If you are a family child care provider who is just getting started you have a lot to handle: meeting licensing rules, designing a curriculum, promoting your program to parents, establishing a contract, and so on. Keeping good records is probably not high on your to-do list.
Many providers hate the idea of record keeping. They would much rather spend time with children. The bad news is that there are so many record keeping and tax rules that it can be overwhelming if you try to master them all at once.
The good news is that you don’t have to master everything at once. Instead, focus on these three record keeping tasks. Performing these tasks will make the biggest impact on reducing your taxes.
One: Save receipts for all expenses associated with your home
You are entitled to deduct at least a portion of all expenses associated with maintaining, cleaning or repairing your home. This includes, toilet paper, light bulbs, welcome mat, dishwasher detergent, furnace repair, lawn mower, and so on. My book Family Child Care Record Keeping Guide lists over 1,000 allowable business deductions that can amount to thousands of dollars. If you’re not sure if the item you bought is deductible in your business, save it anyway. You can sort out that out at the end of the year. The message here is: save receipts for everything!
Two: Keep a record of all the meals and snacks served to the children in your care
Most providers use the standard meal allowance rate in claiming their business food expenses. The rate for 2015 is $1.31 breakfast, $2.47 lunch/supper, and $.73 snack. You do not need to save any food receipts! Instead, keep a daily record of all the meals and snacks you serve. If you are on the Food Program save your monthly claim form. But it’s critical to keep a record for those meals and snacks that you serve for which you are not reimbursed by the Food Program. Forgetting to record one afternoon snack a day for one child for a year will cost you $189 in a food deduction!
Three: Track all the hours you use your home for business use
Most providers do a fairly good job of tracking the hours children are present in their home. Your records should show the moment the first child arrived and the last child left each day. If parent picks up a child later or arrives on time but stays longer to talk to you, keep a record of the actual time the parent and child left.
Next, keep at least two months of careful records showing how much time you spent in your home on business activities after the children left: cleaning, parent interviews, activity preparation, meal preparation, time on the Internet (reading this blog!), parent phone calls, and so on. Use the average of these two months for the rest of the year.
Do these three tasks and you are on your way towards saving lots of money on your taxes. You may even find that record keeping can be fun!
Note to experienced providers: These three tasks remain the most important ones for you to follow each year regardless of how long you’ve been in business!
Tom Copeland – www.tomcopelandblog.com
Image credit: mommywifeandfriend.com
For more information on record keeping, see my book Family Child Care Record Keeping Guide.