Taxable income

 

Is the Money You Receive Taxable Income?

By Tom Copeland. Posted with his permission.

"As a family child care provider you receive money from a variety of sources: parents, subsidy program, Food Program (CACFP), grants, fundraisers, garage sales, maybe even prizes!

How should all of this money be reported? Is it taxable income or not?"

Parents

All money you receive from parents to care for their child is taxable income. This includes co-payments they pay for their participation on a child care subsidy program. It also includes any fees included in your contract: registration fees, late fees, field trip fees, late payment fees, bounced check fees, and so on.

If parents participate in a flexible benefit plan (cafeteria plan) at their place of work, any money received through this plan is also taxable income. If a parent gives you a bonus at the end of the year because they had extra money in this plan that they had to spend, it’s also income!

Even a gift from a parent of cash or a gift card (Merry Christmas!) is taxable income. If a parent gives you a gift of anything except cash or a gift card (flowers, book, candy, etc.), it’s not income. Finally!

Some parents may tell you that they won’t report the money that they paid you by not claiming the child care tax credit on their tax return, in exchange for you charging them less for child care. Even in this case, the money you get is income. Don’t agree to such an arrangement because there is no guarantee the parent won’t try to claim this tax credit, and you can get into trouble with the IRS if they compare your income with the number of children you are claiming on the Food Program.

Subsidy Program

Any money you receive from a child care subsidy program is taxable income.

Food Program

Reimbursements you receive from the Food Program are taxable income, with one exception. Reimbursements you receive for your own children from the Food Program are not taxable income. You can receive reimbursements for your own children if your family income is below $28,694 for a family of two. For a complete breakdown of all family sizes and for the higher rates for Alaska and Hawaii: http://www.fns.usda.gov/sites/default/files/IEG_Table-032913.pdf.

Grants

Grants you may receive to help your business are taxable income. These may include toys, scholarships to attend a conference or take classes, home improvements, fence, etc. When you purchase items with your grant money that are used in your business you can deduct them using the normal rules of business deductions.

For small items this may mean your business expense will be equal to your grant income and you will not owe any additional taxes. If the items are larger and must be depreciated, or if you use the items for your family, then you won’t be able to wipe out all the grant income and you will owe some additional taxes. However, this should not be a reason for you not to accept the grant!

Fundraisers/Garage Sales/Prizes

You must report as taxable income and profit you make on fundraisers. For example, let’s say you decide to enlist parents to help you sell candles to buy a swing set. If the cost of the candles is $1,000 and you earn $3,000 in sales, your profit was $2,000 (taxable income). When you purchase the swing set, you can deduct it under the normal rules of business deductions.

You don’t have to report any profit from garage sales. This is because you aren’t selling the items at a profit. The amount you sell something for at a garage sale is less than its purchase price.

If you win a prize (provider of the year, lottery, bingo parlor, etc.) congratulations! However, you must pay taxes on your prize. If the prize was associated with your business you must report it as business income. If you win the lottery or win at the bingo parlor, report this as personal income.

Summary

Because of the many different sources of your income, it’s important to keep a careful record of where your money came from. You can do this by writing this down on bank deposit slips, entering it into Minute Menu Kids Pro, or creating your own income report.

Many answers to your business questions can be found at www.tomcopelandblog.com

Join The Child Care Business Partnership!

Minute Menu and Tom Copeland have teamed up to offer you the chance to reduce your taxes, receive direct assistance if you are audited, and personalized business advice so you can be more successful. For $15 a year you can join The Child Care Business Partnership and start receiving direct help from Tom Copeland in using Minute Menu Kids Pro. Also, if you join before October 31, 2013 you will be entered into a drawing with a chance to win a set of Tom Copeland’s books, worth more than $90. For more information: http://www.tomcopelandblog.com/2013/07/the-child-care-business-partnership-tom-copeland-minute-menu-and-you.html, or email Tom at tomcopeland@live.com.

Grants for family child care?

 

Where are the Grants for Family Child Care Providers?

By Tom Copeland,published with permission

"Where can I get a grant to help me start or expand my family child care business?"

It's a common question for many family child care providers who don't have a lot of cash on hand.

The answer is discouraging.

The federal government does not offer any direct grants to family child care providers. Private foundations and corporations are unlikely to give grants to providers. Other than a few special programs, the only source of grants is through Child Care Resource and Referral agencies.

Child Care Resource and Referral

In most states, these agencies offer selective grant programs that are funded by the federal Child Care Development Block Grant and sometimes state dollars. Usually the grant cycle is every two years. Contact your local CCR&R agency for more information. They will know about any grant programs in your area.

Online Services

There are several online services (here and here and here) that purport to offer access to grants for family child care providers. These sites charge a registration fee of $30 and will send you a list of grant prospects. Although I haven't tried to use these services, I don't believe they are helpful because there are no federal grants directly available to you.

Has anyone tried to use these services?

Other Possible Options

Some states or private organizations may offer grant programs. One example is VOICE, a New York union that offers up to $500 grants to New York providers living outside New York city.

Why no Grants?

Why aren't there more grant programs available other than those through your local Child Care Resource and Referral agency?

Family child care providers are for-profit businesses. (Although it may not feel like it!) Few government programs or private foundations or corporations will support for-profit businesses with grants.

It would make little difference if you decided to set up a tax-exempt non-profit organization to operate your business. First, it would be extremely difficult to establish a tax-exempt organization when you serve so few children. Second, organizations that might have money are reluctant to deal with businesses that serve only a handful of children.

Loans

There are a few more opportunities to get a loan versus a grant. See my article "Where to Get a Loan."

What other sources of grants or loans do you know about?

Tom Copeland - www.tomcopelandblog.com

Image credit: usuchild.usu.edu

However, family child care is one of the few businesses for which you don’t need virtually invest money. Start by reviewing what the standards ask your state license. In Illinois you are asked to have a smoke alarm, a fire extinguisher A, B and C , and from January 2014 Radon test . You also need small beds where napping children - do not support lying on the floor mats! - , which costs around $ 28 each. Personally I'd recommend you purchase many building blocks Duplo Lego- type, because it is one of the few things that entertain children up to 30 minutes straight. The rest of the materials that you need them can get them little by little, when your business is in place. Many of them can make yourself, or buy them at garage sales and thrift stores.

Additional expenses are physicists to his aides, substitutes and all people living in the house, which can be covered by your insurance. The first physical including TB test, which can be done at the Health Department for $ 10 per person. Also need training CPR / FA, if you take it with us the cost is $ 60 dólaes , call you to Lucrecia Nieto at 847-625-4231 to sign up . You also need the training Kids Syndrome Shaken Baby and Sudden Death ", that can cost $ 7.00 in your CCR & R agency. Other mandatory training is "Forced Delator / Mandated Reporter", which can take free internet. (www.state.il.us/dcfs/child )

Save ALL your records of expenses from the moment you decided to start your business, including miles used. If you don’t have receipts, make a note: On 01/05/13, at 123 Martin Av. , $ 2.00 for a used puzzle. 5 miles on 1/31/13 to go to training "shaken infant syndrome”. Normally, with all your tax deductions , such as income or margage, billes, devaluation of the house by using the own home business, the first year losses are declared in the Income Tax, and may receive credit for low income. Use that money to finish assembling your business.