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Starting a daycare business is a wonderfully rewarding career. However, record keeping and filing taxes for your daycare business can be daunting and confusing. What records do you need to keep? How long do you need to keep records and receipts? In this brief guide, you will find general guidelines for record keeping and the records necessary in the event of an IRS audit. This information in no way replaces any advice you should receive from a tax accountant.

In general, daycare businesses must keep their income and expense records for as long as they are important for tax laws. This is usually the later of the following dates:

• 3 years from the return due date or the date the tax return was filed.
• 2 years after income tax was paid.

Kathleen Kansfield, CPA and Martin Freeman, CPA for home daycare businesses, advise that daycare providers keep records for the following lengths of time:

For a minimum of 7 years keep records of:

• Bank statements
• Canceled checks
• Deposit receipts
• Payment receipts
• Attendance reports
• Bills

For a minimum of 4 years, keep payroll records (if applicable)

Never throw away:

• Copies of your income tax return
• Audit reports from the IRS and any related correspondence
• Information related to home purchase and improvement

Be sure to keep careful records in these areas as these are the ones the IRS adjust most:

• Gross receipts: Bank accounts and Federal food program reimbursement records
• Food expenses and food reimbursement (remember that you cannot deduct food for your family, this is a nondeductible personal expense)
• Automobile expense ( keep an automobile mileage diary)
• Business use of the home: square footage of your entire residence and portion used for your business; daily records
• Receipts for supplies and miscellaneous expenses

Gathering Information for Your Tax Return

Start gathering your records from your daycare business on January 1^st. While this sounds early, if you have issues or questions you have plenty of time to make arrangements to get it.  If for some reason you cannot file taxes by April 15^th, you can file an extension on your tax return. File for an extensions BEFORE April 15^th and be sure to pay any taxes you think you might owe when you file the extension form.

Also, keep in mind that canceled checks are not acceptable for the IRS if you get audited. You will need to provide actual receipts.  Be sure to consult a tax accountant to answer any questions you may have and to file your tax return for your daycare business.

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Staring a daycare business can be a confusing process. Should you become sole proprietor of your daycare business? Should you incorporate your daycare business? How do you incorporate your business? These are some questions to ask yourself before you begin the daycare licensing process. Susan Cooper, M.Ed, and member of the non-profit Applied Scholastics International explains daycare business models and describes the benefits of sole proprietorship and partnership for daycare business owners.

OwnADaycare: What is sole proprietorship? What are the first steps in becoming sole proprietor of a daycare center?
Susan Cooper: A sole proprietorship just means that there is only one (sole) owner of the business. In a daycare center that would be the responsible party even though many duties are delegated to others. In California, the owner of a daycare center is required to state who the delegated person is to act on behalf of the owner or sole proprietor. This in no way relieves the sole proprietor of his/her responsibilities.

OwnADaycare: What are the first steps necessary for incorporating a daycare business?
Susan Cooper: The first steps to incorporation of a daycare business are the same as any other business. It’s best to check with a State agency to see what is required. In California, the first step is choosing a name that is available by checking with the Secretary of State. Then the next step is filing the correct paperwork with the Secretary of State, such as the Articles of Incorporation. Then hold your first Corporate Organizational Meeting and adopt the company’s Bylaws. Get a Federal Employer Identification Number from the IRS, also called a FEIN. Get a business license from the city or county. Submit a Corporation Statement of Information. Then start the process of applying to the State agency that licenses daycare centers. In California, that agency is Community Care Licensing.

OwnADaycare: What are the advantages of sole proprietorship for daycare center owners?
Susan Cooper: The advantages of sole proprietorship for a daycare center are that you can control the overall philosophy of the program, the policies and procedures of the operation, and the methodology used by the teachers towards educating and instructing the children.

OwnADaycare: What are the advantages of partnership for daycare centers?
Susan Cooper: The advantage of a partnership for a daycare center is that you can have the input from other experts in formulating the policies and procedures of the operation, in adopting a philosophy for the program, and in creating methodology that teachers will use in the classrooms.

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Before deciding to start a daycare business it is important to assess if the business of daycare is for you. This means asking yourself a few simple questions about your personality, your skills and experience. This also means you must also assess the space you are planning for the daycare business.

Personal Attributes

Do I truly enjoy working with children?

Am I in good health?

Am I energetic?

Do I have a high level of stamina?

Can I think quickly and remain calm in emergencies?

Can I come up with projects and activities that will stimulate young minds?

Am I patient?

Do I have a high level of tolerance?

Am I flexible enough to work with children with a variety of temperaments?

Do I really want to be my own boss?

Do I want to improve your standard of living?

Business Skills

Do I view myself as an entrepreneur?

Can I market my business and attract clients?

Do I have any experience as a director or a manager?

Am I highly organized?

