How One Child Care Provider Pushed Back Against the IRS and Won

"Surprise, stress and fear" were the words Massachusetts family child care provider Wendy Arsenault used to describe her immediate reaction when she was recently audited by the IRS.

But she got help, pushed back against IRS demands for records and the audit ended with her not owing any money! Here's what happened.

Initially, the IRS questioned every deduction she claimed on her IRS Form Schedule C Profit or Loss from Business. This is not uncommon in family child care audits. Wendy sent copies of her receipts and other records that the IRS requested. But the IRS told her she owed $3,500 because there were also personal items on her receipts.Wendy then contacted me for help in late November. I told her that her records were fine and that she should tell the IRS that it's common for providers to buy business and personal items at the same time. I described what additional information she should send to the IRS. It seemed clear that the IRS auditors didn't understand family child care.

Wendy followed my advice. Later she said, "I was able to write the IRS with a much better understanding of the law and what I was allowed to claim; and that gave me a lot of confidence. I felt empowered. It was a such a stressful experience, but it was invaluable to hear from you because you turned my fearful stress into an ambition to have my expenses allowed."

After receiving her letter the IRS auditor backed down and allowed all of her business deductions.

I asked Wendy what she learned from her audit experience: "Keep everything! Don't back down! I spent a lot of time copying additional items to show additional proof of my expenses. I also took each explanation they sent me as to why they were disallowing items and explained each expense in detail. In the end it was worth my time. Your advice to me was extremely helpful. You answered communications amazingly fast. As an expert in the field of family child care and taxes, it was invaluable to hear back from you. Thank You!"

Tom Copeland - www.tomcopelandblog.com

Image credit: https://www.flickr.com/photos/afagen/2881289597

For more information, see my book Family Child Care Record Keeping Guide. 

Tom Copeland, www.tomcopelandblog.com