actionable strategies to proactively plan for the internal and external factors that impact the child care business model. Learn more here.