Hi, welcome to book-keeping basics of a home-based childcare. One of the three families now spend over 20% of their income in child care and the cost has outpaced most in a state college tuition's. When you think about basic budgeting in opening a home-based childcare, you really need to think about how many childcare slots does your state allow? How many children do you wish to care for it? How many infants will you take and will you charge more for infants? Will you provide meals or have the families provide the meals? How much will you charge families? Are you going to offer a sibling discount? These are all things that you need to talk about and think about when opening a home-based child care. You also need to make sure that you are keeping receipts and going over all of your expenses. Let's listen into Tom Copeland as he discusses the three most important things that you can do for your record-keeping. What are they? Well, first, save receipts for all your house expenses. Second, keep that daily record of all the meals and snacks that you're serving for the children in your care. Lastly, crack all the hours you're working in your home. You're entitled to deduct all ordinary and necessary business expenses for your family childcare business. Ordinary and necessary needs separately, appropriate, useful, common in your business. Now, your job is providing a home learning environment for children. Parents expect you to maintain your home as a whole. That means that virtually any expense to clean, repair, and maintain your home as a whole is probably going to be considered ordinary and necessary that you can do that. What are we talking about? Property, mortgage interest, rent, utilities, gas, oil, electric, garbage, water, sewer, cable TV, solar panels, house repair, furniture, appliances, equipment, everything outside your home, lawn, more rain, garden hose, wheelbarrow, paying somebody to buy your driveway, paying somebody to ammonia in the line. Household cleaning supplies, light bulbs, toilet paper and detergents, soap and so on. Tools, garbage bags were on virtually everything. It's probably easier to think about those things that you cannot do that personal things such as your clothing, your hairspray, your motorcycle, the bed that kids don't sleep on. Now, save all these receipts, everything associated with your house. Put them in one place, put them in a folder, put them in a bag, put them somewhere. Don't worry when you're buying something. Look at the receipt and think to yourself, Well, isn't deductible or [inaudible] now get into the habit of just saving receipts for everything, throw all the receipts into one place. At the end of the year and you can sort out what's deductible and what's not. Most providers paid too much in tax because they didn't save the receipts, because they didn't realize that some of those things were deductable. When you have all the receipts, you're in a much better position at the end of the year to figure out what you can do that. Second thing, you want to daily record showing which child age eight, which meal and snack each day. We want to have a record that says Sally, on Monday got a breakfast morning snack or lunch afternoon snack, whatever. That's the record we need. We want to count all the meals and snacks you are reimbursed by the Food Program, as well as all meals and snacks which are not reimbursed by the program. Now, you want to say something about the food product. You always want to be under food product. Why? Because you're always better off financially. Reimbursements to the Food Program, our taxable income with the exception of reimbursements for your own children. Those are not facts. Any food that your own children eat is not a deduction. Any food that you eat at home it's also not a deduction. Now, you'll want to win the lottery. Of course, going to report how much you want on the lottery and your tax return. You're going to pay some taxes on them. But after you pay the taxes, you'll still have money left over in your pocket. That's the full program. Yes. Yes, willl pay a little bit more in taxes after joining the FERPA. Your income's going. That's okay. You're paying a little extra taxes but you have more money left over afterwards. Somebody says, you're thinking, this worked for the Food Program, the paperwork, and filling out the forms. No, you're going to be well rewarded. You're going to earn more per hour doing food program paperwork when you're earning per hour caring for children. You always wanted to be on the food program. You always want to stay on the food program. There's something magic about how you track all these meals instead. The full program, that monthly platform makes it easy because that is the record you need to show how many different meals and snacks you've got reimbursed. Save your own copy of that monthly claim form. We use a software program such as [inaudible], which allows you to track all this online. If you're using kid care, you got to enter a snack or meal that has a nutritious component to. For more information, if you go to Kin care.com, and check it out. You can just track these meals and snacks out a piece of paper or use a spreadsheet. There's no magic. But I want to stress the importance of the extra afternoon snack. Snack that you are not getting reimbursed for. Once snack a day. For one child for a year is equal to a $200 deduction. Multiply $200 by all the number, the number of kids that you're serving an extra snack. Means its a lot of money. Yes. Isn't a big deal. Now to claim meals, and snacks, most providers use what's called a standard meal allowance method. If you use this method, you don't need to save any food, and receipts, that's a big relief. No food receipts, you have to worry about. Instead, you need to add up