Keeping good records of your food expenses seems simple enough if you are a family child care provider who uses the standard meal allowance rate.
But many child care providers fail to keep the records they should. As a result these providers lose hundreds of dollars of business deductions when audited by the IRS. I've seen it happen over and over again.
The IRS standard meal allowance rate allows you to claim your food expenses without having to keep any food receipts! Instead, you must keep the following records: the name of each eligible child, dates and hours of attendance in the family day care, and the type and quantity of meals and snacks served.
If you are on the Food Program your monthly claim form contains all of this information. If you are not on the Food Program you can track this information by using a sample log provided by the IRS or use a similar log found in the annual Redleaf Calendar-Keeper (which is also available for free online).
The problem is that most child care providers serve meals and snacks that are not reported on their Food Program monthly claim form. This includes meals and snacks served that are beyond the three servings a day that can be reimbursed by the Food Program. It can also include meals and snacks that were disallowed by the Food Program.
Meals and snacks served to children that are not reimbursed by the Food Program do not have to be nutritious. See my article,"What is a Popsicle Worth to You?"
Unfortunately, many child care providers assume that they can claim these "extra" meals and snacks without keeping any records. I hear providers tell me, "It's in my contract that I serve an afternoon snack," or "I always serve an afternoon snack." This is not enough. In an audit the IRS can say, "Since you didn't keep a record during the year, I'm going to deny this afternoon snack."
Losing this deduction can be a big deal. One snack a day served to one child for a year represents a $179 deduction on your 2012 tax return. In 2013 it will be $185.
The IRS rule requires you to keep a daily record of all meals and snacks served. This can be as simple as recording "Sally, Monday afternoon snack," or putting a checkmark next to a symbol for a snack each day.
How to Catch Up
If you don't have a daily record showing all the unreimbursed meals and snacks you served so far this year, what do you do?
Let's say you always serve an afternoon snack. Put each child's name on a piece of paper and use your attendance records to record how many days the child was in your program from the beginning of the year until now. Show your results by month ("January - 22 snacks, February - 20 snacks," etc.). Ask the parents of each child to sign the bottom of the paper where you have written, "This represents the number of snacks your child was served in my program from January 1st to _____." If you occasionally served a dinner or took children to a fast food place for lunch, add this to the paper. The parents will know that their child ate these meals and snacks and should be happy to sign it.
From this day forward, keep a daily record of the "extra" meals and snacks served to the day care children. It's okay to go back and reconstruct these records for part of a year, but don't make this a habit. Record these meals and snacks each day going forward. Some Food Program sponsors will allow you to record your "extra" servings on your monthly claim form. Ask them if this is okay before you do so.
The Big Three
The tracking of these meals and snacks is one of the top three things you can do to reduce your taxes. The other two are: keep track of all the hours you work in your home (particularly when children are not present) and save receipts for all expenses associated with your home.
Image credit: 1800dentist.com
For more information about tracking food expenses, see my book Family Child Care Record Keeping Guide.