Accidents and child care

Martina Rocha passed us this information:

You know the great responsibility that we have tin our child care work. A few seconds of carelessness can cost us a lot of problems and we can put ourselves in serious situations.

I say this because the last week, at home of a provider who lives the south of Chicago, it was a very serious accident due to a cell, yes, a cell phone!

When you are working or your assistant, or your son, or daughter, husband, or wife, whoever is working in the area of childcare, he is responsible for what he is doing: SHOULD NOT BE SEND OR READ TEXT MESSAGES OR CHECK YOUR INTERNET IN YOUR CELL IN WORKING HOURS.

It's like if you're working in an office, or a factory, or building, or if you are driving distracted an accident can happen or be involved in a situation of risk or danger.

This is what happened the last week in South Chicago: a provider, by being sending and checking her text messages when she was taking care of the children, she did not realize that a big boy flopped over a very young child and breath was leaving, the little boy could not stand to save on the situation, when she realized that the child was purple and he was not breathing. A few seconds more, and he would have died!

It only need seconds for an accident to happen, so I wanted to share with you this information

LET THE USE OF PHONES WHEN WE ARE WORKING; IN CASES OF EMERGENCY ONLY

Martina Roche Ph # 847 630-1273
Founder / President Together for Childhood Network / Juntos por la niñez

As stated by Martina, if you are working, you are working. You can’t use your phone, you can’t watch Telenovelas, talk by phone with friends ... There are people who think that take care of children is just have them at home and say "NO!" every time they do something dangerous or disturbed. That seems easy, but it is not. The children require constant attention, they get bored and create problems, and the person who wants to see the soap has to constantly interrupt, she feel frustrated.

30 years ago my wife and I were in Spain a child care center in which we took care of 62 children, and we had no television, but never had more than 50 at a time. We were only 2 and a person who came in the morning to change 6-8 babies and give them bottles. My wife was busy making food, they need help going to the bathroom, help me to distribute material to change activities, and when he had to intervene because a child was creating problems. How could we do?: Having clear rules of what children could and could not do, and above all always applying my golden rule: "All children must be populated doing something they enjoy doing." They were always in a structured activity, alternating activities shaky energy spent restful activities, and when a third of the children began to not be interested in the activity, I knew it was time to change activities. It was supposed to change activities every 20 minutes or half an hour, but every evening, to deliver the last child prepared everything for the next day. We opened at 7, we closed at 5, and the day grew short. We ended up tired and happy, full of energy.

If child care becomes difficult, think...

Am I really working, busy only in my business?
Do I have clear and simple rules-for children and parents-, and I comply ever?
Do I have my written rules? Have I made ​​known?
Have I created routines, and the children pass easily from one activity to another?
Every day, at the end, I make all that I'll do the next day?
Are my children always busy doing something that they like?

where to refer children for testing and therapy

If any of your children have developmental, speech, hearing, or vision issues, here is a list of the people the parent can contact to set up a developmental screening.

FOR CHILDREN CERO TO 3, THE BEST IS TO CONTACT FAMILY CONNECTIONS, http://www.wiu.edu/ProviderConnections/links/CFCList.html
Ther evaluation, reference and therapy services are free. By my own experience, they are wanderfull people!(by Angel Olmedo)

For any child under age 3 living in Lake County, IL, you can call Child and Family Connections (847-377-8900). CFC covers the whole of Lake County.

If the parent lives in the Waukegan School District (almost all Waukegan addresses are in the school district):

Age 6 weeks to 3 years, call Susan at 847-263-2319, Waukegan Special Education Coordinator.

Age 3 to age 5, call Rebecca Rios at 847-249-6482, Waukegan Special Ed (they maintain a waiting list; it may take months before a child can be screened)

To register for screening for Waukegan children age 3 to 5, the parent must go to the Waukegan School District Welcome Center (on Greenwood, just a few blocks east of the ChildServ office). Rebecca Rios is the contact person at the Welcome Center. The office is open 8 a.m. to 4 p.m. Parents must bring the following documentation:

1. Birth certificate

2. 2 proofs of residency (light and gas bill, medical card, apartment lease, etc)

3. Proof of income (recent pay stub of any parent who is working)

4. Medical records, immunization record

5. Any doctor or teacher notes that refer to the child’s developmental issues that are of concern

If the parent lives in the North Chicago School District:

Call Erica May (847-689-6333 x213) at the North Chicago Special Education Department to schedule a screening. They only screen children age 3 to 5 and the screenings are done only a few times a year (January, May, maybe September)

