Ask Civitas: February 2024 Reader Questions Answered!
You have questions, we have answers! Since taking over Tom Copeland’s blog last year, we’ve heard from a lot of you who have questions about the business of family child care. Here’s a roundup of the latest questions we’ve received from all of you, via the Ask the Experts page.
Can’t watch the video? Here’s a transcript:
Question: I'm looking at setting up a childcare in a rented cottage. The cottage will be licensed as an in home childcare and will not be open every day. I will only open when another provider closes, offering substitute care so teachers can still get to work. What type of insurance do I need?
Answer: I mean, it's really unclear from what you've shared, right? And certainly if there's more information you want to share. So it depends on a lot, is this business part of your existing business, or maybe is it something where you're going to have to put an addendum or change into your existing policy? Is it totally separate? This is likely something you're going to want to reach out to your insurance agent about directly. But definitely, especially for the model you're talking about, you're going to want insurance.
Question: The next two questions go together. My business partner and I are interested in opening up a daycare facility. We have a property in mind and are wondering if we should set up the business as an LLC or a partnership. We plan to get a regular paycheck, and would like to keep our personal taxes separate from the business.
Question: My mother and I are teaming up to run a home daycare center. Previously, my mother ran the business as a sole proprietor out of her home that she rented. We now have purchased a home together and wish to form a partnership to run our home daycare. This home will be under both of our names. Should we form an LLC partnership or should we just become a partnership?
Answer: Okay, so there's a lot of questions here. So first of all, no matter what business structure you have, you can always pay yourself regularly. You want to monitor your budget, you want to monitor your cash flow, but keep those things in mind, right? If you have the cashflow, if you have the budget, you should pay yourself regularly, whatever company you are, right? In terms of what type of business you should be, and certainly we could share a guide that we have, it’s a free guide, but typically what we talk about is if you're in the first two years or the last two years of your business and you're already a sole proprietor, probably not a bad way to go, or a partnership. They're easy to form, easy to maintain in those first two years. Maybe you don't want to stay with it, maybe you do. In those last two years, you're getting close to retirement anyway so maybe just go out. See: Should I Incorporate my Child Care Business?
It gets a little trickier of course when you're in that middle. And so some of the things we look at are then what's your net profit? Very often if you're pulling in a profit of 15,000 or more, then it's something that you want to consider potentially being an S corporation. Regardless with those options, an LLC can be very helpful. An LLC could provide you with just a little extra liability protection, not the same as insurance. You still want your insurance per the last question we had, but it gives you a little bit more protection legally. So even if you're past those two years and you're in year three and you say, "Gosh, I'm not hitting 15,000, Gary, maybe I should stay as a sole proprietor," I would say become a single member LLC, what's often called a sole proprietor LLC. So you still have that legal protection. You're a corporation, but you're treated as a sole proprietor, so it makes it a little easier.
A couple of other thoughts, and I see this a lot. If you are a partner and there's just two of you, or if you're a sole proprietor, you can run into an estate issue. And we're seeing this more and more where you'll have particularly mothers and daughters, and I'm not trying to be sexist or anything, that's typically what we see. Sometimes we'll see siblings, usually sisters who will have a business together, even though it's a home-based business. So it'll be one of their homes, or mom will have it and the daughter will be a partner in the business and will also work there. Keep in mind, if you're a two member partnership or you're a sole proprietor, when the owner passes, so does the business. That can run you into an estate issue. And I actually had this, gosh, about a year ago at a conference, I was talking with a woman who very tragically, her mother died suddenly and was in this situation and she said, "Well, the intention was that I'd always take over the business. How do I do that?" And I'm like, "You can't. As a sole proprietorship, the business died with her. There's no corporation." And that put her essentially at the will of her uncle who was the executor of the estate. I don't want to make it sound like he was a bad guy, right? It wasn't like he was saying, "And I will not let you," but it just created a difficult situation that she wasn't anticipating at a very awful time. And so one of the things you should think about is if you do want to give your business to a sibling, a daughter, a son, another family member, think about the corporate structure. It might save your loved one sometime when you pass some agony if you will, because technically a sole proprietorship or a dual member partnership would have to be entirely dissolved, even if you survive them. So make sure that you think about that.
