The Business Side of Receiving Gifts
Will parents of the children in your care give you a Christmas gift this year?
If they do, are there any tax implications?
Here are some examples of how family child care providers handle the possibility that parents will give them a holiday gift:
* Posted a wish list on their bulletin board giving examples of gifts they would like to receive: supplies, toys, gift cards, cleaning products, etc.
* Asked parents to jointly pick out one big gift (jungle gym, nice easel, etc.) from a wish list that they can all contribute towards
* Asked parents who don’t have as much money for donations of their time to help their business
* Asked parents to make donations to other organizations (Toys for Tots, food drives, etc.) instead of gifts
Some child care providers are uncomfortable posting a wish listbecause they don’t want parents to feel obligated to give any type ofgift. You should not do anything that makes you uncomfortable. Oftenchild care providers establish a wish list when there is a history ofparents giving them gifts and the provider wants to take the opportunityto get something practical to help her business and the children.
Tax Consequences
If a parent gives you cash or a gift certificate, such as a Christmas or holiday gift, it's not taxable income. If the parent gives you a Christmas or holiday present such as a book, flowers, or any other item, it's not taxable income. If you spend the cash or gift certificate on something for your business, or use the present (book on child development), you can deduct it under the normal rules of deductions.
If a parent gives you a "bonus" of $50 for the good job you did that year, this is taxable income. If the parent gives you a gift or present as partial payment for the care of their child, this is taxable income.
In other words, if the intent of the parent is to give you a gift or present to celebrate a holiday or birthday, it's not income. If the intent is to reward you for your work, it is income.
How do you handle parents giving you Christmas gifts?
Tom Copeland – www.tomcopelandblog.com