Other numbers of interest:

Early Head Start and Head Start registration for anyone living in Waukegan: 1200 Glen Flora, 847-249-4330

Head Start for families living in North Chicago: Yaeger School, 847-875-4811

Early Head Start (birth to age 3) through the Lake County YMCA

1500 Sunset Ave, Suite B

Waukegan, IL 60087

847-336-2196 (ext. 232) OR 847-336-2627

Rosa Bermudez, EHS Registration Manager

Send by by Jeanne F. Becker, Director Lake County Family Service Center, ChildServ;1105 W Greenwood;Waukegan, IL 60087;773-867-7386 (work);847-662-0663 (fax) jbecker@childserv.org

www.childserv.org

Tornado safety plan

Tornado safety plan, a model to adapt.

In case of tornado or severe climatic phenomenon, we all got together in the basement. The entrance to the basement is adjacent to the Play Room, where children usually remain. Once we are, I’ll count all children and adults to make sure we're all really. Each baby has a person in charge of bringing the basement.

If the meeting place is made insecure, and we had to move on and off can be done safely, we all go to the North School, which is 2 blocks away. Parents of children have been advised that in an emergency we all move to the North School, main gate.

The phones of the parents are recorded on my phone, and I’ll call all parents notifying emergency to pick up children early.

All parents and people in the house have been informed of this plan.

Fire evacuation plan

 

Fire Evacuation Plan, a model to adapt.
In case of fire or smoke alarms sound, immediately we all evacuated the house. Each baby has a person in charge of get it out. The other children, as they are, come out orderly by the back door and gather in the yard in front of the door of the toolshed. The exit to the yard is adjacent to the Play Room, where children are habitually. Immediately I count all children and adults that we are to make sure that all children and adults have left. Once you are out, no one re-enters as long as the situation of danger.

If the rear exit is not practicable by fire, smoke, or any circumstance, we would leave by the front door, and we went to meeting point marked.

After evacuation if it’s a true emergency, I call the fire department, 911, or emergency phones from my cell phone; I always carry with me in case there is an emergency.
If the meeting place is made insecure, we all go to the North School, which is 2 blocks away. Parents of children have been advised that in an emergency we all move to the NorthSchool, main gate.

The phones of the parents are recorded on my phone, and I call all parents notifying emergency to pick up children early.

All parents and people in the house have been informed of this plan.

How to keep records fo craiglist and Yard sale purchases

How to Keep Records for Craigslist and Yard Sale Purchases

By Tom Copeland. Published with permission.

You're preparing your 2010 taxes when you realize that you don't have receipts for a number of items you bought on Craigslist and at yard sales. Now what?

This is a common concern for family child care providers who often buy such items with cash. But don't give up!

IRS rules say that you must keep adequate records to support the business expenses you claim on your tax return. See IRS Publication 583 Starting a Business and Keeping Records. Ideally, you want a receipt for your purchases, but it's not a requirement.

Here's what you can do when buying items on Craigslist or at yard sales:

* Bring along a receipt book or write down the following information on a piece of paper. It might say: "February 17, 2011 - Used crib - $15 - 1436 Smith Avenue - saw ad on Craigslist." Have the person you bought the item from sign it.

* Save a copy of the Craigslist or yard sale ad you saw in the newspaper or online.

* Take a picture of what you purchased.

If you didn't do any of these things take the following steps for items you bought in 2010. Write out a note describing the date, item purchased, cost, and place of purchase. Estimate the cost if you have to. Take a picture of the items now.

In the future if you forget to get a signed receipt from the person you bought the item from, try to write down a record of the transaction and take a picture as soon as you can afterwards. It's always a good idea to review your records at the end of each month to catch those transactions where you don't have a receipt.

Do you do something different to record your Craigslist and yard sale transactions?

See also my previous post: The Case of the Fading Receipt.

Image credit: landmarkchurchsalisbury.org

For more information, see my book Family Child Care Record Keeping Guide.

Copyright 2011, Tom Copeland, www.tomcopelandblog.com

Posted by Tom Copeland at 12:01 PM in Record Keeping & Taxes | Permalink
www.tomcopelandblog.com

The child and adult care food program

The Child and Adult Care Food Program.

Condensed and summarized by Fernando Olmedo, focalerta@yahoo.es 

What federal program helps improve the quality of family child care programs, promotes children's nutrition and pays child care providers about $500 or $1,000 per child per year?

It's the Child and Adult Care Food Program (CACFP).

