When children catch a disease.

Are You Liable When Children Catch a Disease in Your Program?

By Tom Copeland. Poster with his permission

 It started as a normal day in Kim Mueller's family child care home in Minnesota, when suddenly four unrelated children started vomiting within thirty minutes.

She suspected that it was an outbreak of Norovirus, so she immediately called the parents and asked everyone to pick up their children as soon as possible. She also announced that she was closing the following day (Friday).

By Saturday seven children and several parents had become ill. Kim called her licensor, and the state Department of Health and an Epidemiologist confirmed that it was Norovirus.

Kim had a strict policy that did not allow sick children to come and required parents to pick up children who become ill during the day. Despite this, in the past parents had used medications to mask fever and didn't tell Kim their child had been sick when they showed up for care.

Kim did all the right things. She followed all the state's recommendations to prevent the spread of illness. In fact, she, her co-provider and her daughter did not come down with Norovirus.

Parent Complaint

Most of Kim's parents were very understanding. However, one family who had a vacation planned for that weekend was very angry and blamed her when their entire family caught the virus.

The parents are accusing Kim of ruining their vacation and they want her to pay for their vacation.

Is Kim Liable?

Kim worries that she might be liable in this situation for the costs associated the children and parents getting sick.

This is a concern for many providers. What if the children had gotten measles or some other contagious disease?

Kim is not liable for children becoming ill in her program and is not responsible for financial losses suffered by the parents in this case.

Unless you are negligent in your care of children, you can't be held responsible for children getting sick. Negligence would be if a provider deliberately ignored an obvious injury or fever, failed to follow written instructions from parents about giving a child medications, or failed to inform a parent when a child in her program contracted a contagious disease.

If a parent did sue you because their child became ill while in your program, your business liability insurance policy will likely defend you. Another reason to get this insurance!

I would suggest telling the unhappy parent, "I don't know where the Norovirus came from, but it looks like it didn't come from my family. I did everything I could to prevent the spread of the disease. I following all licensing regulations. Ultimately, despite all the precautions I take, I can't ensure that you child will never become sick while attending my program. I am sorry that this was an inconvenience for you, but I'm not responsible for any of your financial loss. I won't be charging you for days your child misses care because of this illness."

Other Issues

You should protect the privacy of your families by not releasing the names of children who become ill. If you know who brought the contagious disease (or lice) into your program, you should not share this information with parents. Tell the parents how you are handling the outbreak. It doesn't matter to them how it got started.

I believe it's reasonable not to charge parents for days their child misses care because of an outbreak of a contagious illness. Many providers have policies that allow parents to keep their child at home when she becomes ill and do not charge for a set number of days. It's up to you what to put in your policies.

Tom Copeland - www.tomcopelandblog.com

Image credit: www.foodsafetynews.com

Closing down

Closing Down Your Family Child Care Business

By Tom Copeland. Posted with permission.

There will come a day when you close down your business.

When that day comes, here are some tax and non-tax issues to consider:

Tax Issues

Claim all your business income and expenses for the last year you were in business.

When you calculate your Time-Space % for your final year, adjust the number of hours in the year on Form 8829 Expenses for Business Use of Your Home if you closed down before the end of the year. You can only claim house expenses for the months you were in business.

If you have been depreciating items used in your business, you normally will only get a half year's worth of depreciation in the year you go out of business, no matter what month you close down.

The exception is for depreciation on your home and home improvements. For these items you claim the last year of depreciation based on the month you close down.

If before you go out of business you replace items you have been depreciating (carpet, vinyl or wood floors, furniture, appliances, etc.) you will be entitled to deduct all of the remaining unclaimed depreciation on these items on your last business tax forms.

For example, if you replace the carpeting in your playroom before you go out of business, and it's in the fourth year of depreciation, you can deduct the fourth-seventh years of depreciation. If you wait until after you go out of business to replace such items, you will not be able to deduct any of the remaining unclaimed depreciation.

After going out of business, the only thing you need to remember about taxes is that you will owe some taxes when you sell your home. Whether you sell your home immediately after going out of business, or years later, you will owe taxes on the depreciation you claimed on your home since May, 1997.

You will owe this tax whether or not you actually claimed depreciation on your home. Therefore, when you do start to make plans to sell your home, contact a tax professional to help you deal with the tax consequences of this action. See my article:"Will You Owe Taxes When You Sell Your Home?"

You don't have to announce to the IRS (or your state department of revenue) that you are going out of business. You simply don't file any of the business tax forms (Form 8829, Schedule C, Form 4562, etc.) in the year after you go out of business.

Non-Tax Issues

Contact your child care licensor, your local Child Care Resource and Referral agency and your family child care association so they can update their records.

Contact your insurance agent for your home and car. You may be entitled to a reduced insurance rate, depending on your circumstances.

Contact your business liability insurance agent. You may get a refund for cancelling your insurance policy before the end of the year. Save a copy of your insurance policy until the youngest child in your program (at the time you closed your business) reaches age 21. Before then, it may be possible for a child to sue you for an injury that occurred while in your care.

Notify your parents, in writing, that you are closing your business. Keep copies of this notice for your records. If your contract requires you to give parents a two-week notice, do so.

