An Introduction to Family Child Care Record Keeping

Presented by Tom Copeland, JDFamily Child Care Trainer and Author

Hosted by the AFSCME Department of Education

Welcome

This class will help you –– Understand what business records to keep– Learn to identify business deductions– Calculate your Time-Space Percentage– Claim your proper car and food expenses

Instructor

• Tom Copeland, JD• Partnership with National

Association for Family Child Care

• Call Tom: 800-359-3817 ex 321• Email Tom:

tcopeland@nafcc.org

After this class…

•You will be able to download the materials from this class on www.afscme.providerprograms.

•You will get a certificate after you submit the quiz at the end.

•CEU credits vary by state. Contact your local CCPT or AFSCME affiliate office. We are working with crediting agencies to have the workshops approved.

•Questions on AFSCME programs: Kate Headley kheadley@afscme.org or (202) 429-5092

AFSCME

VOICE

CCWU (in NJ)

CCPT

CCPUNITED

AFSCME is uniting child care workers!

Business Resources

• www.resourcesforchildcare.org– Hundreds of free articles, newsletter, tax preparer

directory, and other resources• www.minutemenu.com

– Minute Menu Kids Record Keeping Software program Books by Tom Copeland from Redleaf Press

(www.redleafpress.org; 800-423-8309)– Family Child Care Record Keeping Guide– Family Child Care Tax Workbook and Organizer– Family Child Care Tax Companion– Family Child Care Inventory-Keeper

Redleaf Calendar-Keeper

Poll - 1

How long have you been in business?1)Not yet in business2)Less than 1 year3)1-5 years4)6-10 years5)More than 10 years

Poll - 2

Do you love record keeping?1)Yes2)No

Record Keeping

You may not love record keeping but …..

• Keeping good records means big rewards! 

• The better your records, the lower your taxes

• For every $10 of expenses you claim, you’ll save $3-$4 in taxes

Want to make more money?

Three ways• Raise your rates• Care for more children• Reduce your taxes

You’ll earn more per hour doing record keeping, than you’ll earn per hour caring for children

Three Key Rules of Record Keeping

• Save all receipts for expenses associated with your home

• Record all meals and snacks served to the children

• Track all hours you work in your home

Track Your Business Income

• Parents• Food Program• Subsidy program • Grants

Protect Yourself

• Record sources of all deposits into your business/personal bank accounts– Spouse’s paycheck, checks

from daycare parents, transfers to/from accounts, gifts from mother, etc.

• Get signed parent receipts at end of year– Keep a copy

Child Care Tax Credit

• Most parents can claim the child care tax credit when paying for child care

• Parents should give providers Form W-10 to obtain provider id#

• Providers a can give parents Form W-10 and an end-of-year receipt, but are not required to do so

Employer Identification Number

• Get an EIN to avoid identity theft• Use EIN in place of your Social Security

Number• www.irs.gov (Search for EIN)

– When asked why you want EIN, enter “Started a New Business”

• Or call IRS at 800-829-4933

Track Your Business Expenses

• Keep “adequate records” of all expenses

• Mark all receipts • Organize your records by

category of expense, not by month

• Save all your business records for at least 3 years

 

Adequate Records

• Receipt• Cancelled Check• Credit/Debit Card

Statement• Written Record

(created by provider)• Photograph

Mark Receipts

• 100% Business• Shared

Put into folders with other similar expenses

Supply Expenses

100% Business Shared

$800 + $1,000 = $1,800 x 40% = $720

x 40%

$400

Correct deduction for supplies: $800 + $400 = $1,200

Car Expenses

• Claim car trips that are “primarily” for business purposes

• Don’t need to keep odometer readings

• Keep “adequate” records of business trips– Receipts, mileage log, cancelled

checks, debit/credit cards, written records, calendar notations, photographs

Poll - 3

A provider goes to grocery store to buy business and personal food

Can provider claim this trip as a business trip?1)Yes2)No3)I don’t know

Standard Mileage Method

• 2008 standard mileage rate– Jan - June 50.5 cents per business

mile– July - December 58.5 cents per

business mile

• Can also deduct parking, tolls, business portion of loan interest and property tax

Actual Expenses Method

• Claim business portion of:– Gas, oil, repairs, car

insurance, parking, tolls, depreciation on the car, car loan interest, etc.

• Business portion = Business milesTotal miles

Poll - 4

Are you enrolled in the

Food Program?

