Should You Be On the Food Program?
Some family child care providers continue to question whether it’s worthwhile or not for them to join or stay on the Food Program.
It’s always financially beneficial for you to be on the Food Program!
Here are some frequently asked questions from providers who question this.
Question: My tax professional says I’m better off not on the Food Program because my taxes are now lower. Is this good advice?
Answer: No! Reimbursements you receive from the Food Program are taxable income. (The only exception to this rule is any reimbursements you receive for your own children are not taxable.)
Some people think that this is a reason not to be on the Food Program. Wrong!
Let’s look at an example: Natasha Provider is not on the Food Program, earns $30,000 from parents and spends $5,000 on food. She can deduct the $5,000. She then joins the Food Program and receives $4,000 in reimbursements from the Food Program. She now reports $34,000 in income and the same $5,000 in food expenses.
You don’t lose your ability to claim the same amount in food expenses just because you join the Food Program!
So, her income is now $4,000 higher, meaning she will pay more in taxes because of this extra income. If she is in a high tax bracket of 32% (12% federal income tax, 15% Social Security tax, and 5% state income tax), she will owe an additional $1,280 in taxes.
Is paying more in taxes a reason to refuse to join or quit the Food Program? No. Natasha has an extra $2,720 in her pocket, after taxes ($4,000 income – $1,280 taxes = $2,720).
So, even though Food Program reimbursements are taxable income, you are still better off financially after joining.
Won’t I lose the ability to claim my food expenses if I join the Food Program?
No! Your food deduction will be the same, whether you are on the Food Program or not. When you join the Food Program, you can deduct the meals and snacks you are reimbursed for as well as the ones you are not reimbursed for.
I was on Tier II and the reimbursements I received from the Food Program did not cover the cost of the food, so it was not worth it.
Wrong! Food Program reimbursements were not designed to cover all of the cost of the food you serve. Some money is always better than no money. If you served one breakfast, one lunch and one snack each day and are on the lower Tier II rate, you would be receiving $595 per child per year. That’s better than a kick in the head. Take the money.
Is it really worth doing all that paperwork for a 21-cent snack (current Tier II rate)?
Yes! A typical provider will earn over $10.04 per hour by claiming this snack. If you served one snack a day and cared for four children, you would receive $218 a year ($.21/day x 5 days a week x 52 weeks a year x 4 children). If it takes you five minutes a day to claim this snack, you will earn $10.04 per hour for your work (5 minutes a day x 5 days a week x 52 weeks = 21.7 hours divided by $218 = $10.04)
Tom Copeland - www.tomcopelandblog.com
Image credit: https://www.countynewscenter.com/8-tips-avoiding-food-fights-your-child/