This federal program is administered by non-profit Food Program sponsors in each state. The sponsor will reimburse you $1.19 for serving breakfast, $2.22 for lunch/supper and $.66 for a snack if you are low-income, serve low-income children, or live in a low-income area. If you don't meet this standard you will receive $.44 for serving breakfast, $1.34 for lunch/supper and $.18 for a snack. Check here for the most current rates.

All licensed child care providers are eligible to participate on the Food Program. In some states you can be exempt from state regulations and participate. Check with a Food Program sponsor in your area for your state's rules.

How to Join the Food Program

There are local Food Program sponsors in every state; in many areas there are competing sponsors. All sponsors must follow the same federal guidelines and pay you the same amount. To find out the names of the sponsors in your area, contact your local Child Care Resource and Referral agency or your state office on nutrition.

I strongly recommend that all child care providers join the Food Program and remain on it as long as they are in business. Being on the Food Program is a sign of professionalism and it shows your concern for the nutritional health of children. It's a benchmark of quality that benefits you and the children in your care.

See also my article: The Three Most Common Objections to the Food Program

Are CACFP Reimbursements Taxable Income?

This question continues to confuse some family child care providers, Food Program (CACFP) sponsors, and tax professionals.

The short answer is Yes.

There is an exception - reimbursements received for a child care provider's own child is not taxable income. IRS Publication 587 Business Use of Your Home says: "Do not include payments or expenses for your own children if they are eligible for the program [Food Program]." The reason is that such reimbursements are considered a "benefit" under Food Program regulations and not subject to taxes, like food stamps.

How should you report Food Program reimbursements on your tax return? Here's where there is the confusion.

IRS Publication 587 says: "Reimbursements you receive from a sponsor under the Child and Adult Care Program of the Department of Agriculture are taxable only to the extent they exceed your expenses for eligible children. If your reimbursements are more than your expenses for food, show the difference as income in Part I of Schedule C. If you food expenses are greater than the reimbursements, show the difference as an expense in Part V of Schedule C."

Therefore, if you follow these instructions and your reimbursements were $4,000 and your food expenses were $5,000 you would should show zero income and $1,000 of food expenses on Schedule C. This is called the "netting" method - you are showing the net income or expense on Schedule C.

However, a newer IRS publication has recommended that child care providers not use the "netting method". The IRS Child Care Provider Audit Technique Guide, revised in 2009, is the publication used by IRS auditors to help them understand the family child care business when they are auditing them. It says: "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."

The Audit Guide goes on: "The netting method is not a preferred method since an [IRS] Examiner will always be looking for the food reimbursement amounts. When you report the amount separately, the Examiner will more easily be able to account for the payments."

Therefore, using the above example the provider should report $4,000 as income and $5,000 as a food expense.

In my many years of experience with IRS audits I have never seen an auditor request that the child care provider use the netting method. Instead, the auditors want to see all the Food Program reimbursements reported as income and all the business food expenses claimed as a deduction.

If you use the netting method you are paying the same taxes as someone who shows all the income and all the expenses. Therefore, you won't be in trouble with the IRS if you do use this method.

If the child care provider in our example was not on the Food Program she would report zero income from reimbursements and claim $5,000 in food expenses. When she does join the Food Program her taxable income will rise by $4,000.

Don't let someone tell you that you shouldn't report your Food Program reimbursements as taxable income. They are probably confused about the netting method. Show them this blog post if you need to convince them.

If you are having problems with your Food Program sponsor about this, I would be happy to contact them.

The Three Most Common Objections to the Food Program

All family child care providers are better off financially if they join and stay on the Child and Adult Care Food Program.

If you serve a breakfast, lunch and one snack a day to children the Food Program will pay you about $500 or $1,000 a year per child. Yet less than half of all eligible child care providers are participating on the Food Program.

Why?

There are three common objections to participation.

1) "If I join the Food Program I'll pay more in taxes."

This is true. However, it's also true that you'll pay more in taxes if you win the lottery, if your husband gets a raise, or if you raise your rates.

The reimbursements you receive from the Food Program are taxable income (See my article on this). Therefore, your taxes will go up. But, what's more important than how much tax you pay is how much money you will have after you pay your taxes. For every $1,000 you get from the Food Program you will keep about $600-$700 after taxes.

2) "I will lose some of my food deductions if I participate on the Food Program."