1)Yes2)No

Food Program

• Join the Food Program!• You are always financially better off• You are always eligible for the lower Tier II

rate– Can receive higher Tier I rate if you are low

income, serve low income children, or live in a low income area

• Reimbursements for children are taxable– Exception: reimbursements for own child

Benefits of Food Program

• Joining the Food Program is like winning the lottery

• You’ll receive about $500 or $1,000 per child/per year

• If paperwork for Food Program takes 3 hours a week, you’ll earn about $12.80 or $26.66 per hour (for 4 children)

Standard Meal Allowance

• All providers eligible to use this rule• Can claim up to 1 breakfast, 1 lunch, 1

supper, and 3 snacks per day/per child• Never count meals for own children

Standard Meal Rate

• 2008 rate– $1.11 breakfast;

$2.06 lunch/supper; $0.61 snack

• 2009 rate– $1.17 breakfast;

$2.18 lunch/supper; $0.68 snack

Keep Food Records

• Keep daily record of all meals and snacks served

• Use monthly Food Program claim form

• Track non-reimbursed meals daily on a calendar

Actual Food Cost Method

• Estimate your actual food costs

• Many different methods to use

• Must keep all food receipts - business and personal

Three-Step Process for Claiming Expenses

1) Is it Deductible? 2) How Much is Deductible? 3) When Can I Deduct it? (Follow the above 3-step process of all

expenses, except the car and food)

Step One – Is it Deductible?

• “Ordinary and necessary” for your business• Typical, helpful, appropriate,

useful

• Your home is an educational environment for children

• Parents expect you to maintain your home as a home

• Expense to clean, maintain, or repair home is probably at least partly deductible

Common Deductions

• House– Property tax, mortgage interest, utilities,

house repairs, house insurance, house depreciation

• Outdoors– Trees, snow shovel, rake, new siding,

paint, etc

• Living room– Couch, table, chair, blinds, curtains, rug,

lamp, etc.

• Bathroom– Towels, toilet paper, light bulbs, soap, etc.

Step Two – How Much Can I Deduct?

• 100% personal purposes – No business deduction

• 100% business use– Deduct 100% of the cost

• Both business and personal – Use the Time-Space Percentage

The Time-Space Percentage

• Number of hours your home is used for business = Time PercentTotal number of hours in the year

 • Number of square feet of home used regularly for business = Space

PercentTotal number of square feet in your home

 

Time Percent X Space Percent = Time-Space Percentage

Time Percent

Count hours • When children are present in your home

– From when first child arrives until last child leaves

• When children are not present in your home and you are conducting business activities– Cleaning, activity and meal preparation,

parent interviews/calls, record keeping, Internet, etc.

– Track these hours for at least 2 months/year

Counting Hours

• 11 hours/day caring for children (M-F) = 55 hours/week = 33% of year

• 14 hours/week business activities when children not present = 8% of year

• Typical Time Percent = 35-45%

Space Percent

• Count rooms that are regularly used for your business

• “Regular use” means two-three times a week

• Count basement and garage as part of home

• Most providers use all rooms in their home on a regular basis

Time-Space Percentage

• 40% Time x 90% Space = • 36% Time-Space Percentage

• 45% Time x 100% Space =• 40% Time-Space Percentage

Exclusive Use Room Rule

• Allows providers to claim higher Time-Space Percentage

• Room must never be used for personal purposes!

• Examples: playroom, storage room, crib room

Poll - 5

Do you have an exclusive

use room?

1)Yes2)No

Step 3 – When Can I Deduct It?

•If an item costs less than $100 – deduct it in one year

•If an item costs more than $100 – depreciate it

Depreciation - spread deduction over a number of years

What Can be Depreciated?

• Office Equipment– Computer, printer, fax,

copier, scanner• Personal Property

– Furniture, appliances, play equipment

• Land Improvement– Fence, driveway, playground

equipment• Home Improvement

– Remodeling, new furnace, deck

• Home

Tax Consequences of This Webinar

• Count the hours spent on this webinar as part of your Time Percent

• Depreciate a portion of the cost of your computer/printer and monthly Internet fee

Summary

Three Key Rules of Record Keeping

• Save all receipts for expenses associated with your home

• Record all meals and snacks served to the children

• Track all hours you work in your home

 

Closing

 Taking care of children is

only half your job

The other half is taking care of your business

It takes a special person to be business-like in a caring profession

You can do it!

Contact Tom For Help

• Call: 800-359-3817 ex 321• Email: tcopeland@nafcc.org

Visit www.afscme.org/providerprograms for more programs like this one.