all the meals, and snacks you serve. That's why it's so important. You're traveling, and you're going to multiply it by an angle standard allowance rate. You can find this rate by contacting a local food program sponsor, your sponsor, or your local child care resource and referral agents. Use this method, you are entitled to deduct up to one breakfast, one lunch, one supper, and three snacks per day per child. Meals or snacks that you serve that are not reimbursed by the food program to not have to be nutrition. Let's say you're on the food program, you serve breakfast, morning snack, lunch, you get reimbursed for them. Great. But now you serve, let's say an afternoon snack. Well, what does that stand? Popsicle, donut, cupcake, apple, it doesn't matter. You're entitled to [inaudible]. You don't need a receipt, you don't need a menu, you don't need a recipe. You don't need to write down what the snack was. You're just recording snack. I'm not telling you to serve [inaudible]. I'm just saying whatever you serve counts. One provider said as the kids left at the end of the day, and they're walking out the door, she passed out a cracker. One cracker, two crackers, three crackers, four crackers. She's able to make money crack minutes past now crackers because the cost of the cracker is a lot less than what she's able to deduct for that step. So this is a big deal tracking these extra non reimburse snacks. Third, track the hours you're working. First, track all the hours you're working in your own home when kids are there. Next, we also can count all the hours that kids are not in the home, but you're still in the home doing some business activity. Let's explain. Hours kids are present. Want to know all these hours. The more hours you're working, the lower your temp. Let's just say you're carrying for good 06:00 A.M. to 05:00 P.M. that's 11 hour a day. That's the average number of hours that providers care for children. That represents 33% of the year. Now, you want to track the moment the first child arrives until the last child leaves. Not what your operating hours are now, not your contract says when our kids actually there, and the time that I would pay most attention to is picked up. We want to know when the last parent walks out with their child not when they sign out. Pick up time is let's say 5:00. The last parent shows up at let's say 5:00 but starts talking to you, maybe they sign out but they're still talking and hanging out. They're outside on the porch, you're outside on the lawn, they're still there. Maybe they don't don't leave until 5:30. You want to record 5:30. Now if it's every day, an extra 30 minutes, that represents one and a half percent for the year. Now, that might not sound like a lot but we're going to use this as part of a formula to determine how much of all these thousands of dollars of house expenses you can give them, and one-and-a-half percent times thousands of dollars, adds up. It's worth the hours children are not there. This is the big deal. This is probably the most important thing I want to say as part of this video. You're entitled to track all these hours when kids are not there and you're in a home: cleaning, meal preparation, meal planning, activity preparation or recordkeeping, book program paperwork, time on the Internet, panel interviews, phone calls, listening to me now. You can count this time assuming you're in your home and kids are not there. When you're done listening to me, you got a calendar someplace and write down how much time you spent listening to this video. You've got to be in your home. So if you're traveling away from your home, going to the library, going into a training class away from your home, that time doesn't count. You got to be in your home. How do we track that? I would strongly recommend that you pick two months each year and carefully record on a calendar somewhere all the activities that you're doing. Let's say kids arrive at 6:00 but from 5:30-6:00 in the morning, you're cleaning. So you'd write down Monday 5:30-6:00 cleaning, Tuesday 5:30-6:00 cleaning Wednesday 5:30-6:00 cleaning and so on. Meaning after the kids doing record-keeping, some curriculum work, something on Saturday, whatever. You can use a kid care software for this. Then after doing this carefully for two months, you want to use an average of those two months. If you work 40 hours one month and 46 hours another month carefully, the average is 43 hours. If you can say that the rest of the year, you spend roughly the same amount of time as those two months, you could use 43 hours for the entire year each month. This again is single most important thing you can do to reduce your tasks, two month every year. If you want to do more in two months, fine. But I think two months is added. Here's an example. How many hours kids are there? Let's say you're caring for kids 06:00 AM-06:00 PM, 12 hours a day, not unusual. You work five days a week, 50 weeks a year, as you take a two-week vacation to Hawaii, that's 3,000 hours a year. You're tracking the hours kids are not present and your average was 10 hours a week, 50 weeks, 500 hours extra per year, 3,000 plus 500, $3,500. There's a total of 8,760 hours in a year. In this case, your time percent is 40 percent pretty common. There's no upper limit as to what it might be. You might be doing second shift care, overnight care, just longer hours and that's fine, record which you're actually working entitled to all of these hours. That's what I wanted to say. Save receipts for every one. If a daily record of all the meals and snacks are taken, particularly those that you're not getting reimbursed for by the food company, record all the hours you work, particularly the hours the children are not present. Next we will go on to what actually is taxable income.