False. Whether you are on the Food Program or not you will deduct your food expenses in the same way. Let's say you are not on the Food Program and spend $4,000 a year on food for your business. Once you join the Food Program you will still be able to deduct the same $4,000 as a business expense. The only difference is that you now are receiving reimbursements from the Food Program of about $500 or $1,000 per year per child.

3) "The Food Program is not worth it because of all the paperwork."

Look at the Food Program as another job. Are you being paid a reasonable amount for this job? If you served one breakfast, one lunch, and one snack a day to four children and spent three hours a week on Food Program paperwork how much would you be earning per hour? If you received the lower Tier II reimbursement rate you would be earning $13.06 per hour. If you receive the higher Tier I rate you would be earning $27.13 per hour. In addition, much of the paperwork you must do for the Food Program (attendance records, meal counts, etc.) you need to do for tax purposes even if you are not on the program.

Unfortunately, some tax professionals and child care providers are confused about the tax benefits of being on the Food Program. Don't let anyone tell you it's not financially worthwhile to be on the Food Program!

Home improvement

What is a Home Improvement?

By Tom Copeland.  Published with permission

Family child care providers are entitled to deduct expenses that are "ordinary and necessary" for their business. Because you are offering a home-based learning environment for children, it's reasonable to deduct many expenses associated with your house.

This includes expenses associated with cleaning, maintaining and repairing your home. It also includes home improvements.

Home improvements are expenses for the permanent improvement or modification of your home that increase its value or prolongs its useful life.

Examples of home improvements include: attic fan, awnings, carport, central air conditioning, central security alarm system, deck, furnace, garage, new room addition, porch, remodel kitchen/bathroom/playroom/bedroom/living room, replacement windows, and tile/wood flooring.

Home improvements must be depreciated over 39 years. A house repair can be deducted in one year. House repairs include: painting, wallpapering, replacing broken roof shingles, deck staining, floor sanding, furnace cleaning, plumbing/electrical repairs, and replacing broken glass.

Home improvements you made before your business began should be added to the value of the home and depreciated as one. Home improvements you make after your business begins should be depreciated separately.

I recommend that all child care providers depreciate their home improvements. You can use my Family Child Care Inventory-Keeper to help you record these improvements. Although the deduction for home improvements may be small each year, they will add up over time. See my article, "How to Conduct a Household Inventory to Save Money."

Let's look at an example: In 2012 you add a deck to the back of your home that costs $4,000. Since the deck is used by both your family and your business, you must multiply the cost by your Time-Space Percentage. If you Time-Space Percentage is 40%, the business portion of the deck is $1,600 ($4,000 x 40% = $1,600). $1,600 depreciated over 39 years results in a $41 deduction each year for 39 years. If you don't stay in business for the next 39 years (!) you won't get any depreciation after you are closed.

If you made home improvements either before or after you went into business that you have not yet depreciated, it's not too late to claim this depreciation. Use IRS Form 3115 when filing your 2012 tax return. See my article, "How to Claim Previously Unclaimed Depreciation."

www.tomcopelandblog.com

MOTXILA 21, SEGUNDO VIDEO

http://www.youtube.com/watch?v=1y6WseczA2w
Use este link para ver otro video de la banda MOTXILA 21, compuesta en su mayoría por niños y jóvenes con sindrome de Down.
Si le gustó, busque el otro que tenemos.

Do you qualify to receive social security benefits?

Do You Qualify to Receive Social Security Benefits?

By Tom Copeland. Published with permission.

Family child care providers work very long hours each year and look forward to the day when they can receive Social Security benefits.

But, before you can receive these benefits you must first qualify to receive them.

You must work and pay Social Security taxes for at least ten years before you will quality to receive Social Security benefits.

You don't have to work these years consecutively and they can be a combination of years working as a family child care provider and as an employee for another business.

To pay Social Security taxes you must earn a profit of at least $400 in a year. If you have a business loss or a profit of less than $400, you won't owe Social Security taxes for that year and the year won't count towards the ten-year goal.

In a survey I did for my book Family Child Care Money Management and Retirement Guide 16% of family child care providers did not have a profit large enough to qualify for the work they did in the previous year.

To see if you have qualified to receive Social Security benefits, go to the Social Security website and look up your record of earnings or call 800-772-1213 . If you are age 60 or older you should be receiving an annual statement that will tell you if you do qualify.

If you do earn more than $400 profit, you should be filing IRS Form Schedule SE Self Employment Tax with your annual tax return. This form will calculate the amount you owe in Social Security taxes. The amount is then transferred onto your IRS Form 1040 and added to the federal income taxes you owe. You do not write a separate check to the Social Security office. Check your own past tax records to see that you properly filed IRS Form Schedule SE.

