Are There Personal Records You Should Keep?

Most family child care providers are well aware of the need to keep business records.

Such records include receipts for items used in your business, children's attendance records, records of the hours worked in your home, records of the meals and snacks served to the daycare children, mileage records, and so on.

You might say, "Isn't this enough? Don't tell me I need to keep more records!"

I wish I could say that keeping your business records is all you need to do. But it isn't.

Why you need to keep personal records

As a family child care provider it can sometimes be difficult to sort out the business from the personal:

* When you go to a grocery store or Walmart or Target - is this a business or personal trip?

* When you buy cleaning supplies for your home - are these business or personal expenses?

* When you clean your home - is this a business or personal activity?

This becomes important if you are audited by the IRS.

Let's say you are being audited and the IRS agent asks for your mileage records. You show him your records for your business trips (receipts, cancelled checks, credit/debit card statements, calendar notations, etc). They include 40 trips to the ABC Grocery Store, 15 trips to Walmart and 30 trips to Target.

The IRS agent asks, "I'm not going to allow you to claim every trip you made to these destinations, because some of them had to be for personal purposes. Did you make other trips to these destinations that you didn't claim as a business trip?"

You say, "Yes, I did make other trips that I didn't claim." The IRS agent responds, "Prove it."

If you can't prove you made some personal trips to these destinations, the IRS is likely to disallow some of your business trips.

Therefore, you need to save records of personal trips you made in your car. Such records can include: receipts for item that you didn't deduct, debit/credit care statements, or cancelled checks.

The same goes for the purchase of cleaning supplies and the tracking of your cleaning hours.

Some providers deduct half the cost of cleaning supplies (detergent, paper towels, toilet paper, etc.), but only save every other receipt. This will be a problem in an audit because the IRS won't allow you to deduct 100% of cleaning supply receipts, unless you can show personal receipts.

If your records show you spent 5 hours a week cleaning your home for your business, the IRS won't accept all of these hours unless you can show you spent some personal hours cleaning as well.

If you use the KidKare online software program, you don't need to enter your mileage for personal trips, but you should keep records as described above. You don't need to enter expenses for personal items, but you should keep these receipts. You should enter personal cleaning hours at the same time you enter business cleaning hours.

Conclusion

Save all your receipts, business and personal!

In my opinion, I think it's easier to do this than to try to determine which purchase is business and which one is personal.

Here's an example: If you bought a birthday toy for your own child, you probably were not thinking this was a business expense. But, if your child lets the daycare children play with the toy, you can deduct part of the cost!

I know I'm asking you to keep more records, but it's worth it! At the end of the year you might realize you can deduct more than you first thought.

And, in the even of an IRS audit, you will have everything you need to defend yourself.

Tom Copeland - www.tomcopelandblog.com

Image credit: https://www.vox.com/the-goods/2018/10/10/17956950/why-are-cvs-pharmacy-receipts-so-long

For more on record keeping, see my book Family Child Care Record Keeping Guide.