The last thing I would say is that there's a myth around if you have a corporation that you cannot deduct your home, that's not true and we could share a guide on this. If you're an S corporation or C corporation or an LLC, treated as either of those, you can do your home deduction through what's called an accountable plan. We have a template free of charge, it's a one-page thing. Essentially you're reimbursing yourself for the use of your home. Now, you have to follow the same exact rules that the IRS has. So it's not like Erica could sit there and say, "I'm going to reimburse myself for three quarters of all my home costs because I want to," that's not allowed. She still has to do it per the IRS guidelines, but you can still do it. See: What is the Time/Space Calculation?
Question: I'm in the process of hiring for the first time. Is there any contract template I can benefit from to give this person that I want to hire?
Answer: Absolutely. We do have a guide on making an offer, and we can put that in the comments.
See: Extending an Offer
Question: Next question. Hello, I'm a director at a daycare center. We are dealing with so many call-outs. As you know, we are a ratio-based business. I just did a count and found out that one person called out 18 times in four months. This does not include the time she already took off. We just need some help in writing up a policy. If you have any ideas, that would be great. We just don't know what a fair policy would be. So I can take that one-
Answer: So absolutely you need a written policy. We have a guide for that that we can also add to these notes. See: Employee Handbook. Secondly, the amount really depends on your business and what your business can handle, what your needs are, the behavior of the other staff members, and then the company culture as well. I would say that that's excessive, 18 times in four months for sure. And absolutely you're ratio driven, you just want to make sure you're consistent with whatever policy you put in place that you put it in place for everyone. That good, Gary?
That's excellent. And by the way, just real quick, why don't you tell them about your background? I know we've had questions where people have said, "Has anyone here actually worked in early childhood?" And you have and many of us have.
Erica Knowles: I did. I was a director for 18 years. My husband is about to retire from the military. So I was a director in multiple states from nonprofit in a church to massive corporation to privately owned and franchise. But yeah, I was a director for 18 years all over. And now I'm here helping, still helping and I love it.
Gary Romano: Which is great, and we love having you here. And I think just a testament to it. I think about, I want to say 40% of the team now either came from center or family care backgrounds, and so just want to make sure that people know this is not always us saying well, in other business areas, but there's a lot of firsthand experience. Sorry, I sidetracked us.
Question: All right, next question is: We are a childcare center who does not participate in the food program since our families do not meet the qualifications. Are we able to deduct meals on our taxes at the current reimbursement rate? And then there's another question that goes along with that, which is I use the standard meal allowance when doing my record keeping and taxes. Do I keep track of the money I spend on food as an expense? For example, when I have a pizza party, I use my business account to buy pizza and drinks. Do I log this as an expense?
Answer: So a couple of questions here, right? So one is if you are not using the CACFP, so first of all, as Tom did, and you all know and I won't bore you with everything, we're big fans of the CACFP. We see it as being not only a great program for children and families, but as a childcare provider, it is financially beneficial. I know there's paperwork involved, et cetera, it can be a pain. But by and large what we see is that providers make more money on it, you're not squeezing them and feeding them dog food or something. I know that.
The reason is that purposely the federal government puts more money into the program than they expect you to spend because they're paying for your administrative time. And so it can be a great program. If you are not in it and you are a family care provider, family care providers only, you can use the standard tier one meal rates, and you can use those on your taxes to do the deductions. So that way you don't necessarily have to keep every single record of everything you purchased in terms of food, but instead, you have to keep a record of who the kids were and the meals they had. So it does make it a lot easier.
Do note, part of what's tricky is, and I know this happens every year, people go, "Which rates am I supposed to use? Because they change midyear." The rates are set on a K-12 academic year. So they start in August, and then end in July. Whatever rates are in force on January 1 of the given tax year is what you use. So in other words, the '22-'23 rates were used January 1st, 2023 so those will be the ones that you'd use on your 2023 taxes. So just know that. In terms of the pizza party, it really does depend on the nature of it. I'm assuming here that it's replacing a meal for you. In that case, that would be valid. See: Claiming Meals/Snacks That Are Reimbursed by the Food Program
Question: All right, so next question. We are thinking about getting a new countertop. This is considered a repair, correct? Also, is a new dishwasher on the 30% energy saver tax credit? I assume a stove is not. What about a gas water heater?