If your profit is slightly below $400 and you have not yet qualified to receive Social Security benefits, it is a good idea to reduce some expenses to show a higher profit and qualify for that year.

It may seem strange to hear me say not to claim a business deduction! Claiming all allowable business deductions is a message I've been preaching for many years. However, making sure you qualify to receive Social Security benefits is one exception to this rule.

Image credit: money.howstuffworks.com

For more information about Social Security, see my book Family Child Care Money Management and Retirement Guide.

Posted by Tom Copeland at 05:44 PM in Money Management & Retirement | Permalink
www.tomcopelandblog.com

Family Child Care Provider Successfully Claims Exclusive Use Room in IRS Audit

Family Child Care Provider Successfully Claims Exclusive Use Room in IRS Audit

By Tom Copeland. Published with permission.

When family child care provider Bethany Marcoe from Sioux City, Iowa was notified she was being audited, she thought she had done nothing wrong and had nothing to hide.

"I went into my audit with great confidence and came out crushed," she wrote me. The auditor told her she owed about $2,800 in taxes.

Bethany had claimed that she used her toddler room and basement exlcusively for her business on her 2009-2011 tax return. I first wrote about Bethany's case in my article "How to Defend Your Exclusive Use Room." For a discussion of the exclusive use rule, see my article "How to Claim the Exclusive Use Rule."

Family child care providers are the only business that can claim rooms in their home that are used exclusively for their business, as well as rooms that are used regularly.

This uniqueness can create problems when child care providers are audited by the IRS and the auditor does not understand these rules. This is what happened to Bethany.

The auditor said she could never claim an exclusive use room for two reasons. One: once a day care child leaves a room it is no longer used for business purposes. Two: there is no way to prove that the child care provider's family does not use these rooms when day care children are not present. In addition, the auditor claimed that Bethany must report as income reimbursements she received from the Food Program for her own child. See my article on this last point.

I wrote a letter to the auditor on Bethany's behalf and refuted the auditor's statements.

At one point the IRS auditor told Bethany that she couldn't claim exclusive use rooms because of what was written in IRS Publication 587 Business Use of Your Home. There is nothing in that publication that says what the auditor thought it said.

It took my letter and Bethany's insistance before the auditor finally read the instructions to IRS Form 8829 Expenses for Business Use of Your Home. There it explains how to calculate the Time-Space Percentage when there are exclusive use and regular use rooms in the same home.

At last the auditor agreed with Bethany. As a result, her tax bill dropped from $2,800 to $1,105.

Bethany had inadvertently claimed all of her basement as exclusive use space, even though she had a laundry room and bathroom in the basement that were used by her family. Her initial Time-Space Percentage was 74%. The auditor originally would only allow 48%, but in the end accepted a revised 59% based on an exclusive use playroom and part of the basement.

Note: some family child care providers and tax preparers are reluctant to claim a Time-Space Percentage higher that around 40% because of the fear that the IRS won't accept a higher percentage. This case is one of many examples where a provider has succesfully claimed a higher percentage.

Bethany wrote me a letter of thanks, saying, "I don't think I could thank Tom enough for giving me the necessary information and encouragement to fight the IRS. Armed with this information from Tom I was able to show the IRS... I was still in the right... and I won."

If you are being audited about your exclusive use room you may want to use the arguments in my letter to defend yourself. Before you do, please contact me to get the latest information on this tax issue.

I continue to help child care providers who are being audited by the IRS through my work with the National Association for Family Child Care. If you need help, please contact me at tomcopeland@live.com or 651-280-5991 begin_of_the_skype_highlighting FREE 651-280-5991 end_of_the_skype_highlighting .

Image credit: Bethany's exclusive use toddler room

For more information on how to calculate your Time-Space Percentage when you have exclusive and regular use rooms, see my book Family Child Care Record Keeping Guide.

www.tomcopelandblog.com

Tax Consequences of Not Being Licensed

What are the Consequences of Not Being Licensed?

By Tom Copeland. Published with permission.

As a family child care provider you fall into one of three categories:

* You meet your state child care regulations

* You are exempt from your state child care regulations

* You are in violation of your state child care regulations

If you are an exempt provider this means you are operating legally under your state's laws. This would be the case if your state had a certification or registration system that was voluntary and you didn't sign up. Or if your state only licenses providers who care for more than four children and you care for three.

