Don’t Let Tax Time Get You Down! We have resources to help!
- Recorded Webinar with Q&A. 2020 Tax Returns: Tips for Family Child Care Home Providers (Handling Grants, COVID business expenses, & More!), January 2021
- Slide Presentation from the 2020 Tax Return Recorded Webinar
Additional Resources You Can Use!
These one pagers are easy-to-understand explanations of IRS forms and business calculations to save you money!
- Understanding the Time-Space Percentage Used to Claim Business Expenses on Your Tax Forms (A one page explainer, English and Spanish)
- IRS Form 8829: Understanding Expense Deductions for the Business Use of Your Home (A one page explainer, English and Spanish)
- IRS Schedule C: Understanding Business Deductions Using Schedule C for Sole Proprietors (Profit or Loss Business IRS form, a one page explainer, English and Spanish)
Other Resources from Tom Copeland
- Tom Copeland’s web site
- 2020 Tax Changes Affecting Family Child Care Providers (February 17, 2021)
- What Are the Tax Consequences of a State Grant? (February 8, 2021)
- How to Find, Choose and Work with a Tax Professional (January 16, 2021)
- Recorded Webinar with Q&A. The Tax Consequences of Coping with COVID-19: Tax Tips for Family Child Care Home Providers (Deductible expenses, calculating the time-space percentage, understanding SBA programs, deciding when to claim Social Security, and more!), February 17, 2021
- Slide Presentation from the Tax Consequences February 17, 2021 Recorded Webinar
Links to Internal Revenue Service Forms & Material
- IRS Form Schedule C – Profit or Loss from Business (Sole Proprietorship)
- IRS Video – Schedule C: Who need to file this form and how to do it
- IRS Publication, Schedule C Instructions & Additional Information
- IRS Form 8829 – Expenses for Business Use of Your Home
- IRS Publication, Form 8829 Instructions & Additional Information
- All IRS Forms and Publications
U.S. Small Business Administration (SBA) Business Relief Options for Family Child Care Homes
In response to the COVID-19 public health pandemic, Congress passed several bills in 2020 to provide business relief, particularly for small business owners such as family child care home providers.
The SBA Paycheck Protection Program (PPP) expired on May 31, 2021. This means that PPP applications submitted on or before May 31 will continue to be processed in June. However, no new applications will be accepted unless Congress extends the program.
Brief Background About PPP loans. Congress created the PPP “forgivable loan” (in other words, a grant) for small businesses in March of 2020. Congress has extended PPP several times. In December 2020, Congress separated PPP into two programs.
- First Draw PPP forgivable loans are for businesses that did not receive a PPP forgivable loan in 2020.
- Second Draw PPP forgivable loans are for businesses that received a PPP forgivable loan, but still have additional need for financial support. The Second Draw PPP loans are restricted to businesses with 300 or fewer employees and must be able to show at least a 25% reduction in revenue between comparable quarters in 2019 and 2020.
As long as borrowers use the funds for eligible expenses, borrowers can apply for “forgiveness”, which is what turns the loan into a grant that does not need to be repaid. Borrowers need to apply for forgiveness within 10 months of spending the money.
How and when to apply for loan forgiveness
Borrowers can apply for forgiveness once all loan proceeds for which the borrower is requesting forgiveness have been used. Borrowers must apply for forgiveness within 10 months after the last day of the covered period (the 8-24 weeks for which the loan covered). If the borrower does not file for forgiveness within 10 months, then borrowers will need to being making loan payments to their PPP lender to repay the loan.
To apply for forgiveness, contact your lender.
Once you have spent the PPP funds, contact your PPP lender and complete the correct form.
SBA Form 3508S. This form is for borrowers of $150,000 or less. It’s a short one page form. No calculations are required. Borrowers do not need to submit documentation (unless required by your lender). However, the SBA requires retaining all records for Form 3508S for four years. This is required in the event that you are selected for an SBA random audit. This form can be used for either First Draw or Second Draw PPP loans. Each loan must use a separate loan forgiveness application form. Therefore, the form cannot be used to combine both First and Second Draw PPP loans. In the event that borrowers received both a First and Second Draw PPP loan, borrowers must first apply for forgiveness for the First Draw Loan. Once that form has been submitted, borrowers can then apply for forgiveness for the Second Draw PPP loan. You may want to apply for forgiveness as soon as the funds are spent so that you don’t have to worry about bumping up against the 10 month time limit for submitting the forgiveness form.
