{"id":71916,"date":"2016-12-14T12:01:35","date_gmt":"2016-12-14T17:01:35","guid":{"rendered":"https:\/\/www.chcfinc.org\/clearinghouse\/?page_id=71916"},"modified":"2017-09-25T08:51:50","modified_gmt":"2017-09-25T12:51:50","slug":"record-keeping-taxes","status":"publish","type":"page","link":"https:\/\/www.chcfinc.org\/clearinghouse\/manage-your-business\/record-keeping-taxes\/","title":{"rendered":"Record Keeping & Tax Deduction"},"content":{"rendered":"

[vc_row type=”container” padding_top=”” padding_bottom=””][vc_column][vc_column_text]While mostly associated with aiding the tax preparation process (federal, state, local), income\/expense tracking and record keeping also allows\u00a0a provider to be in compliance with legal requirements (such as employee records), to see the progress of his\/her business, and to plan the business\u2019 future.<\/span><\/p>\n

Regardless of a childcare provider’s business structure, it is extremely important and helpful that he\/she keep a record of all income and expenses, retain all receipts, and distinguish between personal, business, and what is shared. \u00a0As a family childcare provider, items brought that are used for both business and personal purposes probably represent the vast majority of the purchases.<\/span><\/p>\n

\"taxes\"<\/p>\n

Receipts and\/or other records (i.e. bank statements, canceled checks, credit card statements, attendance records, meal logs, calendar notations, ledger, digital files\/spreadsheets, mileage logs, photographs, etc.) \u00a0are needed to justify the data presented in the provider’s tax forms.<\/span><\/p>\n

Before putting away receipts, the provider mark which items were used exclusively for his\/her business, personal or were shared. \u00a0Receipts should be stored in folders or envelopes containing similar expenses (toys, supplies, utilities, household items, etc.). \u00a0A place should e set up in the home where receipts can be placed and organized.<\/span><\/p>\n

Review your records at least once a month.<\/span><\/p>\n

The IRS recommends maintaining records for 3 years; however, the IRS can audit for periods more than 3 years past. Employee record keeping rules vary according to federal and state government requirements and it’s just as important to\u00a0regularly destroy and dispose of unnecessary records.<\/span><\/p>\n

In addition to keeping a record\u00a0of income and expenses, a provider should also document working hours. This is an important step in calculating the amount of rent\/mortgage and other household expenses that a provider may be able to deduct on Schedule C as a sole proprietor. He\/she may do this by keeping a separate log, a recording on an attendance sheet, or on a calendar.<\/span><\/p>\n

Note: working hours are not solely the hours’ children were in the provider home, but also time spent cleaning, doing laundry, meal preparation, planning\/preparing activities, interviewing parents, paperwork, writing emails, taking business calls, doing recordkeeping, and more.<\/b>[\/vc_column_text][\/vc_column][\/vc_row][vc_row type=”container” padding_top=”” padding_bottom=””][vc_column][vc_message message_box_color=”orange”]Keep copies of checks received from subsidy programs, grants, and\/or food reimbursements.<\/span>[\/vc_message][\/vc_column][\/vc_row][vc_row type=”container” padding_top=”” padding_bottom=””][vc_column][vc_tta_accordion active_section=”0″ collapsible_all=”true”][vc_tta_section title=”Separate Accounts” tab_id=”1447869841409-101a14d3-a918″][vc_column_text]The high level of shared household and business expenses presents a special challenge for family child care providers.<\/span><\/p>\n

As a sole proprietor, a childcare provider is not required to have separate accounts for personal and business.<\/i><\/b>\u00a0\u00a0A childcare provider is required to maintain accurate record keeping. Having separate personal and business accounts are deemed to be the most practical way of achieving this. For this reason, it is recommended that the provider establish checking and credit card accounts specifically for the business.<\/span><\/p>\n

If the provider is a sole proprietor or partner, he\/she can take a draw by writing a check to himself\/herself from the business account.<\/span><\/p>\n

Separate accounts may also reduce accounting\/tax preparation expenses since the accountant\/preparer will not need to spend time separating personal from business.<\/span><\/p>\n

Should the provider be audited, keeping personal and business separate will provide a clearer audit trail.<\/span><\/p>\n

The IRS in its Child Care Provider Audit Technique Guide has stated; \u201cexamination of these returns may result in the following determinations:<\/span><\/p>\n