Category Archives: The IRS and Child Care Providers

IRS Forms and Schedules You’ll Need

On Your Mark… Get Set ….. Go!

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The IRS has recently announced that they will not start processing 2013 tax returns until January 31, 2014. This means there is no reason to efile or mail in your tax forms before then.

Before sending in your tax forms, here’s a review of the key business tax forms you must file and the order you should be filling them out. Continue reading

Track your hours BEFORE and AFTER children are present


Before and After Hour ChecklistYour job starts well before children are present and goes on well after the last child has left your care.

Unfortunately, it is exactly for that reason that so much of your time never gets counted, as it should.

Most child care providers give an approximate idea of how long they spent doing “chores”.

Unfortunately, many “lo-ball” on the actual amount of time they spend doing chores before and after children are present.  We believe this checklist will help you.

First, don’t think of it as an administrative chore.  That makes it “work”.  Instead think of it as truly getting to see how well you manage your time – in real numbers.  You will either discover that you know your day down to the minute, or you will discover you don’t and have shortchanged yourself.

Click HERE to download a word version of this checklist, that you can customize to your specifications.  Click HERE for a pdf version.



Safe Harbor Rule Does Not Favor Child Care Providers

CAUTION NEW IRS RULING!When this rule was introduced in early 2013, the new rule allowed for family child care providers to claim up to $1,500 in house expenses on their 2013 tax return, without being required to produce receipts, (IRS Rev. Proc. 2013-13).

Recently, the IRS updated this ruling, and we feel even stronger now that for the vast majority of our child care provider clients this rule is not in their favor and we will not be using it.  We can confidently say that most, if not all, of our client’s deductions exceed the limit of $1,500.00.

Our best advice is if you are not one of our clients, call us at 619-589-8680.  Otherwise, we urge all child care providers to seriously question any tax preparer who encourages you to use this deduction, unless you completely understand how it will impact your return.  Once done, you can’t amend this portion of your tax return.  You are locked in.

How To Calculate Time-Percentage

What do we mean by Time Percent?

This percent is determined by adding up the number of hours you are using your home for business purposes and dividing this number by the total number of hours in the year (8,760). There are two types of hours to include: hours when day care children are present in your home and hours when children are not present but you are engaged in business activities. Continue reading

Recordkeeping and Taxes Go Hand-In-Hand


Employment of Child Care Workers, BLS, 2012More than half of my clients are child care providers, and many of them became clients after attending one of my tax and record keeping seminars to the child care community through YMCA Child Resource Services. According to a recent report, the Bureau of Labor claims that one-third of all child care providers operate as self-employed businesses, and many of these child care providers care for children in their home. Continue reading

Exceptions to the In-Home Exclusive Use Rule

You may be able to deduct the business expenses for that part of your home even if you use the same space for non-business purposes.

To qualify for this exception to the exclusive use rule, you must meet both of the following requirements.  Continue reading

Ten Things The IRS Needs To Know About Your Child or Dependent Care.


IRS Tax Tip 2011-46,  Last Reviewed or Updated: 04-Sep-2013  

If you paid someone to care for your child, spouse, or dependent last year, you may be able to claim the Child and Dependent Care Credit on your federal income tax return. Continue reading

Audit Alert #2 – Letter from the IRS?

What to do when you get a letter from the IRS.

uh oh signYou’ve gotten a letter from the IRS.  Don’t panic.

Call your tax preparer, but a note of caution; you need someone who can represent you in front of the IRS.  You do not want to do this alone.  If you do not have an Enrolled Agent to work with – you want one. EAs are the only federally licensed tax practitioners who specialize in taxation and also have unlimited rights to represent taxpayers before the IRS.

I am an Enrolled Agent, and if you want someone local to you, you can locate an Enrolled Agent by contacting the National Association of Enrolled Agents, NAEA.  If you want to learn what is an Enrolled Agent and what distinguishes them from other tax preparers, please read Enrolled Agents . Continue reading

Audit Alert #1 – Trip Wire – Mileage Logs

What is one of the most common trip wires to trigger an audit?

CAUTION Audit Alert SignWondering why you got a letter from the IRS?  Could it be your mileage log?  The IRS Is a stickler for details when  it comes to mileage logs.  Did you make sure that your mileage log reflected the day-to-day use and associated expenses for your vehicle(s)?

Whether you are a roadwarrior account manager for a company, or a child care professional – your vehicle log is one of the most important documents you have to maintain – CONSTANTLY.  Don’t think you can fudge it and not end up paying dearly.

Back in February 2010, a man named Mr. Royster¹ went before the IRS to defend his lack of documentation for his vehicle.  In particular, he didn’t have a day-to-day log of his mileage and associated expenses.  Mr. Royster tried to reconstruct his mileage for the previous 12 months, but the IRS determined his reconstruction failed to show the specifics.

Inadequate mileage logs can also create its own set of problems.  Think of it this way; you are giving the IRS a reason to dig deeper into your records.  That can end up costing you dearly and a loss of vehicle deductions.  Take the time to keep good records – it’s worth it in terms of dollars and cents — and peace of mind.

But back to Mr. Roster.  The IRS ended reviewing – and scruitinizing 3 years of his history.  He only had mileage logs for 2004 and 2005 that showed beginning and ending odometer readings for each day.  The court ruled that INADEQUATE.  Consequently, the court gave Mr. Royster ZERO vehicle deductions for 2004 and 2005!

If you have any doubts about your mileage log, feel free to download our free templates.  One is from the Bradford Tax Institute and is a very good excel spreadsheet for calculations.  The other is a simple mileage log – so feel free to modify to your own personal need.

¹Bradford Tax Institute



Single-parent families or households where both parents work need quality daycare services, and providing these services can be a profitable venture. When you start making income, the IRS will be there to take its share of what you earn. Some careful planning can lessen the tax bite and allow you to keep more of your profits. Continue reading