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Daycare and Taxes All things related to Taxes and running a Daycare post here. Topics of tax exemptions, forms, filings, tax write offs, IRS etc.

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  #1  
Old 04-15-2012, 07:49 PM
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grandmom grandmom is offline
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Default Tom Copeland Please

A provider-friend has been told by her CPA that the IRS has changed a rule greatly effecting us. She was told she could only claim one more hour per day for cleaning/preparation/etc than the actual hours children are in care.

For example, if children are in care for 10 hours, she could only claim 11 hours that day on her taxes.

Is this true?

Thanks Tom.
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Old 04-16-2012, 06:29 AM
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You'll have better chance of him seeing this if you post it to the Daycare and Taxes board....http://www.daycare.com/forum/forumdisplay.php?f=8
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Old 04-16-2012, 07:24 AM
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I would be surprised if that were true. I found this on the IRS website in the Child Care Provider Audit Technique Guide:

http://www.irs.gov/businesses/small/...206004,00.html


Time Percentage (Form 8829 Part I lines 4-6)

The time percentage is the total number of hours the facility was used for the child care business during the year (the numerator) divided by the total hours in the year (8,760 hours). The provider should record how the total hours the facility was used, was computed. Hours spent cooking, cleaning, and preparing activities for the business of child care could be included in the calculation of the numerator of the time percentage if the tests for deduction under IRC Section 162 (ordinary and necessary expenses) are otherwise met under the facts of the particular case. As illustrated in Revenue Ruling 92-3, one hour is added to the 11 hours of actual day care operation for the hour before and hour after regular hours spent preparing for and cleaning up after the children.

Note to Examiners: The Revenue Ruling example is not an absolute rule. The time outside of the regular hours to be added can be more or less depending on the facts and circumstances in each case, which need to be evaluated in line with Section 162 (ordinary and necessary expenses). Some providers, because of the type of service provided and/or ages of the children, might spend more time preparing activities for the children than others and vice versa. In addition, some preparation work might be done on the weekends. Recordkeeping time can also be included. Often a provider will keep a detailed log of his/her activities for a significant part of the year. This detailed record keeping of the time spent and tasks performed is essential to provide the details needed by the examiner to make an informed determination under Section 162, so it is highly recommended that all providers keep such logs. Ultimately, examiners should make a decision based on the facts and circumstances of each case.

The part in red is what I do in the event of an audit. I think mayber her CPA didn't read the ENTIRE update...?
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Old 04-16-2012, 09:10 AM
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In his tax webinar this year Tom said that you can keep a detailed log of time spent for at least two months of the year and then use that to determine an average for tax purposes.

From reading DCMom's post, I'd say that would work in the case of an audit.
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Old 04-16-2012, 09:12 AM
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Quote:
Originally Posted by MN Day Mom View Post
You'll have better chance of him seeing this if you post it to the Daycare and Taxes board....http://www.daycare.com/forum/forumdisplay.php?f=8
I moved it to the tax area so hopefully Tom will see it now and have an answer for you.
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Old 04-17-2012, 07:12 AM
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Default hours worked

The IRS has not changed its rules regarding how many hours you can claimed you worked in your home when children are not present. There has never been an upper limit on this. An IRS Revenue Ruling did rule on one case where a provider did work an extra hour per day. But this ruling (Revenue Ruling 92-3) only dealt with this provider who happened to be working an extra hour a day and the ruling said she could count this hour.

I have handled many IRS audits for family child care providers where I have won many hours beyond the time children were present. I've posted news of these audits on my blog. In one audit a provider claimed more than 20 hours a week and won!

Keep good records (at least 2 months worth) and claim all the hours you work.
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Old 04-18-2012, 12:22 PM
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Do many people just write down their hours year round or only two months? I'm sure mine change greatly throughout the year.
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Old 04-19-2012, 06:39 AM
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Default Hours worked

If your hours worked varies a lot by month, you may want to track more months to get a more accurate average.
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