If you are exempt the tax consequences are the same as if you were licensed. You can fill out the same tax forms in the same way. You are entitled to the exact same deductions as a licensed provider. The drawbacks: in most states you won't be eligible to participate on the Food Program, and it will be harder to find business liability insurance. Some insurance companies will only offer coverage if you meet your state regulations. In addition, you may not be eligible for grant or loan programs offered through your Child Care Resource and Referral (CCR&R) agency. Lastly, you won't be able to meet higher quality standards and receive financial rewards through your state's Quality Rating and Information System (QRIS), nor will you be eligible for accreditation or other credential programs that signify a quality child care program.

What if you are in violation of your state's child care regulations? In this case you will lose the ability to deduct house expenses (mortgage, rent, property tax, utilities, house insurance, house repairs, and house depreciation). But you can claim all other deductions (food, toys, supplies, car expenses, etc.). You won't be able to get business liability insurance or be on the Food Program. You won't have access to services from your CCR&R (training, grants, loans, referral listing, and more).

I believe every provider should meet their state's child care regulations. Research indicates that providers who do so offer higher quality care than those who don't. If you are licensed I believe every provider should strive to achieve a higher level of quality by participating in their QRIS program or NAFCC Accreditation or a CDA credential.

Photo credit: fbcmlincolnton.com

For more information about starting your business, see my book Family Child Care Business Planning Guide.

Posted by Tom Copeland at 08:48 AM in Record Keeping & Taxes, Starting Your Business |
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Do I Have to Be Licensed to Deduct My House Expenses?

Do I Have to Be Licensed to Deduct My House Expenses?

By Tom Copeland. Published with permission.

Family child care providers are fortunate to be able to deduct many expenses associated with their homes.

These include property tax, mortgage interest, utilities (gas, electric, water, sewer, garbage), house repairs, house insurance, and home depreciation.

These house expenses can total thousands of dollars and represent a signficant business deduction.

Child care providers can deduct the business portion of these expenses (their Time-Space Percentage) on IRS Form 8829 Expenses For Business Use of Your Home.

Can all child care providers claim these house expenses?

The instructions to Form 8829 state that to qualify to claim house expenses, "... you must have applied for (and not have been rejected), been granted (and still have in effect), or be exempt from having a license certification, registration, or approval as a daycare center or as a family or group daycare home under state law."

Suppose your state law says that you can care for unrelated children from one family without needing a license. If you do care for three children from one family, and no other children, you would be exempt from state licensing rules. Therefore, you can claim Form 8829 house expenses.

In this example, if you were caring for unrelated children from two different unrelated families, you would be in violation of state law and therefore would not be entitled to claim house expenses. But, even if you were operating illegally, you could still deduct all other business expenses: food, toys, supplies, car expenses, depreciation on furniture and appliances, etc.

So, the answer to the question posed in the title of this article is "no."

Sometimes tax preparers don't understand the rules for claiming house expenses. A tax preparer from Florida asked me about this today. Sometimes a tax preparer will ask a child care provider, "Are you licensed?" That's not a helpful question. This is because you can be exempt from licensing and still claim the same expenses as a licensed provider.

If you use a tax preparer and are exempt from licensing rules (or have applied for a license but not yet received it), let him or her know that you are still entitled to claim house expenses on Form 8829.

Note: There are some drawbacks if you are not licensed. See my article, "What are the Consequences of Not Being Licensed?"

Image credit: lindaschildcare.net

For more information on claiming deductions, no matter what your status is, see my book, Family Child Care Record Keeping Guide.

Copyright 2011, Tom Copeland, www.tomcopelandblog.com

Should You File Two Schedule C's When Your Husband Works With You?

Should You File Two Schedule C's When Your Husband Works With You?

By Tom Copeland. Published with permission.

Are there situations where a family child care provider would want her husband to pay Social Security taxes under his name on the profit from her business?

Let's say a family child care provider and her husband work side by side caring for children. The child care provider is self-employed (a sole proprietor) and reports all the profit from the business on her business tax return (Schedule C).

The child care provider will pay Social Security taxes on her profit. As a result, she will receive higher Social Security benefits when she retires.

Because the husband is not paying any Social Security taxes on this profit, his Social Security benefits will be lower when he retires.

Is there a way for the husband to earn higher Social Security benefits in this situation?

Yes.

IRS rules allow a married couple in this situation to split the profit, pay Social Security taxes under both their names, and thus spread the future Social Security benefits between the two of them. This can be done without them filing as a partnership.

