Family Child Care Provider Wins Big Tax Court Victory!
After a nearly four-year battle with the IRS, Cathy Alcantara, a family child care provider from Wheaton, Illinois won her IRS audit in Tax Court. As a result, she saved over $6,500, plus interest.
After Cathy contacted me for help, I advised her to fight the audit of her 2005, 2006 and 2007 tax return.
Her original auditor wanted to lower her Time-Space Percentage from 41.7% to 33.5% and deny her thousands of dollars of deductions for repairs and household purchases. Cathy’s local tax professional and I argued her case through a series of letters to her appeals officer without success. I recommended that Cathy then appeal her case to Tax Court because I believed the IRS was wrong about their interpretation of the law.
I filed her Tax Court petition in March 2011 and had the trial moved to St. Paul, Minnesota, my home. I wrote an 18-page letter (accompanied by 36 pages of documents) to the IRS attorney before our scheduled trial date in April 2012. I was hopeful that we could settle the case before it went to trial. Initially, the IRS attorney wanted to argue several points, but after sending her another six-page letter, she agreed to drop her objections.
Instead of owing $4,899 in taxes for the three years under audit, plus $978 in penalties and $717 in interest (through 2008), Cathy owed nothing! Obviously, Cathy was grateful for the help I gave her. In a letter to me she wrote: “I do not know how I can say thank you for resolving my case with the IRS… I was incensed by how little everyone at the IRS knew about childcare tax law and how readily they “made up” how to handle things versus doing their own due diligence… Thank you for knowing and understanding the ins and outs of the childcare tax laws as not many people do!... Without your help, I probably would have left the childcare business.”
Throughout this entire case, Cathy was convinced that she had done nothing wrong (she hadn’t!). Her record keeping was very good. She showed great persistence and patience in battling the IRS for so long.
Usually I help child care providers by answering their phone questions or occasionally writing letters on their behalf. This case was unusual in that we couldn’t settle it and had to go to Tax Court. I’ve handled four previous Tax Court cases on behalf of family child care providers and either won every issue in dispute or more than 75% of the issues in dispute.
Thanks to Enrolled Agent Mike Politowicz for helping to fight this case with the auditor and appeals officer.
Tom Copeland - www.tomcopelandblog.comImage credit: https://www.maxpixel.net/Jumping-Teenager-Female-Athletic-Girl-Outdoor-4057747