Answer: So great question. So on the countertop, maybe. A new countertop depends a lot in terms of the value it's adding and the functionality. So the general rule is if it's similar materials and function, then it's considered to be a repair, you could deduct it. If it isn't, then it's something that you may have to depreciate. So for example, let's say you're replacing the wonderful formica countertops that I grew up with and you're using some other kind of similar product, that's fine. That's likely a repair. If let's say you come in and you say, "I'm taking out the formica countertops and I'm getting imported Italian marble from this one mountain, that's the only place we could source it and it's going to cost a mint." No. You're clearly adding to the value and I know there's a lot of gradations in between there. So this is more art than science.
But what I would think about is does it have the similar function? Does it have similar materials? If so, then likely they would be considered a repair, and that's my guess here, but I always like to make sure we're good on that. In terms of the energy saver credit, it does depend on a number of factors, and even it could depend locally. I mean, one of the things I found out recently when we were looking at Massachusetts at replacing some items in our home that it can also even depend on who you have as your utility company because here in Massachusetts, some of the utility companies kick in additional things and have additional criteria. So do know that your credits, and I know the energy saver credit, you're probably talking about the federal one, but as it trickles down to state and localities, there can be differences. The other thing I would remember is the energy saver credit is not for your business. So if you're doing the credit, the business use portion does not get assessed, that credit. It's considered, it's one for personal individual use.
Question: All right, the next two questions go together. The first one is we have received $285,000 from the accelerator grant this year, which will be used for a new building that we will build next year. What can I do to help my income tax? We will be receiving over $815,000 next year for the building as well. This is a major problem.
Question: The next question is we got a minor renovation grant for our family childcare for 65,000 and used it all for building an outdoor classroom, which is 100% for business. It is both income and expense. How do we report the grant as income, and the construction costs as an expense? Do we report both in one year? If we report the income in one year and the construction as depreciation for let's say 10 years, we end up paying so much tax and it makes us in a much higher tax bracket. How do we do that?
Answer: This is great. So first is the grant considered income? It is. When in doubt, the rule of thumb is that it is income. I know there were some very specific state exceptions. State only with some of the federal funds, but there are few and far between. Usually they were for very specific programs and it's so rare, I can't even name one off the top of my head. So for almost anyone, assume that that grant is taxable income. You're likely going to get a 1099 of some kind. Usually a 1099-NEC. For some reason, some states send a 1099-G, which is technically for unemployment, but whatever. Let's put that aside. So even if you don't get the 1099 though, remember you are still legally obligated to report it. We've had that question come up before, but I never got a 1099. Do I have to report it? You do.
So how do you address a grant that's provided in one year, and the construction happens in another? Most childcare providers, and I can only think of one or two I've met and they were larger centers, use the cash method of accounting. So what that means is when the money comes in, you record it. It's similar to the way you run your checking account, right? You don't start writing checks on your account until that paycheck is in and deposited. You count the money as leaves, so as soon as that money leaves your checking account, well, it's no longer yours. So when you're using that cash method. In that case, unfortunately, the grant received in 2023 would count as income in 2023 and the expense of 2024.
We've had a number of times where we've advised states, be very careful on when you distribute that money end of the year just because of this reason. We've seen again, again, in fact last year I had one provider who tragically got per funds from the state, I think it was a construction program. She got it on December 30, and there's no way she can spend it, but it is taxable income so that was 2022 income, but there was no way she could have spent it. Unfortunately, that's the way it works.
Are 100% of the outdoor classroom expenses deductible? Maybe. You want to be certainly careful in documenting it. You want to know how much those the costs are. We can share a depreciation guide, again, free of charge. There's a table there that can help you, but that could be a complex project so it does really depend on the various costs, how much they are, et cetera, and also what the business use is. And you may turn around and say, "Well, there's no kids in our home who will use it. You'd want to document that and be very careful about it." So definitely check the guide for that. See: Depreciation
We also get this question, and I know that this is implicit in what's happening, which is what happens, or it's explicit, what happens if the grant funds push me into a higher tax bracket? Typically, and I had a whole chart ready and I apparently forgot to pull it up. So typically what happens is even if you move up, because we have a graduated system, so what it means is as you go up a tax bracket, it only counts on the money you make after that bracket. So in other words, it doesn't go back to every dollar you would earn before it. Because of that, it's only a percentage on that amount of money. So let's say you're in the highest tax bracket in the land, it pushes you in the highest one, and you have $100,000. I'm keeping the numbers easy for me. You're in the 37% bracket. Well, you're still pocketing 63% of that $63,000 so it's not bad. So I would be very careful about how it might push you into a bracket.