Am I detail oriented?

Am I good at keeping accurate records?

Am I honest and direct?

Can I communicate effectively with parents and neighborhood leaders?

Can I write effective policies, handbooks, notes and emails to parents, and newsletters?

Can I cope with long hours and high levels of stress?

Can I perform a variety of tasks at once?

My Home

Do I have (or can I develop) space that is separate from my home?

Do I have office space and storage space?

Can I provide a variety of areas for play both indoors and outdoors?

Do I have enough space for bulletin boards and displays of artwork?

Is my spouse supportive of my business venture?

Can my children accept that they will share their home, toys and mother with other children?

Am I ready to achieve my dreams through a rewarding child care career?

Do not worry if you answered no to several or many of the questions in the self-assessment. Instead, brainstorm simple solutions to your challenges. For example, if you were unsure of the question, “Can I write effective policies, handbooks, notes and emails to parents, and newsletters?” there are several solutions this. There are so many websites that offer free daycare business forms and handbook templates. Try the resources at Supporting Providers. This website provides free printable business, forms, contracts. If you don’t have office or storage space you may qualify for a daycare grant that will enable you to expand. Visit daycaregrants.org to see free daycare grant listings by state.

Now that you have decided daycare is for you, being by getting the daycare forms necessary for starting a daycare business in your state. Visit daycareforms.org.

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We asked our OwnADaycare Facebook fans who are daycare owners, to reveal information they would love to anonymously convey to parents. This information is helpful not only for parents who send their child to daycare, but also will help new daycare owners create and enforce policies for their daycare business.

Concerns fell into two categories: Daycare owners have issues with respect for policies and with behavioral issues:

Parents, Please Respect our Business and Our Policies

Please be on time and pay the correct amount on time. Child care providers have families too and have to make dinner, clean up and put their children to bed also. So if you are late picking up, their children are overtired and hungry.

Daycare providers are not babysitters; they are professional child care providers.

Bring the items you’re asked to bring (and that you agreed to bring) for your child. When parents following this rule it helps daycare providers care for your child and allows the provider to buy everything they need to care for your child.

Follow the parent and provider agreement and contract that you signed. It is your responsibility to read it. Would you buy a house or a car without the contract before you sign it? If you don’t follow what it says then prepare to lose your child care.

Please read the newsletters and calendars. Child care providers put a lot of time and effort into planning activities for your child and would like for the children to come prepared.

If your child is up all night puking and had a 104 fever, please keep him home! Please don’t give your child medicine before coming to daycare to disguise a fever. Sure, you might miss a day of work, but the alternative is getting all of the kids sick all of the kid’s parents missing a day of work.

If you work together with your child care provider on every aspect throughout the day care journey, you may avoid lots of unnecessary conflict! Follow all policy rules, and work WITH the child care provider, rather than AGAINST her!!

Lack of respect and is frustrating. Just because a child care provider is at home all day every day, doesn’t mean that he or she is obligated to accept kids at any hour during the day. There are regulations that must be followed.

Your childcare provider needs paid days off.  You get paid when you take a day off, so please give it to them and don’t make them feel guilty that they need time off.

Please respect the child care provider’s home. Child care providers work hard keep it nice. There are areas in the home that are NOT for daycare. Please keep your child out of those areas.

Please don’t throw your kids art projects on the car floor. Hang them up at home and talk about them. Tell the child care provider how much you appreciate the efforts it takes to do a project.  It is a lot of work while we are a cook, plumber, housecleaner, shrink, teacher, counselor, etc. We usually love what we are doing for the children – being appreciated really helps us get thru those rough days.

Don’t expect the child care provider to potty train your child if you are not willing to do it at home. The child care provider will help but it is not their responsibility.

Please Communicate! Child care providers may be able to handle a lot of what is thrown at them, but cannot read minds. Child care providers won’t bite, will not take anything you say to them personally. Please communicate what you expect of them and allow them to fill those needs or to openly express to you why they are not able to do so.

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Green Environments for Daycare Centers photo by jekert gwapo

Increasingly, more family daycare businesses are becoming environmentally safe and responsible.  Child care providers are special taking measures (as an important component of their daycare jobs) to ensure that the environment provides the best in health for children, offer locally-grown or organic food, and celebrate multiculturalism.

Matt Haugh directs sales and marketing for BigToys, Inc., a commercial playground equipment manufacturer based in Olympia, Washington. In Part 2 of our interview with Haugh, Haugh describes the types of equipment necessary and safe materials for green daycare centers.

OwnADaycare: What kind of equipment would a small family childcare business require? What types of materials should a small family childcare business avoid?

