Family Child Care Tax Companion 3
• A certified public accountant (CPA) is less likely to be familiar with family child care
taxes than is an EA.
• A tax attorney or tax professional who specializes in family child care returns may
be a good choice if the person is very familiar with the field and has kept up with the
annual changes in tax laws.
An EA, CPA, or lawyer can represent you before the IRS if you are audited. Tax
professionals who lack these credentials usually cannot.
Once you narrow your referrals to the tax professionals who have the credentials you are
looking for, the next step is to determine how familiar each person is with the tax rules
involved in your business.
First, ask about the preparer’s experience doing family child care returns:
• How many family child care tax returns did the tax professional complete last year?
Although experience is important, a less-experienced preparer may have more moti-
vation to learn about your business and keep up with changes in the tax law.
• Of the family child care tax returns that the tax professional signed, how many
have been audited over the years? Was the preparer at fault in any of those audits?
Although being audited is not necessarily a reflection of the tax professional’s skill
(many audits are chosen at random), you will want to find out if the preparer did the
Next, find out if the preparer is familiar with the following issues that are specific to
family child care businesses:
• Calculating the business use of your home and your Time-Space percentage.
The preparer should know that you are entitled to include all the hours that you have
worked, even after the children are gone.
• Reporting Food Program income and expenses and the IRS standard meal allow-
ance rate. The preparer should know the current meal rates and should remind you to
count meals that weren’t reimbursed by the Food Program when using those rates to
figure your food expenses.
• Depreciating household furniture, equipment, and appliances that are used in
your business, and home depreciation. The preparer should know that you are enti-
tled to claim this depreciation and that it is always worthwhile to do so.
• Paying employees. The preparer should know that you need to withhold and pay
Social Security taxes (and perhaps state employment taxes) on your payments to any-
one who helps you care for the children, no matter how small the amount. Exceptions
to this rule are rare.
You are responsible for any mistakes on your tax return, even if a mistake is made by
your tax professional. (You also need to keep the proper records to support the numbers
on your tax forms.) The Tax Organizer in part 2 of this book will help you communicate
with your tax professional and will help you and your tax professional avoid the most
common mistakes on family child care tax forms.