Do You Have to Include Your Basement and Garage in the Total Square Feet of Your Home?
Answer: Yes. The IRS Child Care Audit Techniques Guide clearly states that your basement and garage must be included as part of the total square feet of your home. Many child care providers use these areas on a regular basis for their business and can therefore count the space in their Space percent calculation.
For example, you might have in your basement: laundry room used for your business; furnace and hot water heater used for your business, storage of household items used for your business (tools, lawn mower, garden items, etc.), etc. This would make your basement regular use for your business.
In your garage you might have: car used for business, garden tools, garbage can, bicycles, and other household items used for your business. This would make your garage regular use for your business.
Can You Count the Hours You Spend at a Workshop on Child Development Sponsored by Your Local Child Care Resource and Referral Agency at Their Office in Your Time Percent?
Answer: No. You can’t count any hours in your Time percent if you are away from your home, even if you are conducting business activities. You could count the mileage to the workshop and the cost of the workshop as business expenses.
Can You Count the Square Footage of Your Outdoor Play Area in Your Space Percent?
Answer: No. Only count space that is part of the structure of your home, including decks, but not patios. You can, however, count the cost of the play area as a business expense.
Do You have to Recalculate Your T/S% Each Year?
Answer: Yes. Your T/S% can change from year to year so be sure to do the T/S% calculation each year.
Source: TomCopelandBlog