And remember, it's only the taxable income that we're worried about. So if you spend it all, and you have expenses to match it, it won't affect your tax bracket at all, because the taxes are determined on your taxable income. Last thing I'm going to say is a little bit of a pitch that we've been talking about internally. I know some of you have asked about what's happening in Congress with the tax bill that's in there that would be retroactive. This is something when we talk about depreciation and that mismatch between what you're able to deduct and how much you paid out in a given year, the bonus depreciation has been a big deal for folks. There is an opportunity if the Senate does act for this to be retroactive through 2023 that you'd have 100% bonus depreciation. So if you're so moved, you may want to call your senator. I think this is a big opportunity as well as the child tax credit for folks in the childcare industry. That's my commercial. See: How Does Relief Funding Affect Your Taxes? And also, Tax Credits for Child Care Business
Question: All right, so next question is, we've always paid annual taxes to the IRS. I'm sorry, we've always paid annual taxes. The IRS is suddenly asking for it to be paid quarterly. Last year our income was higher due to grants. What should we do?
Answer: You should pay your quarterly estimated taxes. And the last ones were due January 16th, so we've passed that date for 2023. Start planning it, put the money aside. A good rule of thumb is anywhere 20, 25% of what you take in, you should set aside for estimated taxes. We say 20 to 25%, I usually count that 5% as being your state taxes. And this is not being partisan, I'm just saying point of fact, if you're in a high tax state like I am, you might want to do 25%, 20 goes to the Fed, 5% goes to the Commonwealth of Massachusetts. If you're in a lower tax state like Erica is, you might say if I'm in Virginia, maybe I'm only going to just do a straight 20% and I'm not going to worry about the state tax too much. But yes, you should be paying quarterly taxes. And my guess is because you had grant money and you made enough where the federal government is saying we want ours throughout the year.
Question: All right, so I had new concrete put in the front and the backyard. The front concrete was cracked and uneven and parents drive up to pick up and drop off their children. As for the back part, it's the backyard and it's exclusively for daycare use for the children to play. The concrete was uneven and cracking, which caused the kids to trip and fall. I live in California, my husband and I own our property. Would I be able to deduct some of these expenses? I was told no because it stays with the property, which adds value to it.
Answer: That's very odd, I haven't heard that before. I mean, I've heard a lot of different things and misinformation. So in this case, you would be able to deduct the amount based on your time space. (See: What is the Time/Space Calculation?) You're also going to want to think about depreciation, depending on your circumstances. So I just say that. This is also an assumption, I'm reading it now, and I do read these ahead of time, it's not like I'm winging it. I also wonder, I'm assuming it is your property that you own. If it's a rented property, that's a totally different thing. But assuming it's your property that you own, yes, you would do your time/space, and then based on the amount that's left over, you may need to depreciate that.
Question: All right, so another question. Speaking of time/space, I'm calculating my time/space percentage. If I was open for a full year, do we go off of how many days we were in business that year? Or is it still, how many days are in that year total? For example, I've only been open for 11 weeks.
Answer: Gotcha. So yeah, it does get a little complicated, right? So you want to go off of how many weeks you were open. Assuming you started it or ended in that tax year. So if I, let's say retired in August, at the end of August, I would only count the time through August. The other thing is a seasonal business. And I do know, I know it's not extraordinarily common, but I know a number of FCCs where especially those that are right near schools, particularly elementary schools where they're serving the staff and faculty, they'll close over the summers, because a lot of the parents will be home with the kids and choose not to have care.
And if you're seasonal by the way, you can do that. If you're just entirely closed over the summer and you say we basically work an academic year, you can exclude that time so know that's another option for it. So again, if you're a year round business though, and let's say you're only really open 46 weeks a year because you're taking those other six weeks off throughout the year for vacations and stuff, but you're normally operating year round, you would still use that full amount. So it isn't just only when I'm open, it's in those circumstances when you're closing, when you're opening, or you're planned to be closed over the summer for a period of time because you're seasonal.
Question: What can I do if the HOA is demanding I close my registered in-home childcare business?
Answer: Unfortunately, you have to seek legal counsel for that one. I know we have a few of those. That's not one because it depends on a whole bunch of factors. You're better off seeing an attorney in your area who specializes in it.
