Family Child Care Provider's Family Owes No Money After 3 IRS Audits

Everyone, including family child care providers, are afraid of being audited by the IRS.

But, imagine how a child care provider in Montana felt when she, her husband and her daughter each received a notice they were being audited by the IRS on the same day in November 2010!The IRS said the daughter owed $4,800 in taxes.

All three operated separate family child care businesses. The IRS believed that the daughter had not properly reported her reimbursements from the Food Program as income. They also said the daughter could not deduct expenses such as outdoor plants, a garden and gifts of plants to the parents.

The child care provider (the mother) called me for help. Over the next year and a half, I advised her on the phone about how to handle these audits. She worked with a local accountant and tax attorney as well. I believed she had a strong case and urged her to be patient and wait for the IRS to pay attention to the records she sent.

Earlier this month the IRS finally closed their files on these three audits and no one owed the IRS any money! Unfortunately, the child care provider had to pay her accountant and tax attorney several thousand dollars to get this result.

The Montana provider was grateful for my help:

"I called you and asked your advice as to how to proceed with the audit. You were so knowledgeable and helpful in walking me through this vigorous process.  I called you after that with concerns and each time you reassured me that I was handling the paper work for the audit accurately. You were very encouraging by stating you thought the outcome would likely be in our favor.

“We are very pleased with the results of the three audits. Tom, I can’t thank you enough for walking me through the process of completing the three audit returns and for your support. Thank you also for the last 15 years of talking to me on the phone when I have had tax questions."

Tom Copeland - www.tomcopelandblog.com

Image credit: https://ojs.gsdjournal.it/index.php/gsdj/comment/view/16/0/58878

For further information about what to do if audited by the IRS, see my Family Child Care Tax Workbook and Organizer.