To do this, the husband and wife should each file a separate Schedule C. They would split the income and expenses on these two forms and each pay Social Security taxes under their own names. This will not increase the total Social Security taxes they will pay.

The two should split the income and expenses according to the amount of work they perform for the business. A husband who works two hours a week doing the record keeping should not claim 50% of the income and expenses.

Warning

The reason to file two Schedule Cs for the one business is to allow the husband to contribute more to his Social Security account, and later earn higher benefits. However, before taking this action I strongly recommend that you find out the long-term impact on the Social Security benefits for both you and your husband.

Social Security rules are complex. You qualify to receive Social Security benefits by working for at least ten years. If your husband also works, you can both receive Social Security benefits. If your husband dies you can receive some of his benefits. Depending on how much you and your husband have earned over the years, it may be more beneficial to have future earnings credited to your husband.

To find out what will be the impact of crediting the profit from your business to you alone or to split it between you and your husband, use the Social Security Retirement Estimator. Talk to someone at your local Social Security office if you are within five years of you or your spouse retiring. They can answer your questions to help you make the best decision.

Other Considerations

You can only file two separate Schedule Cs if you are husband and wife and filing jointly. Unmarried couples or same sex couples cannot do this. You cannot do this if you are a Limited Liability Company (LLC) or a corporation.

If you do this, parents can still pay you and therefore your husband does not need to obtain his own EIN. You don't have to put your husband's name on your child care license or contract. There doesn't have to be any change in how you operate your program.

If you hire employees, either you or your husband can pay the employment taxes. It will not affect the total amount of taxes your family will pay.

I would recommend you keep records (for at least two months each year) to show how many hours in a month each person is working. This will help you defend how you split the income and expenses if you are audited. If you each worked about the same number of hours, each of you would report 50% of the income and 50% of the expenses on their own Schedule C. It doesn't matter who actually paid for the expenses or if all the income was deposited into a checking account under your name only. If you do have a separate business checking account I would recommend putting both names on it.

You can stop filing two separate Schedule Cs in future years if you want to.

Image credit: childcareresearch.org

For more information about claiming income and expenses, see my Family Child Care Record Keeping Guide.

Posted by Tom Copeland at 10:22 AM in Money Management & Retirement, Record Keeping & Taxes | Permalink
www.tomcopelandblog.com

What To Do When You Disagree with Your Tax Preparer

What To Do When You Disagree with Your Tax Preparer

By Tom Copeland Published with permission.

When a family child care provider hires a tax professional to do her taxes, she wants her taxes to be done correctly. She expects that her tax preparer understands the many unique rules affecting her business.

Sometimes, however, you may question how your tax preparer has filled out your tax forms.

What should you do if you disagree with what your tax preparer tells you?

First, say to your tax preparer, "Show me something in writing from the IRS that supports your position."

If the tax preparer can show you that you are wrong, then accept it. But, if he or she can't back up their position with a written authority, you should not let it go.

Ask the tax preparer to contact the IRS directly to seek a written authority. You could also contact the IRS yourself: 1-800-829-4933 .

You can also contact me for help. Or you can ask your tax preparer to contact me (tomcopeland@live.com). I'm happy to point out what the IRS may have said about your question. I've posted everything the IRS has written about family child care in the "IRS Audits/Documents" section shown at the top of my blog.

Here's an example: Let's say you want to deduct the business portion of car loan interest when you are using the standard mileage rate. Your tax preparer says you can't deduct car loan interest unless you use the actual expenses method of claiming car expenses.

You say, "Show me something in writing that supports your position." Your tax preparer won't be able to. Then you say, "I'm not going to accept what you say without a written authority. Please research this issue and contact the IRS if necessary."

In fact, IRS Publication 463 Travel, Entertainment, Gift, and Car Expenses" page 16 says, "However, if you are self-employed and use your car in your business, you can deduct that part of the interest expenses that represents your business use of the car."

Sometimes the answer won't be so clear cut. Your tax preparer may say you can't deduct your front door welcome mat because it's not an "ordinary and necessary" business expense. This language can be found in IRS Code Section 162(a). Ordinary and necessary means typical, helpful, appropriate or useful for your business. Something doesn't have to be indispensible for it to be ordinary and necessary.

There's nothing in writing about welcome mats. You argue that parents and children use your welcome mat to wipe their feet and therefore it's ordinary and necessary. Your tax preparer disagrees and says that it's a personal expense. If you are at an impass, you must make a decision whether to back down or insist that the welcome mat be deducted.

Sometimes you may disagree with your tax preparer because he or she is being too aggressive in claiming business expenses.

