Business Basicsfor Family Child Care

Welcome!

Presented by: Janet Peterson B.A. Revised 2012

Contracts & Policies

Contract Time Money Legally binding Signed & dated

Policies Expectations Basic procedures

Marketing

• Describe your business benefits• Features give the basic facts• Benefits describe why a particular feature meets

the needs of children and parents

• Determine fees• What is your time worth?• What do you offer / what is the value?• What are the average rates in your area?

(find out at www.iacommunityaction.org)

Marketing

New clients: Business cards (www.vistaprint.com) CCR&R listing 1st impressions

Existing clients: Regular communication Displays of children’s projects Parent involvement Ongoing professional practices

Main record keeping objectives Record all income from all sources Save receipts of all business expenses, and

expenses related to your home Record attendance and the number of snacks

and meals served Track all the hours you work in your home Record mileage for business trips

Income

Parent fees Food program reimbursements Grants Child care assistance payments

Keep a detailed record of all deposits to your account: income, gifts, prizes, etc.

Gifts & Grants pg. 11-12

Cash gifts or gift certificates from parents are income and must be reported

Gifts of personal items or toys for the program are not reported as income

Grant money received is income – unless it is received because you qualify as a low-income household

Tax information for parents

End of year receipt or statement

IRS Form W-10* Your EIN* (Employer

Identification Number)

* www.irs.gov

Expenses

For every $100 in expenses you can track, you can save $30-$50 in taxes owed

(from Family Child Care Record Keeping Guide 7th edition pg. 16, Redleaf Press)

Expenses - Is it deductible?

Yes! IF it is it “ordinary and necessary” to your business

You must have an “adequate record” of the expense

An item is an expense or not depending on how it’s used; not why it was purchased

Record it according to how much is deductible Personal use only = 0%

Business use only = 100%

Shared between business and home

File it!

Save receipts by categories such as:

ToysHousehold itemsOffice suppliesEquipmentRepairsEtc!

Quick review:

Record all income (also tracking all bank deposits)

Save receipts for all expenses Determine how much of the expense can be

deducted Record amounts in the Calendar Keeper File by category

Deductions for Shared Expenses Determining your

Business Use Percentage

1. Time-Space %2. Actual Use %

Time/Space percentage

Time (page 54-68)

Record all hours you work in your homeThe average is 68.4 hours/week

Space (page 68-74)

Calculate the amount of space you use in your home by room

Rooms must be used “regularly”

Actual use percentage (page 76-77)

Beneficial for calculating expense for costly items that are shared by the child care and the family.

Such as computer, outdoor play structure, dishwasher

Business Use / Total Use = Actual Use Percentage

Actual Use expense examplePlay Structure use: June-July

Business Use: Sally & Billy use M-F 2 hrs per day for 43 days = 86 hours each, or 172 hours

Own child: Jonnie 2 hrs per day x 43 days = 86 hours PLUS 3 hrs per 9 weekends = 27 hours, or 113 hours

Total hours used by all children: 172+113=285

Business Use Percent: 172 / 285 = 60%

Food expense Deductible Food• served to daycare children• served to paid employees

Not Deductible• Food eaten by provider, and

family• Meal leftovers served to your

family

Food expense

Standard meal allowance (pg 36) requires you to track number of meals and snacks served, and the hours children were in care.

Actual cost method requires that you calculate actual cost of snacks and meals that you serve (page 41)

You must use this method for employees and if you provide care outside of your residence

Food Expense

Standard allowance for food expense (2012): Multiply the number of meals/snacks by

Breakfast = $1.24 Lunch and Supper = $2.32 Snack = $ .69

Car expense (page 96-103)

Record mileage for business trips, and use the standard mileage rate ($.555/mile for 2012) to deduct your expense (pg 100).

OR Calculate the actual cost (pg 101-102) by comparing business mileage to personal mileage; and tracking all expenses related to your vehicle

Car Expense

Deduct part of your vehicle property tax and car loan interest

By tracking the total miles your car is used for the year and the business miles; determine how much is business use.

Example: Your van is driven 16,000

for the year. 400 miles were for business. 400 / 16,000 = 25%

Deduct 25% of interest and tax as a business

expense.

Depreciation chapter 7, pg. 125-142 Items that cost under $100 or that lasts less

than 1 year, deduct in the year you purchased it.

Items that cost over $100 and will last a number of years should be depreciated A portion of the cost will be claimed each

year for a number of years Keep an “inventory” of these items with the

cost and year purchased

Depreciation example

Washing machine purchased for $400 Business Use % is 38% 38% x 400 = $152 business expense Recovery period = 7 years $152 / 7 = $21.71 annual deduction for

7 years

Liability Insurance

Not required for registration – but important to have

Inquire to your current insurance agency that you are “just looking into the cost”

Find a new insurance company if yours refuses to cover home child care

For more information, see “Family Child Care Legal and Insurance Guide” by Tom Copeland at www.nafcc.org

Employees (pg. 150-159)

Paid helpers are your employees Pay minimum wage Cannot hire anyone under age 14 who is not your child Hiring your own children who are under age 18 reduces

the amount of federal and state paperwork you will have Check with a tax professional to determine which state

and federal procedures you need to follow.

“Family Child Care Tax Workbook and Organizer” (www.nafcc.org)

Thank you for attending Business Basics for Family Child Care!Janet Peterson, B.A. www.everydaymiraclesfcchome.com

Helpful Resources• www.irs.gov (Internal Revenue Service)

• Employer Identification Number with form SS-4• Publication 587 “Business Use of Your Home”• Paying estimated taxes, payroll taxes

• www.nafcc.org • Publications, articles and on-line training