Question: All right, so this one is long. All right, so it says, we have a family that enrolled in our preschool in August of '23. In our contract, we informed them that the academic year tuition payment is divided into 10 monthly payments, September through June. Parent paid September through December, invoice for January sent to the parent on 12/12. Parent emailed on 12/27 at 9:40 PM to withdraw student effective that date. We have in our contract a two-week written notice is required for the client to terminate this contract. Payment for the notice period is due whether the child is there or not. Can we legally ask for January's full tuition month of payment since they notified us of their withdrawal, they wanted to withdraw their student three business days before the payment date? Or do we have to accept their two weeks of payment? Can we legally ask for tuition February through June? That's a whole lot.
Answer: I feel so bad because reading through the whole thing, and all I'm going to say is unfortunately, again, this is a case where you have to seek legal advice. Likely from the way you're describing it, you would have to end up in small claims court, and that may not be worth it, depending of course on the amounts and stuff. But from what you're saying, it sounds the effort might be more worth than the juice. So I say that and I know that I don't say that lightly, I know it's lost money. But like I said, I would seek legal advice on that one.
Question: Okay. All right. So the next two questions go together. If I generate a net operating loss on paper for my first year in business, it says I cannot depreciate the home during that year. Instead, it carries over to the next year until a profitable year occurs, does that sound right?
And then the next question is Indiana home inventory as you describe in your books, I was not sure if I should depreciate all my appliances such as a stove, refrigerator and et cetera with the method or if it goes with the home itself. Also, not sure if the mechanical systems such as AV and furnace that are connected to the duct work go for the 39 years with the home, or seven years with my personal property.
Answer: Wow, so many good questions and those are really two separate ones so I can get these right. One generating an net operating loss on paper for your first year. So if you do have a loss in that first year, yes, it would carry over into the next year. Again, it depends on how big the loss is, and I'm assuming by saying you had a net operating, you did have revenue against it. So it depends on the level of loss. If it is that you have a loss because you had no income because you were starting up your business, you would report that on the following tax year. So if Erica started her business in 2023 and said, "Well, I had a loss because I put out $10,000, but I had no income yet, not until 2024," had an email like this the other day, in that case, she would report that $10,000 in 2024 against her original revenue. Hope that makes sense.
Other question, depending, the depreciation piece, and again, we'll put that in that nice little flow chart in the comments, trace it down because it depends on what your time/space is, how much that is left depends on what you're going to have to depreciate. But yes, typically if you're dealing with any sort of fridge, stove, HVAC, anything else furnace, it is not depreciated at the same length as your home. So it doesn't go for the 39 years. They each have their own schedule. But take a look at that one, it'll help guide you through it. See: Depreciation
Question: All right, so I have a childcare center with a couple of employees. I offer one an 80% tuition discount for her child. I know I must count 60% of that as income for her. Where would I put that on her W-2? Is it wages only? Social Security wages, Medicare wages, or does it go in a benefits box?
Answer: So if you have an 80% tuition discount, it would be considered a fringe benefit, yes, it would. And that means it's going to be subject to income tax withholding, Social Security tax, Medicare. It's going to typically be put in box one, wages tips, and other compensation. So just be aware of that, that once you get past, and the person has it right, once you get past that 20%, that's where the federal government starts saying, "Well, is this really compensation in a different form?" So that was easy.
Question: Yep. Next question is very long, I'm going to pick pieces out of it. So I'm a family childcare provider, I have two well-trained dogs. They've taken classes to become therapy dogs, part of their dog behavior training. I have a child in care who is physically aggressive for one of those dogs. I let the mother know that the child hits the dog, and he will not be welcome back if it continues. I have tried to work with this child. Since the child has returned from winter break, my dog's stress level has increased. What can this person do? Can she give this family a two-week notice or should she?
Answer: Yeah, I mean it's really tough because, and I think the larger lesson here is making sure you have things documented. And so making sure that there's a clear understanding of the termination policies and what could happen, that's really important. In this case, that's really the big question is what was the policy that was the one that you have in place? You have in place with that family, and that they signed and acknowledged. So I would defer to that policy, even in an extreme case like this. We can also put in there some additional reference policies for you. But I would go back to that policy and again, crucial reason to have a policy and one that's either signed or another way acknowledged by parents. See Child Care Parent Contract Pt. 1 & Child Care Parent Contract Pt. 2
Question: Absolutely. Next question. I'm a certified family childcare provider in Kentucky. I have a few questions about the money used for the ARPA grant. Can I claim food if I'm enrolled in the food program? And do you show receipts for that since you are not expected to keep them for the food program? Can I use the money for a new lawnmower and lawn tools bought to keep in my yard? We also installed a new furnace and backup, a hot water heater for those allowable.
