The Three Most Common Objections to the Food Program

6a0133f3fc5805970b014e8864ece7970d-320wiAll family child care providers are better off financially if they join and stay on the Child and Adult Care Food Program.

If you serve a breakfast, lunch and one snack a day to children the Food Program will pay you about $500 or $1,000 a year per child. Yet less than half of all eligible child care providers are participating on the Food Program.

Why?

There are three common objections to participation.

1) “If I join the Food Program I’ll pay more in taxes.”

This is true. However, it’s also true that you’ll pay more in taxes if you win the lottery, if your husband gets a raise, or if you raise your rates.

The reimbursements you receive from the Food Program are taxable income (See my article on this). Therefore, your taxes will go up. But, what’s more important than how much tax you pay is how much money you will have after you pay your taxes. For every $1,000 you get from the Food Program you will keep about $600-$700 after taxes.

2) “I will lose some of my food deductions if I participate on the Food Program.”

False. Whether you are on the Food Program or not you will deduct your food expenses in the same way. Let’s say you are not on the Food Program and spend $4,000 a year on food for your business. Once you join the Food Program you will still be able to deduct the same $4,000 as a business expense. The only difference is that you now are receiving reimbursements from the Food Program of about $500 or $1,000 per year per child.

3) “The Food Program is not worth it because of all the paperwork.”

Look at the Food Program as another job. Are you being paid a reasonable amount for this job? If you served one breakfast, one lunch, and one snack a day to four children and spent three hours a week on Food Program paperwork how much would you be earning per hour? If you received the lower Tier II reimbursement rate you would be earning $13.06 per hour. If you receive the higher Tier I rate you would be earning $27.13 per hour. In addition, much of the paperwork you must do for the Food Program (attendance records, meal counts, etc.) you need to do for tax purposes even if you are not on the program.

Unfortunately, some tax professionals and child care providers are confused about the tax benefits of being on the Food Program. Don’t let anyone tell you it’s not financially worthwhile to be on the Food Program!

I’ve written three handouts that explain the tax benefits of the Food Program in more detail. You may copy them to help educate other child care providers.

The Tax Consequences of Child and Adult Care Food Program Participation

The After Tax Impact of Food Program Participation

Is it Worthwhile to Claim an 20-cent Snack from the Food Program?

Image credit: kernchildcare.org

6a0133f3fc5805970b01bb08151dd5970d-320wiFor more information, see my book Family Child Care Record Keeping Guide.

Tom Copeland, www.tomcopelandblog.com

 



Categories: Food Program and Food Expenses, Record Keeping & Taxes, Starting Your Business

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7 replies

  1. I’m surprised about the amount of money per child. We are on Tier II. We average claiming 7-8 children per day and 10 in the summer. Two rarely eat breakfast here and every now & then someone will miss breakfast or snack they are all full time. Last year our food program total was $2,800 for the year and the year before $3,200.

  2. I was told the food program was too much paperwork by a licensed provider before I was licensed. I decided to do it anyway to see for myself. I don’t have any extra paperwork! I use the Minute Menu program to track everything, not just my meals. It’s quick and easy. The only hassle for me is having to notify the program if we are not here for meal times or if I am closed but it’s worth it.

  3. I love the food program! I agree, with Minute Menu Pro, it’s no big deal.

  4. QUESTION..Do providers have to report this income to SNAP, Can DSS compute the income with your other income?, Can a provider lose their SNAP benefits because the USDA income put them over the eligibility amount?Is there a way to handle this?

  5. According to SNAP eligibility rules, you can use your net income to determine your eligibility. Net income is your gross income minus all business expenses. Your Food Program reimbursements would be included in your gross income, but you can then deduct your food expenses when calculating your net income. So, count the reimbursements as income and use the standard meal allowance rule to claim food expenses.

  6. What I do with my checks is to save them back for my quarterly tax deposits. I am an S-Corp so I must pre-pay. I am spending money on groceries anyway. I regard the food checks as “extra” money so I do not feel as if I am financially sacrificing in order to withhold for taxes. Now that my area has become Tier 1, Most of my tax burden is covered.
    My daily record keeping amounts to maybe 5 minutes per day and my end of month paperwork amounts to less than 15 minutes.

  7. I would be willing to bet providers quit the food program en masse on October 1, 2017, when the new regulations hit. The food they are expecting providers to serve is far more expensive than the modest reimbursement, plus the complete failure of the KidKare software to even resemble a workable tool makes the headache not worth the effort.