Introduction_to_Family_Childcare_Recordkeeping

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					                    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: 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 is uniting child care workers!

                        AFSCME



CCWU (in NJ)                                 CCPT


                                     CCPUNITED
                VOICE
             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: tcopeland@nafcc.org



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

				
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