But, if you tell parents months in advance that you are closing your business, some parents may want to terminate earlier. Take this into consideration when deciding when to inform parents of your decision.

If you are closing down your business, I hope you take a moment to appreciate how all of your hard work over the years has had a positive impact on so many children. Congratulations!

Tom Copeland - www.tomcopelandblog.com

Image credit: www.daycareresource.com

For more information about the tax consequence of closing your business, see my 2014 Family Child Care Tax Workbook and Organizer.

Mistakes on child care returns

Common Mistakes Made On Family Child Care Tax Returns

By Tom Copeland. Posted with permission.

In the past two weeks I've seen these common mistakes made by family child care providers on their tax returns:

* Not deducting car loan interest

* Counting time spent shopping

* Not depreciating items owned before the business began

* Claiming 100% of household supplies

I've been reviewing the tax returns of family child care providers who are members of The Child Care Business Partnership. If you join (or renew) the Partnership before March 1, 2015 I will review your Minute Menu Kids Pro tax reports and/or your tax return for free!

Common Mistakes

Car loan interest: Many providers who are self employed fail to deduct the business portion of their car loan interest, even when using the standard mileage rate to claim car expenses.

Time percent: You cannot count hours spent on business activities outside of your home (shopping, attending training workshops, meetings in other provider's homes, etc.). This is because your Time-Space % is used for house expenses and when you are away from your home, even when it's for a business purpose, you are not using your home.

Property depreciation: Every Minute Menu report and tax return I looked at failed to claim depreciation on household items owned by the provider before she started her business. This is a big deduction that you should not overlook. See my article "Conduct a Household Inventory To Save Money."

Household supplies: Many providers try to deduct 100% of their household supplies (toilet paper, paper towels, cleaning products, laundry detergent, etc.). Since these items are also used personally you must apply your Time-Space % before deducting them. If you buy these items separately for your business and personal use, keep receipts for all business and personal purchases.

Depreciation: A number of providers entered items that cost less than $500 into the depreciation section of Minute Menu Kids Pro. You do not have to depreciate items costing less than $500. See my article on this topic. Entering a $400 table or couch into Minute Menu Kids Pro can be confusing because you are likely to choose the expense category of "Furniture/Appliances." But, any items entered there will be treated as something to depreciate. Instead, enter items costing less than $500 under "Household Items."

Space percent: One provider didn't claim a bedroom and laundry room as regular use in her business.  She was entitled to count the entire bedroom because she used it to store a lot of daycare items. Her laundry room is also regularly used by her business. Day care children do not need to be in a room for it to be considered regularly used in the business. Even rooms that licensing rules prohibit children to enter can be regularly used. See my article"How to Calculate Your Space Percent."

Hours when children are not present in home: Most providers did a poor job of recording the hours they spent on business activities when children were not present in the home. Try to keep at least two months of daily records for such activities as: cleaning, activity preparation, record keeping, meal preparation, time on the Internet (reading my blog!), parent interviews and phone calls, etc. See my article "The Single Most Important Thing You Can Do To Reduce Your Taxes."

Home depreciation: Many providers failed to claim depreciation on their home. This is a large deduction that you don't want to miss. Some of these providers had never claimed house depreciation. I told them to file IRS Form 3115 to recapture any previously unclaimed depreciation. See my articles "Should You Depreciate Your Home?" and "How to Claim Previously Unclaimed Depreciation."

Mileage: You can't claim trips to the gas station to get gas or have your oil changed as business miles, unless the overall use of your car is more than 50% business.

Actual business use percent: Some providers claimed different actual use percentages for items such as water (55%), cable television (65%), electricity (80%), and so on. Although you can calculate an actual business use percent on some business items, you should only do so if you have tracked the actual use for at least a month or two. This means recording on a calendar or some other place the business and personal use. Although you could do this for the use of the television or cell phone, it becomes extremely difficult to try to do for utility expenses. Typically, providers will use their Time-Space % for all shared items. See my article "How to Calculate an Actual Business Use Percent."

Estimated tax payments: You cannot deduct any quarterly estimated tax payments as a business expense. Do not enter these expenses into Minute Menu.

Tax preparation fees: You can only deduct the cost to have your business tax forms completed by a tax preparer. These forms include: Form 4562 Depreciation, Form 8829 Expenses for Business Use of Your Home, Schedule C, Schedule SE, Form 3115, and any payroll tax forms. Get your tax preparer to break out the cost of doing these forms from your other personal tax forms. If you use TurboTax, apply your Time-Space %.

Nobody ever said preparing a family child care tax return is easy. Try to avoid these common mistakes.

To get your free review of your tax return and/or Minute Menu yearly reports, join or renew The Child Care Business Partnership. The annual $15 fee is tax deductible and I'll refund it if I can't save you at least $15 in taxes! Members of the Partnership also get access to nineteen instructional videos on how to use Minute Menu Kids Pro software more effectively.

Tom Copeland - www.tomcopelandblog.com

Image credit: blogs.angloinfo.com

My 2014 Family Child Care Tax Workbook and Organizer offers line-by-line instructions on how to fill out all of your federal tax forms.