Matt Haugh: There are many factors that contribute to creating a safe and developmentally appropriate playscape, and regional differences make it difficult to generalize. Fortunately, BigToys has a network of professionals who can answer any question, and we’ve also created a helpful guide to early childhood play spaces, which can be found here as a PDF, where you’ll find many ideas for natural playscapes that we like to think of as “pockets of play along a path.”

Obviously all playground designs should begin with safety, and it’s important to consider supervisor visibility (lines of sight), sun exposure, pooling water, and many other factors. Beyond core safety, well-designed playgrounds incorporate as many natural elements as possible while creating exploration and growth opportunities for developing minds and bodies. From a safety, durability, and design perspective, commercial manufacturers can play a critical role, but it’s also worth consulting with local landscaping and materials experts to come up with a total design that can be comfortably maintained while giving kids maximum exposure to nature.

For many customers (especially small centers) it makes the most sense to start small, and slowly add more natural and environmentally friendly materials as budget allows. This also lets learn how the kids interact with new elements, which supports decisions about future changes and additions. Thinking of it as an ever changing, organic growth and learning process can be very liberating compared to the more traditional “rip out and replace” mindset.

OwnADaycare: When selecting playground equipment many daycare providers have been told to avoid items that are made of treated wood. Is this correct? Can you elaborate on this?

Matt Haugh: BigToys’ wood structures are conditioned with copper azole (a water-based wood preservative comprised of 96% copper and 4% azole) which prevents fungal decay and insect attack. Our conditioning process provides lasting durability, releases no air pollutants or wastewater, and uses recycled materials. Furthermore, our wood conditioner contains no heavy metals, is arsenate free, won’t leach out, won’t dissolve, won’t stain, and won’t pollute. Copper azole is approved by the EPA and CPSP for use on playground equipment.

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Green Daycare Environments photo by jekert gwapo

Increasingly, more family daycare businesses are becoming environmentally safe and responsible.  Child care providers are special taking measures (as an important component of their daycare jobs) to ensure that the environment provides the best in health for children, offer locally-grown or organic food, and celebrate multiculturalism. Matt Haugh directs sales and marketing for BigToys, Inc., a commercial playground equipment manufacturer based in Olympia, Washington. Haugh describes green environments for daycare centers in this interview with OwnADaycare.

OwnADaycare: What exactly is a green/environmentally friendly playground/play environment?

Matt Haugh: The essence of a natural playground is one where natural behaviors are promoted and supported, so, [in addition to the technical dimensions mentioned in my article in Park & Rec Trades], we believe that green playgrounds should have at least two crucial properties: They should be made from the most environmentally friendly materials available, and they should promote not just physical activity, but also creative and collaborative social play. Ideally, commercial equipment should offer play activities that merge the physical with the social, as happen with several BigToys patented marquee events.

OwnADaycare: Is building a green playground economical and realistic? Is any playground completely environmentally friendly?

Matt Haugh: There’s never been a better time to build an environmentally friendly playground as our environment has never been more threatened, nor have there ever been more excellent options from which to build the optimal playscape. Increasingly, minimizing environmental footprint is becoming non-optional, even in tough budget times. BigToys has spent the past 40 years making tough, often expensive choices, because we believe you can’t truly care for children without doing everything possible to protect the planet they’ll one day inherit.

OwnADaycare: Please give me more background about your company, BigToys, Inc.

Matt Haugh: For the past 40 years, BigToys Inc. has been building commercial playground equipment that provides a safe, fun, developmentally appropriate play experience for kids around the world. Our structures can be found in school playgrounds, parks, childcare centers, and private communities and developments. We offer products for children from 6 months to 12 years old.

We build structures from recycled steel and 100% recycled plastic, or Forest Stewardship Council certified wood, making them the most environmentally friendly playgrounds available anywhere today. Our kid friendly wood treatment is EPA approved and BigToys’ school and commercial playground equipment contains NO PVC.

We put safety first. We are a founding member of the International Playground Equipment Manufacturer’s Association (IPEMA). Our equipment is IPEMA certified and complies with ASTM, CPSC, ADA, CSA, EN, and AU playground safety standards.

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As part of our Interviews with Daycare Business Owners series, we interviewed Angie Koboldt of The Thoughtful Spot Day Care in Lake City, Michigan.

OwnADaycare: Please describe your childcare business. When and why did you start your daycare/childcare business?
Angie Koboldt: I started my childcare business in 2004.  I decided that I wanted to stay at home with my son and make money and a day care would be the perfect way to do that.

OwnADaycare: What is the best bit of advice that you can give a new child care business owner?
Angie Koboldt: The best advice I can give to a new childcare business owner is to have a parent contract and stick to your rules.  Don’t give exceptions, because people WILL take advantage of that.  Taking care of your friends children is an easy way to fill your day care, but it’s also an easy way to be taken advantage of.

OwnADaycare: What was your approach to obtaining insurance for your daycare business?
Angie Koboldt: We just use the insurance agency that insures our home.  We had a hard time finding companies that would insure day care.

