Funding for the grants comes from the American Rescue Plan Act. Before the pandemic, there were approximately 675,000 childcare providers around the country, mostly small businesses, who were already operating on thin margins. 2. . The two-year grant period is scheduled to end in September 2023, meaning eligible employees may receive . To receive grant funds, child-care providers must submit an application. A: If you are incorporated and are being treated as an employee of your corporation, then the corporation will report the grant as income. 1099, W-2? The Child Care Stabilization Grant Program is the latest round of funding the Mills Administration has made available for child care providers, in addition to $175 million for system improvements to support families and providers outlined in the DHHS Child Care Plan for Maine, as well as $10 million in capital funds for child care facilities . Q: Would you need a separate account to pay yourself? What is the SC Building Blocks Grant? A: You can count all hours that you work in your home, either caring for children or doing other business activities. For further guidance on the tax implications of the Child Care Stabilization Grant, please contact your accountant or financial advisor. Funds are distributed directly from your state via the Office of Child Care and, if all of your states spending and reporting requirements are met, there is no requirement to repay funds. If you need to spend the grant money on items for your business, go ahead. Is the grant taxable income? Can I still use the standard meal allowance rate or must they use the actual expense method? Z~0^ I5%jE6)jh2!Z4Wq3 Top of the Document . A: Some states have different rules about this. Here are the answers to the many questions raised during the webinar. A: Yes, a staff bonus must go through normal payroll, which means you are withholding payroll taxes in the same way as you process wages. What if I am on payroll with my staff? A: Only if you already have a post-secondary degree. Providers can therefore use all or part of the grant to pay themselves. This can be done by transferring money from one bank account to another, writing yourself a check, or leaving money in one bank account and make a note indicating that this is money to pay yourself. This builds on critical down payments on relief . Q: I moved my child care business out of my home into a separate building. Q: If my husbands is disabled and collects Social Security Disability Insurance, will it change to regular Social Security when he reaches age 70? We are planning on finishing the kitchen after the first of the year by replacing the old cabinets. All Rights Reserved. The American Rescue Plan Act (ARPA) has provided resources to states to distribute stabilization grants to child care providers to ensure that child care is available to support families and businesses as the economy recovers. A: You can use a vehicle for both business and personal purposes. A: You can apply some of the grant money to cover lost revenue, but you cant deduct lost revenue as a business expense. Ive created an instructional video that answers these questions and many more. 32% of employers have seen some of their employees leave the workforce due to the effects of COVID-19. Even if I didnt get Form 1099? A: Yes, you can pay yourself any amount. Report as income, the amount you received from parents. A: Depends on what your state says. This means you will pay some additional Social Security taxes, but it also means your higher profit will potentially increase your Social Security benefits. This is not a loan. KidKare is a comprehensive record keeping program that includes an accounting section that allows you to keep track of all your income and expenses. She can deduct these expenses from the taxes she owes, so she will not owe additional taxes if she receives the grant. This bill, based on President Biden's bold American Rescue Plan, provides $39 billion in desperately needed child care relief funding. Claim this as a house repair on Form 8829. r}#llQU]giI@ EvO8hwdm49IOr0&5C{A+C uL0PL CivWqU,E,cunk~q.c8XJ89pXS}slO++1*wZQI Q: Where does the grant go on Schedule C? Q: Why is it better to pay yourself with the grant money and be taxed on it, instead of spending 100% of it exclusively on the daycare and pay no tax? A: Not directly. The corporation can deduct your wages and payroll taxes. A: Assuming the money you spend on items for your business are used exclusively for your business, the tax consequences are the same as paying yourself. Phase 4 of the Idaho Child Care Grant provides funding for child care providers in Idaho to ensure they are able to remain open and caring for children. A: Yes, with the exception of a home, home improvement or home addition. . If you receive these funds, you will be mailed a 1099 form. Can I use the grant money for this or would have to pay myself first? The purpose of STABLE is to respond to the urgent need to stabilize the child care sector in Georgia. 9EJH-E*!PPRs&-L\1%gh7XXjZ/ To paint a picture, childcare centers today are facing decreasing revenues due to lower enrollment, higher expenses to operate safely during the pandemic and severe and ongoing staffing difficulties. If you are a sole proprietor (self employed), you do not take out payroll taxes before paying yourself. % A: I dont know the answer for your particular state, sorry. A: It depends on your familys financial situation. The Child Care Stabilization Grant is considered income and is taxable. No. A: No, you cant decrease wages or benefits to employees during the grant period. endobj (wUu4JIvAcA:.