Q&A About the IRS Standard Meal
Allowance Rate
Q: I care for a child who is over age 12
and is therefore not eligible to participate on the Food Program. Can I
still count the meals that this child eats as part of the standard meal
allowance calculation?
A: Yes.
Q: I am a Tier II provider. Does this new
rule mean that I will be reimbursed more by the Food Program?
A: No. The Food Program reimbursement
rates have not changed as a result of this new standard meal allowance
rule. You will still get reimbursed at the lower Tier II rate, even
though you can now claim food expenses based on the higher Tier I
rate.
Q: If I use the standard meal allowance
rate do I have to keep copies of my menus?
A: No. The new rule only requires you to
keep track of the names of the children, the dates and hours of
attendance, and the number of breakfasts, lunches, and snacks served.
If you are using the actual cost method to claim food expenses, you
would need to save the above records, plus receipts, plus menus.
Q: I am a provider on Tier II. Can I use
the Tier I rate to claim my food expenses or do I have to be on Tier I
before I can?
A: Under the IRS rule, all providers,
whether they are reimbursed as Tier I, Tier II, or both, are entitled
to claim food expenses using the Tier I reimbursement rate. You can
use the Tier I reimbursement rate for food expenses even if you are
not on the Food Program.
Q: I thought that I could only claim food
expenses that were more than my Food Program reimbursement. Dos this new
rule change this?
A: There has always been a lot of
confusion about how to report Food Program reimbursements and food
expenses on the tax form. The best advice is this: Report all your
Food Program reimbursement as income on Schedule C (line 6). There is
an exception: Do not report as income any reimbursements you get for
your own children. Claim as a food expense all the food served to the
children in your care (not counting your own children). Your food
expenses might be more or less than your Food Program reimbursements.
You can also claim deductions for meals that you were not reimbursed
and for food that does not meet the nutrition standards of the Food
Program. The new rule makes it easier to claim food expenses by using
the Tier I rate for all the meals you served.
Q: I compared what I would get as a food
deduction under the new rule with what I estimated I actually spent on
food. My deductions would be less if I used the new rule. Can I continue
to use my own method of estimating food expenses?
A: Yes. If you see that you can get a
higher food deduction by using your own method to estimate your actual
food costs, you don't have to use the new rule. Providers who live in
areas with a higher cost of living, or providers who spend more on
food, may be better off not using the new rule. If you are using your
own method to estimate your food expenses be sure to keep attendance
records, meal counts, and business and personal food receipts. For a
detailed explanation of how to calculate your own food expenses, see Family
Child Care Record Keeping Guide.
Q: My actual food expenses are less than
the Tier I rate. Can I still use this rule?
A: Yes! This new rule will benefit you
greatly. Providers who are thrifty in their food shopping and spend
less than the Tier I rate will come out ahead under this rule.
Q: My tax preparer has always advised me to
consider food expenses a "wash." So I don't report the Food
Program reimbursements or any food expenses on my tax return. What do
you think of this?
A: This is not a good idea. Most
providers spend more on food than they get from the Food Program. This
is because many providers serve extra meals and snacks that are not
reimbursed by the Food Program, they serve non-nutritious food on
occasion, and sometimes children eat more than one serving at a meal.
If you are a Tier II provider you are probably spending hundreds and
hundreds of dollars more on food than you get from the Food Program.
So, if you don't report either your reimbursements or your food
expenses on your tax return you are probably paying more in taxes than
you should.
Q: I'm confused. The Food Program only
reimburses me each day for two meals and a snack, or two snacks and a
meal. The new IRS rule allows me to deduct three meals and three snacks
a day. Does this mean that the Food Program will now reimburse me for
more meals?
A: No. The Food Program rules have not
changed as a result of the IRS rule. You will continue to get
reimbursed from the Food Program for no more than three servings of
food each day. But you can now use the Tier I amount to deduct food
expenses for up to six servings of food each day under the new rule.
Q: Each day I serve breakfast, lunch and
two snacks. Does this rule say I can count one more snack and supper
towards my food expenses, even though I didn't actually serve this food?
A: No. You can only count meals that you
actually served.
Q: If I don't save food receipts any more,
how am I going to be able to claim trips to the grocery store as a
business trip?
A: To claim a trip to the grocery store
as a business trip you need to show that the "primary"
purpose of the trip was business. Buying more business food than
personal food is evidence that the trip was primarily for the
business. If you are no longer saving your food receipts, it will be
more difficult to show this. If you have cancelled checks that show
both business and personal trips to the grocery store then it will be
easier to claim the business trips. You could make a notation on your
calendar of all the grocery store trips you make (business and
personal). If you can't keep track of this for the entire year, try to
carefully record this on your calendar for at least two months each
year. In other words, if you recorded that you took 10 trips to the
grocery store that were primarily for your business and another 5
personal trips, you would claim an average of 5 business trips a month
for the year, or 60 trips. Never claim 100% of your trips to the
grocery store as business trips.
