March 31, 2014
Mr. Tom Copeland
1740 Hampshire Court
St. Paul, MN 55116
I cannot put into words how thankful I am that you agreed to represent me in regards to my tax audit for 2009 and 2010.
I first contacted you in February 2012 after meeting with an auditor for the IRS. I had several questions and you replied immediately to my email, both by email and by telephone. You offered advice and technical assistance that I could bring to the second meeting. After an unsuccessful second meeting with the auditor, you helped me to understand the appeal process and submit that request.
My case was unusual because I offered 24 hour child care – including holidays and weekends. The point of contention was the calculation of time-space percentage. I had claimed 98% and the local auditor ruled that an in-home provider could never claim more than 50%. Even with documentation, including IRS Ruling 92-3, my attempts were unsuccessful.
Also, I did not have sign-in sheets to validate attendance, although I had signed contracts. I was also unable to locate all of my receipts. They also disallowed all of my charitable donations as I had no photographic or original receipt evidence of what was donated.
The IRS Appeals officer was located in Florida. I heard from him on July 9, 2012. He indicated that I had erred in my calculations. I again contacted you for advice. You immediately responded with technical assistance in preparing my response. The IRS Appeals Officer again ignored the IRS Ruling 92-3 and indicated that I should have my own special formula since I provide 24 hour child care. He came up with his own formula for me to use when I only had one or two children in care.
Again, you provided technical assistance and advised me to contact his supervisor. I reached his supervisor on August 16. Even after explaining my situation, and referring him to specific technical rulings, he agreed with the Appeals Officer, and limited my time-space percentage to their “invented” formula. He also disallowed all charitable donations and several expense categories.
At this point, you agreed to represent me in tax court and we filed a petition. From that point forward you began preparing my case. You asked for certain documents and I did my best to provide them or at least provide an explanation. From August 2012 until March 2014, you prepared to represent me in Tax Court. On March 17, 2014, you submitted all the documentation you had collected to the IRS Tax Court Attorney.
On March 28, 2014, we received the most wonderful news. The IRS accepted my time-space percentage of 98%. I knew I was “right”, but I waivered in my belief that they would rule in my favor. I was so relieved I broke down in tears. This has been such a weight on me. I still tremble when I realize that this is finally over and that we won! This would never have been possible without you. Without your expertise of tax law as it pertains to child care I would not have been able to proceed through this process, let alone be successful. This victory belongs, in large part, to you.
This explains the “business” side of our encounters, but that was only part of the process. I have been a family child care provider since 1992. I have my NAFCC Accreditation and strive to provide the best quality care possible. I also complete my own calculations for mine and my husband’s tax returns.
I took this audit very personally. Not only did the original auditor indicate I had erred in my time/space percentage, she questioned the practice/quality of family child care. I spent a great deal of time in the audit explaining my schedule and the hours that children were in care, as well as child care regulations. I felt attacked both personally and professionally. I felt that I had failed and put the financial stability of my family at risk. I began to second-guess every financial and child care decision I made. Each time the issue of taxes arose, I became physically sick to my stomach. I felt like a failure and I wanted nothing more than for this to go away. I struggled between “knowing” I was right in my calculations, to being so scared of the IRS that I just wanted to quit the process.
This is when you reminded me of the tax law – reminded me how hard other providers had fought to get these regulations passed – reminded me that I COULD do this – that I could stay the course for myself, for my family and for other providers who may face the same fight. You believed in the process – of which I had become weary. You did all of this for me. Words can never express my gratitude.
You are an excellent tax attorney and representative for family child care. Thank you for all you have done and continue to do for family child care.
I have learned so much through this process. My recommendations for other providers would be:
DON’T TAKE IT PERSONALLY – AND DON’T BE AFRAID!
Become a member of NAFCC – if you ever have a tax issue, you have the guidance of the best tax attorney available – Tom Copeland.
Use the Minute Menu Kids Pro program to record your expenses, time in/out for children, time you work on child care business when children are not in care, record all meals you serve (including those over the amount you can be reimbursed for – they will show up as errors on your monthly report, but you will get credit for them on your end of year statement.)
Keep your receipts in a safe place. I could not locate all of my receipts – and I knew this because I found a bag of receipts labeled “Bag 1 of 2” and I had no receipts for 6 months of one year, and four months of another.
Keep all of your credit card statements, bank statements, utility bills, cell phone bills, etc. I thought it would be easy to just print off any of these if I needed them, since I pay most of my bills online, but that was not the case. Keep them with your monthly receipts and highlight any child care purchases.
Keep a copy of your training certificate or training catalog with your travel receipts to verify that you actually attended a child care function when claiming training costs, hotels, travel, meals, etc.
When making charitable donations, take pictures of what you are donating and list all the articles. Attach this to the receipt issued by the charitable organization. To determine value, you can use the mobile App provided by Turbo Tax (It’s free). This is essential when claiming non-monetary donations.
Use and keep sign-in sheets even if not required by your local state agency.
Don’t assume you will never be audited – prepare yourself so that you will breeze through the process!!
Thank you again for everything. You may use any and all of my story as you see fit to encourage and support other child care providers as they strive to navigate through the processes of the IRS.
Cathy P. Ross
Cathy’s Care Family Child Care