What Records Should You Keep and For How Long?

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Do you feel yourself buried in paperwork as a family child care provider?

There are enrollment forms, children’s medical records, contracts and policies, permission slips, business receipts, tax forms, insurance policies, licensing forms, and so on.

All of these documents are important, but some are more important than others. Also, how long do you have to keep them?

This is especially a problem for child care providers who have been in the business for many years. After fifteen years in business you might need an entire room in your house to store all of these records!

So, what records should you keep, and what can you get rid of?

The general rule is that you don’t have to keep any records, unless you are required to do so, or doing so will protect you. Therefore, you should save records to:

* Meet state child care requirements
* Protect yourself against a lawsuit
* Defend your tax deductions in an IRS audit

Meet State Child Care Requirements

As with everything else involving family child care, check with your regulator or licensor first. Your state may have rules requiring you to keep certain records for a number of years. It’s probable that they are required to keep more records on you than you are!

You may also want to ask your licensor what records they keep on you and for how long.

Protect Yourself Against a Lawsuit

Did you know that it’s possible a child or parent could sue you years after they have left your program because of an injury suffered by the child while enrolled in your program?

It can happen. I once talked with a provider who had been out of business for ten years when she received a letter from a former child’s lawyer announcing that they were suing her for an injury the child suffered in her program when she was three years old.

In general, children retain the right to sue until reaching the age of 18 and in many states they have additional years. For example, in Minnesota everyone has the right to sue for six years after an injury. Children can sue up to the age 18 plus one year. If a child is injured at the age of 12 years old, the child could sue until she reaches the age 19.

Therefore, you need to keep the following records that can help you if you are sued: enrollment/termination records, injury reports/notes, and insurance policies.

You want to keep enrollment/termination records to show when a child was in your program. This can be important if it can be shown that the child was injured at a time she was not enrolled with you.

Whenever a child is injured in your program, keep an injury log that describes the accident and your actions. Even though you may have reported an injury to your regulator or licensor, it’s in your own best interest to keep your notes on injuries and incidents. Many states will allow children to sue for sexual abuse even after the child reaches the age of majority.

To be sure that you can prove you had business liability insurance and to show the coverage amounts of your policy at the time, save a copy of your yearly business liability policies. If you have other insurance for your business, such as a rider for your car insurance or homeowner’s endorsement policy, you will also need to keep these policies. Store these in a safe deposit box. Don’t rely on the insurance company to have adequate records.

Keep all of the above records until the last child in your program reaches at least age 18 (or longer depending on your state law).

Defend Your Tax Deductions in an IRS Audit

IRS rules require you to keep your tax records for three years after you file them. If you have employees you should keep payroll records for four years. Your state may require you to keep your federal and state tax records for longer than three years.

See my article, “Should I Save My Records for 7 Years?”

Therefore, save all records associated with your tax return: receipts, cancelled checks, credit/debit card statements, record keeping calendars, photographs, and other written records. For items you are depreciating (furniture, appliances, home improvements, swing sets, etc.) save these receipts for as long as you are depreciating the item, plus three years.

In my experience, when child care providers pay too much in taxes it’s because they failed to keep these records.

Although you are not required to provide your daycare parents with a record of their payments, it’s a good idea to do so. See my article, “The Truth About End-of-Year Parent Receipts.”

Clean House!

Now that you know what records to keep and for how long, it’s time to go through all of your records and get rid of what you no longer need. If you buy a shredder to destroy you records, the shredder is tax deductible!

Tom Copeland –  tomcopelandblog.com

A previous version of this article was written by Mari Millard and posted on www.thinksmall.org.

Image credit: deaconswife.com



Categories: Record Keeping, Record Keeping & Taxes, Starting Your Business

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4 replies

  1. We run a drywall company as well as a child care (that is slowly reducing and will close within a year) and a bookkeeping business (that is slowly growing) where I hope to help other child care providers with their bookkeeping needs (as well as other small businesses). I just want to verify that I do not need to keep receipts and other paperwork that are not related to our tax returns: such as grocery store (I do standard meal allowance) our family’s personal receipts (clothes, entertainment, etc). I am scanning and saving my receiots on my computer, and I don’t want to waste time and computer space.scanning items that are not necessary. Thanks!!

  2. You are correct. You never need to save personal receipts, or grocery receipts if you use the standard meal allowance rate. If the food receipt has a non-food business item on it, save this receipt for 3 years. Non-tax related receipts can be thrown away.

  3. What is a termination record? I have been in business for 15 yrs and have all enrollment records for the 15 yrs. I don’t think i have one. Should i keep all entollment forms or just the agreements? and injuries and incident forms? It is a shame we li ve in a time when people are just looking for a way to make money the easy way and most of the time they make up stories!! I have always had good relationship with my clients, but one never knows! I also heard of a former childcare provider being sued by a former client after years for some sort of ‘mental distress’ ..something like that. What are the regulations in the state of Florida on that issue? Do youknow?

    • A termination record would be a copy of any termination you gave the parent or the parent gave you. You don’t need to keep enrollment records longer than four years. Keep all injury and incident forms until the child turns 21. State laws vary as to when children can sue. I don’t know the law in Florida about this.

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