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DOUBLE TAP TO ZOOM WITH PHONE OR TABLET Family Child Care Record-Keeping Guide If a client family leaves in the middle of the year, require the parent to sign a receipt for the child care fees that they have paid you for that part of the year. If the parents of a child are separated or divorced, and both parents are paying you for a portion of the child care fees, give each parent a receipt for the amount that they paid you. Never give out receipts that total more than what a parent has actually paid you. If the father gave money to the mother to pay you for child care expenses, give the receipt to the mother for the amount that she paid you, even if she received some or all of this money from the father. If the father asks you for another receipt for the amount he paid her so that he can claim the child care tax credit, don’t give it to him. He should claim the credit by working out an arrangement with the mother. Signed receipts make it less likely that parents will claim an incorrect amount on their child care tax credit forms, since the parent will have to explain why the amount on his tax form is different from the amount on your signed receipt. You can help keep your client parents honest by explaining that they are likely to be audited if the amount they claim toward their child care tax credits does not equal the amount on your receipt. Gifts and Grants You must report as income any gifts of cash or gift certificates to you from the parents of the children in your care. This is true even if the parent calls it a “bonus,” “birthday present,” or “gift.” Small items of a noncash nature (food, flowers, etc.) are not income to you. If a parent gives you a toy, used furniture, or bicycle for your business, don’t report it as income unless the item is given partly in payment for your services. However, you may depreciate these items as expenses (see chapter 4). If you are given $500 to attend a family child care conference by a public or private agency or a parent, you must report this payment as busi- ness income. If you then spend $500 on conference expenses (travel, hotel, and so on), you may deduct it as a business expense. Many providers participate in grant programs run by their state or child care resource and referral agency. If you receive cash or equipment from one of these grant programs, you must report it as income, even if you don’t receive a Form 1099G Certain Government Payments from the agency. The only exception is if you are entitled to the grant only because you have a low income, and the source of the funds indicates to you that this money is not taxable. (Contact your granting agency for further information.) If you receive cash, and then spend the money on items for your business, or if you receive a large item, such as a swing set, you can deduct the cost of these items as a business expense. Use the regular rules for deducting business expenses described in chapter 4. If you are given an item, base your deduction on the fair market value of the item at the time you received it, and depreciate it. If you received a used sofa that is worth $300, you can depreci- ate this amount over seven years. Sometimes child care providers are given a grant with a stipulation that they must return the item if they go out of business within a set period of time. If this is the case, you can treat the item as if you owned it from day one, and you may begin depreciating it in the first 14 COPYRIGHTED MATERIAL