2024 Tax Preparation Checklist for Childcare Centers in North America

As a childcare center director, preparing for tax season can feel overwhelming, but with the right approach and organization strategies, you can make the process easier. This tax preparation checklist will guide you through the steps you need to take to ensure you are ready for tax season, not only helping you this year but setting you up for smoother tax seasons in the future. Whether you’re filing taxes for a home childcare or a center based program, it’s important to stay organized throughout the year. By implementing the below strategies, you’ll have the tools and knowledge to manage your business expenses, understand key tax deductions, and keep track of important documents.

This checklist will help you prepare for the 2024 tax year and establish best practices for the future.

Step 1: Understand the Tax Forms You Need

Knowing the right tax documents for your childcare business is the first step in your tax prep journey. These may vary depending on your business structure:

America

• Schedule C: For sole proprietors or single-member LLCs.
• Form 1065 and Schedule K-1: For partnerships and multi-member LLCs.
• Form 1099-MISC: For payments of $600 or more to contractors.
• Form 1120: For C Corporations.
• Form 1120-S: For S Corporations.

Canada

• T2125 (Statement of Business or Professional Activities): Used by sole proprietors or self-employed individuals to report business income and expenses.
• T5013 (Statement of Partnership Income): Partnerships report income, deductions, and other relevant tax information using this form. Each partner receives a slip outlining their share of the income or loss.
• T4A (Statement of Pension, Retirement, Annuity, and Other Income): Issued for payments made to contractors or self-employed individuals, similar to the U.S. 1099-MISC form.

• T2 (Corporation Income Tax Return): Used by incorporated businesses to report income, expenses, and taxes payable.
• T5 (Statement of Investment Income): If a corporation pays dividends, a T5 slip is issued to shareholders.
• GST34 (Goods and Services Tax/Harmonized Sales Tax Return): Required for businesses registered to collect and remit GST or HST.

If you’re unsure which forms apply to your daycare provider business, consulting a tax professional or using a tax prep tool can help ensure accuracy.

Step 2: Pay Attention to Due Dates

Avoid late penalties by keeping track of critical dates for filing income tax returns, submitting forms, and paying taxes:

Key Deadlines in The U.S

• January 31, 2025: Distribute W-2s to employees. 
• March 17, 2025: Filing deadline for S Corporations and partnerships.
• April 15, 2025: Filing deadline for sole proprietorships, single-member LLCs, and C Corporations.

Estimated tax payments for the 2024 tax year are due:

• April 15, 2025
• June 16, 2025
• September 15, 2025
• January 15, 2026
  

Key Deadlines in Canada

• February 28, 2025: Deadline to issue T4 slips (for employees) and T4A slips (for contractors) for income earned in 2024. Copies must also be submitted to the CRA by this date
• March 31, 2025: Deadline to file T5013 Partnership Returns (if applicable).
• April 30, 2025: Deadline to file personal income tax returns, including those for sole proprietors and self-employed individuals. Payment deadline for any balance owing on 2024 taxes, even for self-employed individuals.
• June 17, 2025: Filing deadline for self-employed individuals (sole proprietors or independent contractors) and their spouses. Note: Any taxes owed must still be paid by April 30, 2025, to avoid interest charges.
• The deadline to file T2 Corporate Income Tax Returns for most corporations is within 6 months of the end of each tax year. 

For incorporated childcare businesses, ensure your fiscal year aligns with the CRA deadlines for T2 returns and payments. Sole proprietors running childcare centres should pay particular attention to the April 30 and June 17 deadlines.

Step 3: Gather and Organize Documents

Keeping comprehensive records throughout the year will simplify your tax prep process. Here’s what you’ll need:

• Income Statements and Balance Sheets
• Bank Account and credit card statements for verifying transactions
• Payroll Records detailing wages, reimbursements, and benefits
• Asset Purchase Details and depreciation schedules for equipment or real estate
• Records of property taxes, mortgage interest, and local taxes related to your business

Using childcare-specific software, such as Lillio Billing and Payments, can streamline this step by generating templates and reports tailored for your daycare program.

Step 4. Look for Tax Deductions 

Make sure to take advantage of any available tax deductions to reduce your tax liability. Common childcare business tax deductions include:

• Supplies: Items essential to daily operations, such as art materials, cleaning supplies, and nap mats, can be claimed as deductions in the year of purchase. Keeping receipts is critical to ensure eligibility.
• Facility Costs: Expenses like rent, utilities, and maintenance directly related to operating the centre are deductible, helping offset the costs of maintaining a safe and welcoming environment for children.
• Vehicle Expenses: If your centre uses vehicles for field trips, errands, or other business-related activities, the associated mileage and parking fees may be deductible. Accurate records of business miles are essential for this deduction.
• Capital Purchases: Durable items such as cribs, furniture, and playground equipment fall under capital purchases. These are typically depreciated over several years rather than deducted in a single tax year.
• Meals: Childcare providers can deduct the cost of meals served to children, based on government-standard rates for breakfast, lunch, dinner, and snacks. Alternatively, you can deduct the actual cost of meals if higher, provided detailed documentation is maintained.
• Staff Salaries and Benefits: Employee wages, salaries, and benefits may be deductible as business expenses, recognizing the investment in staffing for the effective operation of your centre.
• Educational Materials and Supplies: Books, toys, and other learning aids necessary for creating a stimulating educational environment may be deductible.
• Business Fees: Fees related to licensing, banking, legal services, or professional memberships can also be claimed as deductions.

For home-based daycare providers, additional deductions may apply. If your home is used for business purposes, you may claim a portion of expenses like mortgage interest, utilities, insurance, and maintenance. State licensing or registration is generally required to qualify for these deductions, but exemptions or pending applications may also be eligible.

Other deductible expenses include advertising, insurance, internet, phone service, and professional development costs. Directors are encouraged to stay informed about these opportunities and consult with a tax professional or CPA to ensure all eligible deductions are claimed.

→ Read our full blog on Navigating Tax Season Successfully here!

Step 6. Review Available Tax Credits for You and Your Families

Review any available tax credits to support your childcare expenses. Here are some opportunities for childcare providers:

• The Child Tax Credit from the IRS, which offers a tax break on eligible expenses for families in the U.S. with young children
• The Canada Child Benefit, a government program designed to assist with the cost of raising children. Additionally, parents may be entitled to other tax deductions related to childcare expenses.
• Small Business Health Care Tax Credit: If your business has fewer than 25 employees and contributes to their health insurance, you may qualify for this credit.
• Disabled Access Credit: If your business incurs expenses to improve accessibility, this credit may apply.

Step 6. Share Year-End Tax Receipts with Families

Parents in your childcare program may require year-end reports for their own tax filings, especially if they paid for child care services in the previous year. These records should include:

• Date Range: Clearly show the time period for which the charges apply.
• Charges and Payments: Detail the amounts charged and any payments made.
• Your Program’s EIN: Provide your Employer Identification Number for their records.
• Your Program’s Address: Include your business address for proper identification.

With tools like Lillio Billing and Payments, parents can easily download transaction summaries for individual children from the parent app once the receipts are ready, reducing your administrative burden substantially.

Conclusion

Proper tax preparation and record-keeping will save you time and money when filing taxes for your childcare center. By staying organized and leveraging tax deductions and credits, you can reduce your tax liability and keep your childcare expenses running smoothly. Don’t hesitate to consult a tax professional if you need help—taking proactive steps today can make tax season a lot easier in the future.

Make sure to mark important deadlines, gather your documents, and stay on top of potential tax-saving opportunities. With the right preparation, you can focus on what truly matters: providing high-quality care for the children in your program.