Note: It is possible that your lender may have equivalent forms to the SBA form above. Lender forms may be in a PDF format or an online webform format.
Overview of Eligible Expenses for Forgiveness
In general, in order for forgiveness to be approved, at least 60% of the funds must be used for payroll related costs. This means up to 40% of the loan can be used for fixed costs such as mortgage interest, rent, utilities, software used for your business (e.g., for record-keeping or supporting other business operations), perishable goods (such as food costs), expenses for PPE, cleaning supplies, and other expenses related to social distancing and public health requirements related to COVID. For family child care providers, you are eligible for a PPP forgivable loan whether or not you have employees. (For example, for purposes of the PPP loan, an FCC provider is considered an employee). This means when completing the SBA form, the FCC provider is considered 1 employee. (e.g., In response to: Employees at Time of Loan Application, insert 1. In response to Employees at Time of Forgiveness Application, insert 1).
Allowable Expenses for Non-payroll Uses of PPP Funds. Four additional categories of eligible expenses for fixed costs were added through legislation enacted in December.
- Covered Operations Expenditures. Costs related to business software or cloud computing services that support business operations, billing, accounting, or record-keeping. For example, for child care programs, this means the cost of child care management system software that supports business operations or other business support.
- Covered Property Damage. Property damage due to public disturbances that occurred during 2020 that are not covered by insurance.
- Covered Supplier Costs. Expenses pursuant to a contract, order, or purchase order with respect to perishable goods and other items. For example, for child care programs, this means the purchase of food served to children.
- Covered Worker Protection Equipment. Expenses that support business activities to comply with COVID requirements established by the U.S. Department of Health and Human Services, Centers for Disease Control, Occupational Safety and Health Administration, or any equivalent requirements or guidance by a state or local government during the pandemic. For example, for child care programs, this means expenses for PPE, cleaning supplies, sneeze guards, portable water stations, and other expenses related to social distancing and public health requirements related to COVID.
Note: Although expenses related to fixed costs were expanded in legislation enacted by Congress in December, the requirement for at least 60% of PPP loans to be used for payroll related purposes remains in place. Payroll expenses include cash compensation, employer contributions for group health, life, disability, vision or dental insurance and employer contributions to employee retirement plans (exception: benefits for the self-employed (e.g., family child care providers) are not included because the SBA considers such payments already included in compensation).
Each of the SBA Forms that correspond to PPP loans is accompanied by detailed instructions: 4 pages of instructions to explain SBA Form 3508S, 5 pages of instructions to explain SBA Form 3508EZ, and 8 pages of instructions to explain SBA Form 3508.
For help in completing SBA forms, ask your lender or reach out to your local Small Business Development Center (SBDC).
- How to Apply for the Economic Injury Disaster Loan (EIDL) Program (February 4, 2021)
- Top Three Record Keeping Tips for 2021
- How the New Tax Law Affects Family Child Care Providers
- 2021 Standard Mileage Rate Announced
- The Truth About Parent Receipts
- How Can Sponsors and Providers Rebuild in the Midst of a Pandemic (Child and Adult Care Food Program, CACFP)
Tools You Can Use to Support
Your Registered Family Child Care Home!
Have your heard about our online family child care toolkit? Learning resources, business templates, discounts on frequently purchased products and more!
- Recorded Webinar. Overview of the Online Family Child Care Toolkit (January 23, 2021)
- Slides (Introduction to the webinar)
For more information contact:
732-918-9901 ext. 133
COVID-19 Child Care Information – NJ Child Care Agencies
COVID-19 Economic Injury Disaster Loans. The U.S. Small Business Administration offers low interest loans to small businesses, including family child care providers. Unlike the PPP program, the Economic Injury Disaster Loans (referred to as EIDL) are not forgivable. The interest rate for family child care homes is 3.7%. Payments are deferred for one year (although interest accrues). The loan is for 30 years, but can be paid back sooner if the borrower chooses to do so.