I heard this week from a child care provider whose tax preparer told her she could automatically claim that she worked 2 hours per day doing business activities when day care children were not present in her home. There is nothing in writing to support this position.

In fact, it's dangerous to claim any business hours unless you can back them up with some records to show the actual hours you worked. (The best way to show such business hours is to track them carefully for at least two months each year and use the average for these months for the rest of the year.)

If your disagreement with your tax preparer is over a few minor matters, it may not be worth pursuing. But if the disagreement is over a major issue, such as your Time-Space Percentage, then you may want to insist on seeing something in writing before you agree with your tax preparer's position.

If you can't agree on major issues, it may be time to consider changing tax preparers.

No one, including tax preparers, will always have the right answer. We all make mistakes. I make mistakes. However, you should not accept what a tax preparer tells you unless you are comfortable that he or she is giving you the correct information. Asking for something in writing from the IRS to back up a claim is a reasonable request.

Image credit: aksenate.org

For more information about working with tax preparers, see my 2011 Family Child Care Tax Workbook and Organizer.

Posted by Tom Copeland at 10:01 PM in Record Keeping & Taxes | Permalink
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How to End Your Agreement with Parents

How to End Your Agreement with Parents

By Tom Copeland. Published with permission.

There is a right way and wrong way to end your agreement with a parent of a child in your care.

The right way is to follow the terms of your contract. If it requires you to give parents a two-week notice, do so. You and the parent can agree to end your agreement earlier than two weeks if you put it in writing and both sign it.
Here are three tips to follow to improve the chances that the ending of your agreement will go smoothly.
"Terminate at will"
While I recommend that you require parents to give you a two-week notice to end your contract, I also recommend that you do not restrict yourself to the same terms. Instead, put in your contract, "Provider may terminate at will." This gives you the flexibility to end your agreement immediately if the parent is threatening you, creating a disturbance for your business, or refusing to pay you for your services.
Refund payments?
You cannot charge parents for days that you refuse to provide care. Let's say you want to immediately terminate your contract with a parent. It's Friday. The parent has paid you for the past week and has paid you in advance for the last two weeks of care. If you tell the parent she can't come back on Monday, you are obligated to refund her the amount she paid you for the last two weeks.
Did you or the parent terminate care?
Sometimes there is miscommunication between a family child care provider and a parent. If you are in a conflict situation with a parent and are considering terminating care, be sure you communicate clearly. Let's say the parent owes you money for care from last month and you are struggling to collect it. Your contract requires the parent to give you a two-week notice while you may terminate "at will."
When you try to discus this payment issue today, the parent is vague about when she can pay you. You then make one or more of the following statements:
"I can't wait any longer for your payment."
"I've had enough. I don't think I can go on like this."

"You must pay me by tomorrow or I'm going to have to end our agreement."

It's possible that the parent will conclude from any of these statements that you have terminated your agreement the day of this discussion. Let's say the parent doesn't show up tomorrow and you don't hear anything more from her. Has she effectively given you a two-week notice because she hasn't returned? Did you terminate her?
If it's not your intent to terminate your contract immediately, it's important to be clear to the parent that you expect her to bring her child to your program the next day ("I'll see you and your child tomorrow.")
If you are terminating immediately, you cannot expect any payment from the parent for care after that day.
What if, in response to any of your comments above, the parent says, "I'm not coming back." If you want to be able to collect payment for the next two weeks, you need to come to an understanding that the parent is giving her two-week notice. Therefore, say to her, "Does this mean you are giving me your two-week notice?" If the parent agrees, then either write up a short note that says this and get the parent to sign it, or send the parent an email indicating that you are accepting her two-week notice.

If a parent is not showing up for care and has not given you an official notice to end your agreement, send the parent a note, asking for clarification. If you are willing to continue to provide care say, "I have not ended our contract. You are welcome to continue to bring your child to my program. If I do not hear back from you within a week, I will assume you have given me your two-week notice and I will then proceed to take legal action to collect what you owe me under our contract."

If you don't want the parent to return, say, "I'm sorry we couldn't agree to continue our agreement. I'm no longer providing care for your child." Then say either, "You owe me $ under our contract," or "I'm refunding you $ for the days you paid for care after the end of our agreement," or "You do not owe me any additional money."
The language you use is important to be clear whether you or the parent is ending your agreement.
Image credit: whatafy.com

For more information about contracts, see my book Family Child Care Contracts and Policies.
www.tomcopelandblog.com