Answer: So few different questions here. So if you're using ARPA money, in terms of claiming the food and the program, so I'm assuming what you're saying is can I somehow use an ARPA grant against the food program? No. That's actually something that's not typically allowed. But if you're enrolled in the food program, again, as we talked about earlier, you can deduct the meals against it. And in that case, you would not have to keep the receipts, but you would have to keep some sort of log that you have that would say who was in this day, and how many meals and snacks did they get. For reference, see: faqamericanrescueplansustabilitypayments.pdf (ky.gov)
In terms of could you use the ARPA money for new lawnmower, lawn tools, upkeep of the yard, install new furnace so what I would say is unfortunately, it depends a little bit on the state under the original federal statute, likely those things would be allowable. But here's the thing. The federal government said with the ARPA funds, you can't go wider than them in terms of what's allowed, but you can go narrower, so I would look closely at what you've agreed to in the grant in terms of allowable. The other thing I would remember is the funds are for business use. So with that lawnmower, with the furnace, what's the business use portion of it? So in other words, you can't just say lawnmower costs me $1,000, that's what I'm going to take as a business expense. But if it's also your personal lawn, which it is, you're going to have to come up with some way to split that cost, and the only amount that can go on the grant is a business expense.
Question: Next question. As a licensed home daycare provider, can I use my clothing, shoes, purchases, et cetera as a business expense?
Answer: So typically no, right? And we get this question a lot. The way the IRS defines it is you can deduct uniforms, but a uniform would have to have things like the logo on it. Really what they're looking for and they actually say this is it's not something that you would wear in your personal life so it's got to be a rather unpleasant looking thing typically.
I mean a lot of us, we might go around a polo shirt with the company logo, but I own the company and I don't usually wear stuff with the logo on it when I'm out of work. So what I would say is if it is clothing in particular that is branded, that is uniform, everyone has to wear it who's an employee. Those things, yes. If it's your personal, even if it's a blouse, you just say, "I'm only going to wear it to work." Doesn't count. With shoes, similar thing as you'd want to look for something like if you were in a different industry, a steel-toed boot or something that was an OSHA requirement. Even with uniforms, it would be very hard to pass muster with a shoe, for example.
Question: I'm an S corp family childcare, work on my own. How is the appropriate way to pay myself? It is very hard to find an accountant who can help me.
Answer: So with an S corporation, it's an interesting piece because you're both the owner, but you have to also be a W-2 employee. So rule number one is you have to have some W-2 employee wages, right? Now what the IRS says is you need to pay yourself a reasonable wage. So what's a reasonable wage? That's all the IRS tells us. They're like, "We'll know it if we see it." And by the way, and I had this confirmed from a good friend of ours in Wisconsin, the IRS is looking at reasonable wages. They always have, they've always seen it as being, if you are audited and you're an S corp or an LLC is an S corp, they're going to ask you about your reasonable wage. So what is a reasonable wage? You'll sometimes hear people say, "35, 40% rule where they'll say half the money should go is W-2 income, half of it should not."
We actually don't recommend that. What we recommend is look at comparable positions in your area, and I'm using round numbers. Please, no one feel bad if you're not pulling in $100,000 from your childcare business, just using simple round numbers. If let's say you're making $100,000 and you look around and remember, it doesn't necessarily have to be the owner of a childcare business. It could be a director's position, or you might say, really, I'm more comparable to a line teacher. Maybe you say in our area is 35,000, then maybe you can justify that. 35,000 would be pretty low, I would not try to push it. I'd say that might be a place where you take a hit, but let's say it's 40,000 or 45,000. Document it, print those out, keep them in a file.
We have an S corp, I have done this for myself. This is not something where I just tell you to do it and I ignore it. I have a file that has comparable wages for my position. So that's step one. The remainder of that money can then be paid as profit. So if let's say again, we're saying it's $100,000, reasonable salary is 45,000, then 55,000 could be paid to you as profit. The advantage is profit bypasses the 15.3% of payroll taxes. So that's the savings there for you that can add up. So just know that that's how you do it generally, we also have a guide on that that we can share as well. See: A Guide for Sole Proprietors
Question: All right. So the next one is my 2-year-old began attending a home daycare. A contract was signed from only my wife, I did not sign the contract. The child is now being terminated. The daycare owner would like to terminate care because they're saying that his son is no longer allowed to come due to biting, throwing toys, hitting kids. I do not feel comfortable sending my child back there. They did say that he could come for the rest of the month. Does he have to pay whether or not he goes back the rest of the month?