*S5kL%4HSx gx(#-ZN(?o]Zmp onB={ 0,1 IU]MCU If so, the corporation must pay you with the grant money through your normal payroll process which means paying payroll taxes. Child care stabilization grants were appropriated to states in the American Rescue Plan Act (Public Law 117-2) to help stabilize the child care sector via subgrants to child care providers due to the COVID-19 pandemic. Stabilization Grant Guidance FAQs. Q: I have two workers and pay them in cash and hope to give them IRS Form 1099. The American Rescue Plan Act (ARPA) Child Care Stabilization Grant, which some call the daycare grant, is a federal financial assistance program recently launched by the Office of Child Care to provide $24 billion of economic relief to child care programs impacted by the COVID-19 pandemic across the country. Provider A receives a $3,500[1] grant and uses the entire amount of the grant to pay herself; the full amount of the grant will be taxable, but the provider can spend the funds on whatever she wants (e.g., pay down personal debt, save for an emergency, save for retirement, go on vacation). Example 1: Provider pays herself the full amount. ); 45 CFR Parts 98 and 99; The American Rescue Plan (ARP) Act of 2021 Q: Can I use the Stabilization grant to replace my old central air condition unit? NOTE: Child Care Stabilization Grant payments may be taxable. See the video here: [video width="1390" height="1000" mp4="http://tomcopelandblog.com/wp-content/uploads/2022/02/Questions-and-Answers-about-Stabilization-Grants.mp4"][/video]. Q: Can I use this grant to pay myself? However, even if it does push you into a higher tax bracket, it only means you will pay more in taxes on the grant amount that is in the higher tax bracket. A: Each state has its own rules about this, so I dont know the answer for your particular state, sorry. stream Q: Do I claim the same time-space% I used last year? Each state will receive anywhere from $39 million to $2.9 billion in funding from the grant to distribute as they see fit to eligible child-care providers. Q: We started adding more kitchen cabinets this summer. On April 9, 2021, the Delaware Department of Health and Social Services and the Delaware Department of Education announced that the Delaware Early Education and Child Care Stabilization Fund will provide $66,752,816 in direct grants to support eligible early child care professionals across Delaware. The grant opportunities available to the state's early childhood community will help address operating and facility costs, and will support greater access and quality. These funds give them a lifeline at the perfect time. A: Yes. <> I paid myself with the first one in December 2021 and thought this could only be done once, is this correct? Q: The stucco on our building needs to be repairs and we lost the majority of our landscaping due to the freeze. The Child Care Stabilization Grant (CCSG) Program sustains Arizona's child care network by giving a consistent, reliable funding source directly to child care providers to cover increased cost and challenges due to COVID-19 through June 2023. You can use it for free during a 30 day trial period. Therefore, you would need to file 1099-Gs to avoid penalties for failure to file (Internal Revenue Code Section 6721) or failure to furnish (6722). On another slide it says that state grants are taxable income. Q: How do I create an emergency fund with this grant? Here is the recording of my recent webinar, Child Care Stabilization Grants and New Tax Changes for 2021., The tax implications of the Stabilization Grants, What expenses can be deducted in your business. The CCSG application is now closed. +|>Pv o+$^1-{z(*EW~l3Md Y{'m"7E:OeegN$d8=Jby&afJISI. That said, if a provider is receiving other public benefits based on income eligibility (e.g., health benefits, tax credits, student financial aid) and this grant increases their taxable income to a level that will make them no longer eligible for those benefits, they may need to look very closely at the cost versus the benefit of receiving a stabilization grant. You would report $5,000 as income and $2,000 as an expense, and end up paying taxes on the difference, or $3,000. Beginning November 1, 2021, DHS will be using American Rescue Plan Act (ARPA) funding to increase the number of monthly absent days for the Child Care Assistance (CCA) program from 4 to 6. Then put aside some money in a place that is low risk (bank savings account, short-term bond fund or money market account). You will report less income in this situation, but you cant deduct anything that a parent owes you. L*|29j]NG0Sm59!aI6a}4r. A: Each state has its own rules about this. A: No. Find Stabilization Grant Applications for your State or Territory. Investing in Iowa's Child Care (IICC) Funding Program A: Yes, you can deduct this in one year as a repair. Are these expenses 100% business or time-space% deduction? There is not law that requires you to stay in business. Q: Will getting this grant put me in a higher tax bracket? 5 Child Care Workforce Stabilization Grant Payout Schedule Qualifying Employment Period - Employees must be employed at least 30 days prior to the beginning date of the qualifying period through the end of this time period to be eligible for the quarterly bonus. Example 3: Provider uses some of the grant to pay herself and some for business expenses. Q: Can I claim Social Security on my ex-husband? A: All non-profits should be filing a tax return, unless your preschool is owned by the children. All programs will receive a 1099 for grant funds received. I feel like its just more income I have to claim and pay taxes on. 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