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Child Care Business Income & Expenses As in any business, child care providers must keep a record of income and expenses in order to file tax returns at the end of the year. Setting up a record keeping system that is easy to follow on a daily basis helps to eliminate last minute pressures of compiling information at tax time. Proper determination and recording of expenses will prevent unnecessary overpayment of taxes. As a child care provider, you may want to apply for a tax identification number, called an Employer Identification Number (EIN), to be used on all business and tax forms instead of your social security number. This will keep you from having to give your personal Social Security number to clients. This number is issued by the IRS. You do not have to have employees to apply for an EIN. Income Your child care business income should include any money you collect for the care of children. The most common sources of child care income are: • Parent fees - These are the fees that parents pay for the care of their children. • Subsidies - When the government or other agency pays a portion of the fees for child care, you may receive a separate check from the agency that subsidizes care. • Government grants - Providers may receive start up grants or other funds to enhance their program. These funds are usually obtained through your local CCR&R. • CACFP Food Reimbursement Program - Many providers are enrolled in a government subsidized food program, which reimburses providers for a portion of food expenses. Some additional sources of daycare business income may be: • Registration fees - Some providers charge a registration fee for new parents to cover the time and materials it takes to register a new child into their program. • Consumable materials fee - You may choose to charge parents for certain supplies, such as crafts or curriculum, when they register or at intervals during the year. • Field trips - Money you charge parents for the expenses incurred on field trips. • Fund raising activities - There are times when providers use fund raisers to raise money for a particular project, such as enhancements for their outdoor play area. Expenses In the family day care business, you will have both direct and indirect expenses. Direct expenses are those costs incurred strictly for your business. These expenses are a direct tax deduction. Indirect expenses are shared between your business and your family. To determine what portion of your indirect expenses are tax deductible the Time/Space Percentage is used. Some examples of direct child care business expenses are: • Child Care Liability insurance • Child Care Accident insurance • Child care memberships, such as your local CCR&R or CCVillage • Food that you serve to the children • Training - all expenses incurred for professional training, such as tuition, manuals, etc. • Dues, fees, subscriptions for child care purposes • Supplies, such as toys, games, books, software, baby bottles, child proofing devices, etc. • Consumable materials, such as craft supplies, party supplies, diapers, paper products, first aid supplies, cleaning supplies, etc. • Equipment, child furniture, bookcases, bedding, computers for the use of the children, etc. • Curriculum • Field trip expenses • Advertising • Mileage - Keep an accurate record of miles driven directly for business purposes, such as going to trainings, shopping for supplies, field trips, business meetings, conferences, etc. • Professional services, such as bookkeeping or accounting, laundry and cleaning services, legal advice, etc. • Bank fees on business accounts • Office expenses, such as paper, ink cartridges, staples, postal fees, etc. • Employee salaries Some examples of indirect daycare business expenses are: • Mortgage or rent • Property taxes • Homeowner's insurance • Utilities • Phone • Cable television • Household maintenance and repairs • Appliances used in part for your business Documentation In addition to keeping records, be sure to keep any available documentation to verify your income and expenses. Save receipts for parent fees, receipts for purchases, invoices, certificates of training, menus, attendance records for the children, and any other documentation related to income or expenses. CCVillage Membership includes many printable forms to help you organize your child care business records, such as income & expense forms, parent receipts for child care, attendance sheets, record of meals served and much more. | |||||||
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