USDA Reimbursements

[tenderhearts]

We have had the same tax accountant do our taxes (daycare) for the last 10 years. I've never doubted what she has done but I've been more interested in understanding how she does it. Well I'm confused about the USDA reimbursements and how she does it, or lists in on the tax return.
Are there different ways of doing it?

[TomCopeland]

Food Program

We have had the same tax accountant do our taxes (daycare) for the last 10 years. I've never doubted what she has done but I've been more interested in understanding how she does it. Well I'm confused about the USDA reimbursements and how she does it, or lists in on the tax return.
Are there different ways of doing it?

Let's say you received $4,000 in reimbursements from the Food Program and spent $5,000 on food (using the standard meal allowance rate, or actual food costs). IRS publication 587 Business Use of Your Home) says to net these numbers, meaning you would report zero income and $1,000 in food expenses. The IRS Child Care Audit Guide says to report the $4,000 income and the $5,000 expense. In my 30 years experience with IRS audits, the auditor will always want to see all of the income and all of the expense.

[tenderhearts]

Thank you Tom, Sorry I'm still confused on the part of receiving $4000 in payments but spent $5000? Is that meaning the amount for the non-reimbursed meals? or am I suppose to be keeping my receipts for groceries? I was told if I was on the food program I didn't have to, but now I'm worried?

My accountant has always added my usda reimbursements to my actual daycare income, I'm not sure what or how she does the non reimbursed, there is nothing on the "other" line of my tax return. Thanks again.

[TomCopeland]

Food

Thank you Tom, Sorry I'm still confused on the part of receiving $4000 in payments but spent $5000? Is that meaning the amount for the non-reimbursed meals? or am I suppose to be keeping my receipts for groceries? I was told if I was on the food program I didn't have to, but now I'm worried?

My accountant has always added my usda reimbursements to my actual daycare income, I'm not sure what or how she does the non reimbursed, there is nothing on the "other" line of my tax return. Thanks again.

You should be deducting food expenses based on either using the standard meal allowance rule or the actual food expenses method. In either case, there should be a line on your Schedule C for food expenses. If you use the standard meal allowance rule you don't need to save any food expenses. Count all the meals and snacks you served (reimbursed meals/snacks and non-reimbursed meals/snacks) and multiply by the standard rate ($1.27 breakfast, $2.38 lunch/supper, and $.71 snack). If you use the actual food expenses method you must save all food receipts and estimate your actual food costs.

So, show your food program reimbursements as income and claim all food expenses using either one of these methods. These food expenses will always include meals and snacks reimbursed by the food program and any other meals and snacks served that you were not reimbursed.