Reimbursement Basics

 

The current reimbursement rates are as follows.

 

 

 

 

 

 

Rates are effective July 1, 2016 through June 30, 2017. Rates normally increase every year on July 1st.

A Tier II provider claims 100 breakfast, 100 lunches, and 100 P.M. snacks for the entire month. If all those meals are approved, reimbursement will be calculated as:

 

  • 100 (breakfast) x .48 (Tier II rate) = $48.00

  • 100 (lunches) x 1.49 (Tier II rate) = $150.00

  • 100 (snacks) x .20 (Tier II rate) = $20.00

  • 48.00 + 149.00 + 20.00 = $217.00 

 

REIMBURSEMENT OPTIONS FOR TIER II HOMES

Option 1: You may elect to receive the lower Tier II reimbursement rate for meals/snacks served to all children enrolled in your day care home.

 

Option 2: You may choose to have your eligibility determined for Tier I rates based on your income. If you choose this option, the following steps will need to be taken:

  • You will need to notify your sponsoring organization to collect income information.

  • Your food program sponsoring organization will provide you with a Provider Income Eligibility Application.

  • You will return the Provider Income Eligibility Application and proof of income to your food program sponsoring organization.

  • Your food program sponsoring organization will determine your eligibility based on federal guidelines.

  • You will receive Tier II rates until the correct income form and documentation is returned to your food program sponsoring organization.

  • You must re-qualify each year.

 

Option 3: You may choose to receive Tier I rates for income eligible children and Tier II rates for those who are not eligible by income. If you choose this option, the following steps will need to be taken:

  • You will need to notify Mid Michigan Food Program to collect income eligibility applications for the families of the children in your care.

  • Mid Michigan will provide income eligibility applications.

  • You will distribute the applications to your parents.

  • Your families will send completed income eligibility applications directly to your food program sponsoring organization.

  • Mid Michigan will determine the eligibility of each family based on federal guidelines.

  • You will receive Tier I rates for meals/snacks served to children classified as income eligible and Tier II rates for all other children.

  • New forms are required each fiscal year (October 1st).

 

You may choose to receive Tier I rates for categorically eligible children and Tier II rates for children who are not categorically eligible. Categorically eligible children are those who participate in a Federal or State funded program whose eligibility criteria are no greater than the eligibility criteria for reduced price meals. If you choose this option, the following steps will need to be taken:

  • You will need to notify Mid Michigan Food Program to collect eligibility information for children who may be categorically eligible.

  • The information could be collected through the use of income eligibility forms or another source of information.

  • Your food program sponsoring organization will determine the eligibility of each family based on federal guidelines.

  • You will receive Tier I rates for meals/snacks served to children who are categorically eligible and Tier II rates for all other children.

  • New forms are required each fiscal year (October 1st).

  •  

By law, the food program sponsoring organization is not allowed to disclose a family's classification to the Provider.

 

INCOME ELIGIBILITY APPLICATION

If a provider is Tier II and would like to become Tier I by his/her household income, a Mid Michigan CACFP Provider Income Eligibility Application is required. To view an example of a completed income application, click here.

 

Part 1: If the provider receives Food Stamps or Family Independence Program (FIP) benefits, complete this section. (If not move on to Part 2).

  • List provider's first and last name.

  • List Food Stamp or household FIP number. A copy of your current Food Stamp or FIP approval letter is required as documentation. (The 16-digit number on a Bridge Card is not acceptable. We must have a case number. The case number will look like this 101234567.)

 

Part 2: If a provider does not receive Food Stamps or FIP benefits, complete this section.

  • List everyone that lives in the home, including all children and adults.

  • List amount and source of any and all income received in the household. Documentation is required for all income. Documentation: a copy of child support or alimony (court order, copy of check, copy of bank statement if direct deposit), a copy of any social security, disability, pension, or any other form of income. For day care income: The Income and Expense Form from the previous month must be filled out as documentation. To view an example of a completed Income and Expense Form, click here.

 

Part 3 of the Michigan CACFP Income Eligibility Application is required to be completed by all providers applying. Make sure that all information is included. The form will be considered incomplete and unusable if all lines in Part 3 are not filled in. A new form is required each year.

 

If a provider is already Tier I by their school district and would like to claim their own child, a Michigan CACFP Provider Income Eligibility Application is required. School district eligibility is verified every five years. Complete either Part 1, if receiving Food Stamps or FIP benefits or Part 2, if NOT receiving Food Stamps or FIP benefits. Documentation is not required if the provider is already Tier I by the local school district. Part 3 must be completed for the form to be valid. A new form is required each year.

 

If a provider is Tier II and will not qualify to become Tier I by the household income, the day care children's parents can fill out income forms and their child(ren) may qualify for the Tier I rate.

  1. The parents will need to complete either Part 1 or Part 2 depending on the household income source.

  2. Part 3 needs to be completely filled out. All lines must be completed for the form to be valid.

  3. New forms are required each fiscal year (October 1st).

 

RECORD KEEPING

Some expenses you use in your day care business are also used by your family. These expenses are partially deductible or "indirect deductibles." This means that only a percentage of those expenses can be counted as expenditures for your business. You will need to know how to determine what percentage is deductible for tax purposes. The formula involves many steps and may seem confusing. We've tried to break down each step and make it as easy as possible so you can deduct the right percentage for your business.

