an introduction to family child care record keeping · – family child care tax workbook and...
TRANSCRIPT
An Introduction to
Family Child Care
Record Keeping
Presented by Tom Copeland, JD
Family 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: [email protected]
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
[email protected] or (202) 429-5092
AFSCME and Child Care Workers
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 business
2) Less than 1 year
3) 1-5 years
4) 6-10 years
5) More than 10 years
Poll - 2
Do you love record keeping?
1) Yes
2) 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)Yes
2)No
3) 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 miles
Total miles
Poll - 4
Are you enrolled in the
Food Program?
1) Yes
2) 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 Percent
Total number of hours in the year
• Number of square feet of home used regularly for business = Space Percent
Total 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) Yes
2) 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: [email protected]
Visit www.afscme.org/providerprograms for more
programs like this one.