A Tax item for Day Care Providers

IRS Reduces Burden for Family child Care Providers (No more saving of food receipts!)

The Internal Revenue Service announced on February 24th , 2003 that child care providers may now choose to use a standard meal allowance rate to claim food deductions instead of keeping detailed records and food receipts. This new rule will significantly reduce the record keeping burden of family child care providers. The IRS estimates that this new rule could save provide approximately 10 million hours of record keeping.

The new rate will adopt the Tier I rate from the child and Adult Care Food Program in effect at the beginning of each calendar year. The rate that can be used for calendar year 2003 is $.98 for breakfast, $1.80 for lunch or supper, and $.53 for a snack. The Tier I rate is the higher of the two different rates of reimbursement under the Food Program.

Providers can use the standard meal and snack rates for a maximum of one breakfast, one lunch, one dinner, and three snacks per child per day. Any extra meals or snacks beyond these amounts may not be counted when using the standard meal allowance rate. Providers can count meals even if they do not meet the nutrition requirements of the Food Program.

The new rule is effective for 2003. However, if providers use the Tier I rates for prior taxable years, the IRS will not challenge this method in an audit. For 2002, the rates are $.96 for breakfast, $1.78 for lunch or supper, $.53 for snacks.

For more information see IRS Revenue Procedure 2003-22 on the web at IRS.gov.

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