 

You will be using what is called the "Time/Space Percentage Formula." Once you determine this percentage, it will be used for all your shared expenses.

 

Step 1. Write Down Shared Expenses: Identify and record the expenses that are used both in your business and by your family. Examples of some of these expenses include:

  • Mortgage interest

  • Rent

  • Utility payment

  • Property taxes

  • Phone bill

  • Maintenance and repairs

  • House insurance

  • Household supplies

  • Cable TV

  • Tax preparation

 

Step 2. Calculate Your Time Percentage

1. Determine how much time you spend in your home doing child care-related business.

  • Hours of operation

  • Time you spend doing business-related activities when children are not present (cleaning, cooking, activity planning, record keeping, interviewing, and phoning).

  • Time you cannot count includes hours spent away from home while doing business-related activities (shopping for food) and hours spent doing general house repairs and maintenance. Making a note on a calendar is an easy way to keep an accurate record of how you spend your time.

 

Example:  

Activity & Hours Spent a Week 

      Child Care (7 am - 5 pm)      50 

      Clean up                              4 

      Cooking                               3

      Planning                              1 

      Record keeping                    2 

      Phone                                 1 

      Total                                   61 hours per week 

 

2. Determine the number of hours per year spent on your child care business.

  • Multiply number of hours per week by the number of weeks per year you run your child care business.

  • There are 52 weeks in a year. If you plan a one-week vacation each year for example, multiply a weekly total by 51 to get the number of hours per year.

  • Add in overtime and the number of hours spent on interviews.

 

Example:

                                                           Hours Per Year

               61 hours per week x 51 weeks   = 3,111

               Interviews/overtime, etc.           = 110

                           Total                               3,221 hours per year

 

3. Divide the number of hours per year you spend on your child care business (the number you just figured) by 8,736 (the number of hours that are in a year) to get your time percentage.

 

Example: 3,221 child care hours per year divided by 8,736 total hours a year = 37%

 

4. Highlight and label this figure as "Child Care Hour Percentage".

 

Step 3. Calculate Your Space Percentage

According to the IRS, business space is defined as space "... that is available for day care use throughout each business day and that is regularly used in that business." Space does not have to be used every business day for it to be considered "regularly" used for business. But a room ordinarily restricted from child care use and used occasionally for the business is not considered "regularly" used for business. For example, if one bedroom is used two hours each day for naps, the space may be counted as regular business use. If another bedroom is used only when a child is sick (two or three times a month), then the space is not counted as being used on a regular basis.

 

1. Figure the total square footage of your home.

  • This can usually be found in information regarding your home when it was purchased. If you do not know the total square footage of your home, measure each room in your house, length and width and multiply. (A 10 x 10 room would be 100 square feet). Add all the rooms, closets and hallways together for the total.

  • If you use your basement for child care business but it is not counted in your original square footage, add that space to your total.

 

2. Add up the square footage of each room and area used regularly for your business.

  • A day care provider usually uses a large percentage of their home for child care business.

  • If laundry for the business is done on a regular basis in the laundry room, that area can be added.

  • Don't forget to include the entryway, hallways and basement.

  •  

3. Divide the number of square feet used in child care by the total square footage of your home.

Example: 1,800 square feet used divided by 2, 000 total square feet = 90%

 

4. Highlight and label this figure "Child Care Space Percentage".

 

Step 4. Calculate your Time/Space Percentage

1. Multiply the Child Care Hour Percentage by the Child Care Space Percentage.

Example: 37% (.37) x 90% (.90) = 33% (.33) Time/Space

 

2. Highlight and label this figure "Time/Space Percentage."

 

Step 5. Apply the Time/Space Percentage

Your Time/Space Percentage is the percentage of shared expenses you may deduct as expenditures of your child care business.

  1. Take the cost of the items you listed in Step 1.

  2. Multiply the total cost of each item by your Time/Space Percentage.

  3. This will give you the amount you may use as an income tax deduction.

 

In this example we used 33 percent of shared expenses can be claimed as child care business when computing income tax deductions. If the example's electric bill is $95 for March, multiply that by 33 percent ($95 x .33 = $31.35). $31.35 can be deducted for that month as an indirect business expense.

 

Be sure you have the records to back up your claim for business deductions and you use the correct tax form to report your time/space percentage calculations.

 

To receive a certificate of training hours you must complete a quiz based on the material above. You are required to get all questions correct. If you do not get 100% on the quiz the first time, you may take it over again. The results of the quiz will be emailed to Mid Michigan Child Care Food Program. When we receive the results of your quiz, a certificate of training completed will pop up that you can print. A copy of the certificate will also be emailed to you. 

 

Reimbursement Training Quiz

 

Breakfast

Lunch/Supper

Snacks

Tier I

$1.31

$2.46

$0.73

Tier II

$0.48

$1.49

$0.20

Call us:

989-695-2683

800-742-3663

Fax:

989-695-5488

Find us: 

P.O. Box 610, 7375 Midland Rd., Suite A. Freeland, MI 48623

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