SuperMoney recently conducted an interview with me and asked questions about how I got into this field, record keeping tips, how a provider should set rates, how to organize financial records, and more.
SuperMoney is a resource for personal finance knowledge.
Tell us a bit about your background. Why did you decide to focus your career on the family child care industry?
My interests have always been writing and communicating. After becoming a licensed attorney, I began work at a child care resource and referral agency in 1984 in St. Paul, Minnesota helping employers offer more child care support services for their employees. I saw that family child care providers received little reliable information about the business side of their work. IRS agents who spoke to providers often couldn’t speak clearly, and child care providers often did not understand recordkeeping and tax issues adequately. I felt that I could communicate complex business issues in a way that could be understood.
So, I created a new job for myself of helping providers become more successful as a business. I travel the country giving workshops on record keeping/taxes, contracts, marketing, legal/insurance, and money management/retirement. I’ve written ten books on these topics. I conduct monthly webinars and have helped providers who are audited by the IRS. I answer questions (at no cost) via phone and email. My website contains over 1,000 articles on the business side of family child care. I left the child care agency in 2010 to continue my work as a self-employed trainer, writer, and consultant.
If someone said to you, “I don’t need to know anything about the ‘family child care industry,’ since I only watch the neighbor’s kids each day until their parents get home from work,” how would you respond?
There is a growing number of child care providers who are not required to be licensed under their state law. These folks care for one or two children in their home (sometimes their neighbors or relatives). Such providers are entitled to the same business deductions as licensed family child care providers and must follow the same IRS record keeping rules. This means they must report their income and expenses on a business tax form (Schedule C) and pay federal income tax and Social Security/Medicare tax on their profit. There is a great benefit to doing so, because in many cases they will be able to wipe out all of their taxable income. On the other hand, failure to treat what they do as a business will hurt them if they get audited if they have not saved their business receipts.
What factors should determine how much a provider should charge for family child care?
Family child care providers are free to charge whatever they want. They should set their rates with three things in mind:
- What do you want to earn?
- What is the going rate in your community?
- What can parents in your community afford to pay?
Your rates should reflect the quality of care you offer. If you offer high-quality care, your rates should be in the top 20th percentile of rates in your area. Beware of charging the “average rate” in your area. If you are above average in quality your rates should reflect this. In the end, parents will pay more based on their perceived benefits of your program. Your ability to show parents how children will learn is directly related to what parents will pay.
Tom Copeland – www.tomcopelandblog.com