OwnADaycare: What steps did you take to childproof your daycare business?
Angie Koboldt: Michigan has a lot of rules, but I also had a young son at the time so we didn’t really have a lot of childproofing to do.  There were already cabinet locks, outlet protectors, and cleaning supplies locked up.

OwnADaycare: Where do you get the inspiration for all of the wonderful theme based curriculum you create?
Angie Koboldt: I love doing projects with kids!  I can see any kind of project/idea and turn it into something age appropriate for children to do.  I pick themes that would interest kids and run with it.

Bio: Angie Koboldt has had an in-home day care for 6 years.  Angie’s hobbies are running, scrapbooking, and card making.  Angie has a son who will be 7 in July.  Her husband works with the Michigan State Police as a State Trooper.  The Koboldts enjoy going to baseball games together and going to the beach!

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As part of our Interviews with Daycare Business Owners series, we interviewed Deborah Sexton of Debbie’s Daycare in Lincoln, NE.

OwnADaycare: When and why did you start your daycare/childcare business?
Deborah Sexton: I started my daycare when my granddaughter was born, and I had 3 surgeries in one year. The time had come to follow my dream.

OwnADaycare: What is the best bit of advice that you can give a new child care business owner?
Deborah Sexton: Advice: Have a contract, renew every year, and remember it’s a business not a place to make friends.  When you start treating families as friends they tend to take advantage of you. It’s business first.

OwnADaycare: What characteristics or qualifications do you have that have contributed to your success?
Deborah Sexton: Being a grandmother, and experience in raising my own children.  Nothing can replace experience.  Education is a plus. This state requires 12 hours of education, but since I’m currently doing daycare on weekends for Air Guards I’m required to have 24 hours of credit.

OwnADaycare: How does your daycare business stretch a dollar?
Deborah Sexton: I watch every penny, I shop for toys and supplies at the goodwill and Salvation Army, and I never turned down when a parent offers things they don’t want of need.

OwnADaycare: What types of things does your daycare business do to encourage parental involvement?
Deborah Sexton: I send emails out every month to parents on what is happening at daycare, plus I post a sign on my door of all the upcoming events.  I invite and encourage them to come along with us when we have an outing.

Bio: Deborah Sexton has run her daycare business out of her home for over 7 yrs now.Her husband, bless his soul, has been a God send.  He helps out with the kids every day after his own job.  The Sextons decided this together, and consider this a family business.  Deborah’s daycare is mostly from referrals, from other families that have come here in the past. The main thing Deborah has learned is honesty, no matter how bad you think it could be. Always be honest with parents and hopefully they will be honest with you.

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Daycare centers are play area where working parents can leave their child for the day so that the parent may be able to go to work. Not all find a happy situation with regards to engaging the services of a day care facility for a child. So if a child is unhappy in the current facility, what then can a parent do?

The first step must be communicating with the day care facilitator. Parents at the first instance be able to address issues and observations about the center’s facilities and processes. It is not surprising that many children learn to use the power of parental guilt to curry favors from the parent. This is easily discernible by a child not wanting to let go of the parent but becomes happy and sociable when left with other children. If this happens everyday, the day care facilitator now can step up and address this situation. This stepping up involves correcting inappropriate behavior in the child and providing the child a full perspective of the child’s behavior in both the parent’s vicinity and most especially when parents are not around. This cooperation is key to finding the best opportunities and instruction for a child.

Change may be the option. One needs to scout around for an alternative facility if there is unhappiness in the child or there are observations that were not addressed even if properly raised. Another day care facility may provide the refuge the child needs and the parent the sense of security that one’s child is able to develop into a good person. One does not get into a lifelong bond in day care facility engagement, parents are free to move about to see other day care centers that may provide services more suitable to the child’s needs and temperament. So finding a suitable day care facility, be it for area or for content, one needs to do the proper legwork or research for one to be able to decide correctly.

Solutions can be found. Sometimes, parents need a realization that day care may not be suitable to one’s child. Having one parent, in a two-parent family staying home may be the healthier alternative for the child’s welfare. Fiscal decisions would have to be made but the loss of one parent’s earning capacity may not be that deeply felt because of the budgetary changes that have been made concerning the adjustment to incomes. One may even not need to give up the income altogether. Working from home, telecommuting and other part time work are options one can undertake to care for the child while still being able to work. Some offices even have day care facilities right in their offices and thus the child can easily accessible by a parent at any one given time.

Parents must decide as a family unit to seek what is the best option for their child. With the many options that have been discussed, with some discernment and decision-making, the ultimate beneficiary is the child’s welfare and development. Finding the solution, if day care services are not good for the child anymore can and may be found for the family’s betterment.

See: How to start a daycare bsuiness

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