Targeted EIDL Advance funds of up to $10,000 (which are grants, not loans) will be available to applicants located in low-income communities who previously received an EIDL Advance for less than $10,000, or those who applied but received no funds due to lack of available program funding. Applicants may qualify if they:
- Are located in a low-income community. The definition of a “low-income community” is defined here.
- Have more than a 30% reduction in revenue during an 8-week period beginning on March 2, 2020, or later. Providers will be asked to provide gross monthly revenue (all forms of combined monthly earnings received) to confirm the 30% reduction.
Applicants do not need to take any action at this time. The SBA will reach out to those who qualify.
U.S. Internal Revenue Service (IRS) Business Relief Options for Family Child Care Homes
Employee Retention Tax Credit. For family child care providers that have an employee, you may also qualify for an employee retention tax credit. Read this one pager on the Employee Retention Tax Credit and talk to your tax preparer to see if you can claim this tax credit.
- New Jersey Economic Development Authority Home Page (the resources below can all be found on the NJ EDA website! Check it out!)
- Business.NJ.Gov, New Jersey COVID-19 Business Information (COVID rules & guidance plus grants & loans)
- What county and local government financial assistance programs are available for my business?
- Where can I find more information about the NJ Small and Micro Business PPE Access Program?
Child Care Aware of New Jersey:
Small Business Administration:
- SBA Business Relief [Insert this bullet]
- PPP Forgiveness. Contact your lender to submit your forgiveness form (SBA Form 3508S). This form is for borrowers of $150,000 or less. It’s a short one page form. (Your lender may use this form or one that is equivalent) [Insert this bullet]
- SBA EIDL Loan Overview (U.S. Small Business Administration, January 2021)
- SBA Targeted EIDL Advance Overview (U.S. Small Business Administration, January 2021)
- FAQs from Tom Copeland’s web site related to SBA relief (e.g., First and Second Draw PPP loans for family child care providers)
- Unemployment Compensation Update (One Pager, Committee for Economic Development, March 2021)
Internal Revenue Service:
- IRS Employee Retention Tax Credit Overview (Child Care Aware of New Jersey, March 2021)
Professionalize Your Family Child Care Home
Tuesday Tips: Newsletters
Child Care Aware of New Jersey:
- COVID-19: Child Care & Recordkeeping 1 pager (May 1, 2021)
- COVID-19 Expense Tracker Template
- The Basics of Using Excel Spreadsheets – Simple Steps for Mastery in Minutes (May 4, 2021) English and Spanish
- Using the MyKidzDay App to Organize Your Records and Communicate with Parents (May 11, 2021) English and Spanish
- American Rescue Plan: Affordable Health Care Coverage through Get Covered New Jersey (English and Spanish)
Strengthening Children’s Fine and Gross Motor Skills – Resources for FCC providers and Parents
- Ages & Stages Learning Activities
- Fine Motor Skill Building Activities for the Home
- Gross Motor Practice Skills and Activities
- Parent Activity Guide for Birth to 3
- Child Activities to Strengthen Fine and Gross Motor Skills (June 1, 2021) English and Spanish
- Summer Professional Development Trainings for family child care providers (June 8, 2021) English and Spanish
- Summer Fun Activities for Children in Family Child Care Homes (June 22, 2021) English and Spanish
- Recorded Webinar with Q&A. How to Effectively Use Contracts & Policies for Family Child Care Homes in the Age of COVID-19 by Tom Copeland, February 22, 2021
- Slide Presentation from the February 22, 2021 Recorded Webinar
Money Management & Retirement Planning
• Recorded Webinar with Q&A. Money Management and Retirement Planning by Tom Copeland, March 1, 2021
• Slide Presentation from the March 1, 2021 Recorded Webinar
• Individual Retirement Account (IRA) Comparison Matrix (One page explainer, March 2, 2021)