Tom Copeland is a long-time champion of family child care programs and a renowned family child care tax expert. He has given trainings at the Oklahoma annual Family Child Care Conference and other venues around the state. Mr. Copeland graciously granted an interview and answered these tax time questions for Oklahoma family child care providers:
1. What is the best way to avoid an IRS audit?
Mr. Copeland: File your taxes on time. Don’t show a loss three years in a row. There’s really not much else a provider can do to avoid an audit. Most audits are at random. If you are audited, contact me. I can provide free help. E-mail Tom Copeland
2. How can a family child care provider go about finding an accountant who actually understands the process of filing their taxes?
Mr. Copeland: Check out the tax preparer directory I created. My book 2011 Family Child Care Tax Companion is designed for providers who use tax preparers. It will help educate preparers about the unique tax issues facing family child care providers.
3. Are there any accountants in Oklahoma that you can suggest?
Mr. Copeland: There are 8 OK tax preparers on my directory, but I don’t know if all of them are still in business. I don’t recommend any particular tax preparer. I’ve written an article about how to select a tax preparer.
4. What do you think about child care providers using computer programs to do their taxes (such as H&R Block or Turbo Tax)?
Mr. Copeland: These software programs are only useful if a provider already knows what she is doing. They won’t explain the time-space percentage when deducting household items and their explanation of depreciation is very hard to follow. I’ve written an article on this.
5. Are there any significant changes for the 2011 tax year that family child care providers should be aware of?
Mr. Copeland:The standard mileage rate for 2011 is $.51 per mile for January-June; $.555 per mile for July-December. The 2012 rate is $.555.
A new 100% bonus depreciation rule allows providers to deduct (rather than depreciate) the entire business portion of items purchased new in 2011 (furniture, appliances, computers, etc.). Homes and home improvements cannot use this new rule. Thus, if a provider purchase a new $1,000 sofa in 2011 and uses 40% for business (time-space percentage) she can deduct $400 ($1,000 x 40% = $400)on Form 4562, line 14.
The Social Security tax rate has dropped by 2% for 2011. For every $1,000 of profit a provider makes in 2011, her taxes will be lower by $20.
6. What is this year’s meal allowance for family child care providers?
2011: $1.19 breakfast; $2.22 lunch/supper; $.66 snack
2012: $1.24 breakfast; $2.32 lunch/supper; $.69 snack