The Daycare File Cabinet

file cabinet

This page includes must-know items by a new daycare provider that didn’t fit under any other category.  You know, that “junk drawer” that every kitchen has.  However, it is pertinent information.

Individual Enrollment Records:
You are required to keep records for each child that enrolls in your childcare. The county has a list of required documents and will supply you with the appropriate forms. This will include things such as an Admissions Form, Immunization Records, Permission for Emergency Medical Care, Permission to Transport and Permission to Administer Medication.

Other items that you may want to keep in your individual files are food program enrollment forms, copies of memos given to the family, permission slips, documentation of medication given to a child, accident reports and copies of end-of-year receipts.

After your initial county inspection to open your daycare, you must grant permission for licensing agency officials to inspect your premises anytime they deem fit. If they do come to your daycare for an inspection, all enrollment files must be up-to-date and complete. Be sure to update the address and phone number in your files when a family moves and be sure to get a new work number if they change jobs.

When you terminate a child, you will want to keep their enrollment file for a period of time. I store my terminated files with the tax records from that year. When I feel its okay to destroy the tax records, I also destroy the enrollment records.

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Register with the CACFP (Child & Adult Care Food Program): This is not a requirement, but you’d be making a mistake if you didn’t. The CACFP comes to your home once per quarter to inspect your kitchen area, note the number of kids in your care and look at your recorded food menus for the month. In return, you get a monthly check that covers the cost of your food. 

Some providers say, "I’d rather go without the check than have to do the paperwork required." Understood... but the government requires you to log your meals served for tax purposes, so you have to do it anyway. All you have to do is add the quarterly inspection and you get a nice check per month.

Join your local Childcare Association:
Your local childcare association can serve several purposes. It’s nice to be able to socialize with people in a “like” business. They provide you with training opportunities required by the licensing agency. You will acquire tips and ideas to make your childcare business run smoothly.  And it’s a good networking opportunity.

Contact your local CCR&R: (Child Care Resource & Referral)
Your local CCR&R is a valuable source of information. Their services include knowing the need for child care in your area, knowing average rates charged by other providers, liability insurance information and a referral program hooking up families with providers.

Liability Insurance:
Liability insurance covers you in case of a serious accident on your premises. Most homeowner’s insurance policies do not cover an in-home childcare business. You need to look into different options for liability insurance. One resource is Day Care Insurance Services.

If you’re planning on transporting children in your daycare, then you need to look into what extra insurance you need to carry on your vehicle.

Set Up a Small Business Checking Account:
For tax purposes, it is important to keep your business expenses separate from your personal household expenses. Setting up a small business checking account simplifies the task.

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Start Savings Funds:
Discipline yourself right from the start to have savings funds. There are three important categories to save for. "Low Enrollment Fund" "Vacation/Sick Day/Injury Fund" and "Retirement Fund". 

It seems like you get a termination notice at all the worst times. If you deposit just a little bit each week into a "Low Enrollment Fund", it won’t hurt your finances as much when you’re short on children in daycare.

If your policy does not include getting paid for sick days or vacation days, you’d be smart to start another fund for that. When those days roll around, just transfer the money from your savings to your small business checking and you’ll enjoy that vacation a whole lot more.

And, of course, we all know how important it is to save for retirement.

Tax Preparation:
I’m not going to even pretend to be a tax expert, but I can give you some pretty good advice from the civilian prospective.

  • Keep ALL receipts. Receipts back-up your tax records and are required for tax purposes. Get in the habit right from the start to just keep every receipt. You never know what might come up that you could claim if only you had the receipt.
  • Keep your records up-to-date. Sit down with “the books” once a month and do the required tax preparation such as categorizing your expenses. If you leave it all until the end of the year, it’s kind of daunting.
  • Take a tax class. Whether you’re planning on preparing your taxes yourself or you’re going to hire a professional, it’s good to know the basics. You then know what purchases and expenses are tax write-offs and what you can do throughout the year to make tax preparation easier.
  • Hire a tax advisor. Tax laws change every year and it’s hard for the average person to keep up with those changes. Hire a professional who is familiar with preparing taxes for child care providers. A good tax advisor will provide you with information on how you can cut down on taxes owed.
  • Keep tax records for at least three years. That’s how far back the IRS can audit you.
  • Pay estimated taxes. The first few years you have a childcare business, there are probably enough write-offs from start-up expenses that you don’t need to worry too much about estimated taxes. Starting in the third year, be prepared to pay estimated taxes. Otherwise, you may get hit with a big tax liability at the end of the year.
  • A little ditty: When I was in my early days of the business, I thought I was doing everything I had been advised to do. But I picked a bad tax advisor. The tax advisor did not advise me to pay estimated taxes and I got hit hard for three years in a row.  I remember every year getting our tax return back from the advisor and finding out the large amount of money we owed. I cried every year. I know it sounds stupid to keep going back to the same tax advisor, but she specialized in daycare taxes so, like I said, I thought I was doing the right thing. After three years in a row, I remember my kids hearing that it was time to give mommy some free time because she had to prepare our taxes. One of them said, “Does that mean Mommy’s going to cry again?” 

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Keep track of your car mileage
Car mileage is a tax write-off, but it needs to be documented. When you travel anywhere that is daycare related, be sure to write down mileage traveled. 

A lot of times, your daycare travel will interact with your personal travel. If you choose to write it off as a daycare expense, you need to be able to say that the primary reason you went on the trip was for daycare purposes. 

Remember, your daycare is a small business. If you need tax advice, refer to the IRS website under “Small Business and Self-Employed One-Stop Resource.”

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Marcia Reagan is the creator of DaycareAnswers and lives in Central Minnesota with her husband and two children.  She's been an in-home daycare provider for over twenty years and loves to share her experience and passion for daycare with other providers.  

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