Answer: So again, I would look at your agreements that you signed when you enrolled, the parent handbook if there is one, and it would depend greatly. That’s your starting point on it is understanding what have you agreed to and the terms you've agreed to.
Question: Yes. All right. So the next question is just someone looking for a transportation waiver form.
Answer: Yeah, and we could give an example of that in the chat.
Creating a transportation waiver involves clearly outlining the terms and conditions under which individuals agree to use transportation services while releasing the provider from certain liabilities. Below is a generic template for a transportation waiver. Please note that you should consult with a legal professional to ensure that it complies with local laws and adequately addresses your specific situation.
**TRANSPORTATION WAIVER AND RELEASE AGREEMENT**
I, the undersigned, understand and agree that by utilizing the transportation services provided by [Your Company/Organization Name], I voluntarily and willingly agree to the terms and conditions outlined in this Transportation Waiver and Release Agreement ("Agreement").
**1. Assumption of Risk:**
I acknowledge and understand that the use of transportation services involves inherent risks, including but not limited to accidents, injuries, and property damage. I voluntarily assume all such risks associated with the transportation services provided by [Your Company/Organization Name].
**2. Release of Liability:**
In consideration of being allowed to use the transportation services, I hereby release, waive, discharge, and covenant not to sue [Your Company/Organization Name], its officers, employees, agents, and representatives from any and all liability, claims, demands, actions, or causes of action arising out of or related to any loss, damage, or injury, including death, that may be sustained by me or to any property belonging to me while participating in the transportation services.
**3. Indemnification:**
I agree to indemnify and hold harmless [Your Company/Organization Name] from any loss, liability, damage, or costs, including court costs and attorney's fees, that may be incurred due to my use of the transportation services.
**4. Compliance with Laws:**
I agree to comply with all applicable laws, rules, and regulations while using the transportation services provided by [Your Company/Organization Name].
**5. Emergency Medical Treatment:**
In the event of an emergency, I authorize [Your Company/Organization Name] to seek emergency medical treatment on my behalf.
**6. Governing Law:**
This Agreement shall be governed by and construed in accordance with the laws of [Your State].
**7. Acknowledgment of Understanding:**
I have read this Transportation Waiver and Release Agreement, fully understand its terms, and acknowledge that I am voluntarily giving up substantial legal rights by signing it. I agree to this Agreement freely and without inducement or assurance of any nature.
**Participant's Name:** _______________________
Question: Perfect. My daughter and I are starting a group family childcare business together. I may retire after five plus years, so she will take over. Should we both be named on the license? How does that work for taxes and claiming this and that?
Answer: That's a great question, we've talked a little bit about this earlier. In terms of the license, it depends on your state, I'm not going to guess at that. In terms of taxes and how you claim this and that, it depends on your business structure. I would think about if you are again, going to be a partnership and it's just the two of you that may not have the lasting effect that you want to have it with your daughter. So it may be something where you pay the additional money and effort to be an S corporation or an LLC as an S corporation, because when you do pass away, and I'm not trying to be morbid, it happens to all of us, that there's no estate issues. Or if you suddenly do, or gosh forbid, your daughter suddenly does, there's no estate issues there. And that, again, depending on the structure of that, would determine how you're making deductions and how profits are being distributed as well.
Question: All right, so I'm a little jealous of the next person. She says, "Hi, I'm looking into a healthcare conference in Australia. I have attended other conferences out of the country that Tom was a part of, but I think I remember something someone said about it needing to be in North America to be considered a business trip." Do you know the answer to that?
Answer: Travel can be international. I can tell you my wife does it all the time for business and it's deductible for company. So yes, I mean, you want to make sure it has a solid business purpose, you don't want to just have it be something that is more personal than not. If you look in some of the documents that we have around travel, you can get the specs on how, if there is personal parts of it, how you do it, because it does get a little bit complicated.
Thank you all so much for all of your questions! We will be back next month with more answers for you, so keep sending your questions to us!
