The Child and Adult Care Food Program and Claiming Food Expenses
By Tom Copeland, JD
Family child care providers are always better off financially if they join the Child and Adult Care Food Program. Reimbursements received from the Food Program for children in the care of the provider are taxable income. Reimbursements received from the Food Program for a provider’s own children are not taxable income. Providers should report taxable Food Program reimbursements and food expenses on IRS Form 1040 Schedule C. See the IRS Child Care Provider Audit Technique Guide: https://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Child-Care-Provider-Audit-Technique-Guide#foodexpenseSome tax professionals are telling providers that they cannot deduct food expenses if the food was reimbursed by the Food Program.
This is false. "The [standard meal allowance rates] apply regardless of whether a family child care provider is reimbursed for food costs, in whole or in part, under the CACFP, or under any other program, for a particular meal or snack." See IRS Rev. Pro.c 2003-22: https://www.irs.gov/pub/irs-drop/rp-03-22.pdf.
In addition, the IRS Child Care Provider Audit Technique Guide states, "If the provider receives reimbursement for food costs through the CACFP ... or any other program, the provider can report all the reimbursements under the income section of Part I of the Schedule C and then deduct the food expenses in full, which is the recommended method...."All family child care providers (whether licensed or not) are eligible to use the standard meal allowance rule to claim their business food expenses. No food receipts are necessary when using this method. Providers may also use the actual cost of food, with receipts, to estimate their food deduction.
For further information, see: Will Your Food Deductions Be Lower After Joining the Food Program? - http://tomcopelandblog.com/will-your-food-deductions-be-lower-after-joining-the-food-program
Is the Food Program Worth It? - http://tomcopelandblog.com/is-the-food-program-worth-it.