XP: NAR-Childcare tax credit dilemma

Floridamom224

Totally not adoption related, but it have this on my mind this morn!

Ugh.  A little sitch came up this morning that got me thinking.  We have always claimed our daycare costs on our taxes.  I dont do our taxes, H handles all of that with our accountant, but I know that in the past we have claimed it.  I have NO idea what claiming it translates into when it comes to our actual refund, but we have an appt this Sat with our accountant.  Isaiah was in a daycare center from January 2010-June 2010.  Then he was home with me over the summer, and he started with his in home babysitter in August when I went back to work.  Anyhoo, H did some research and found out that even though he goes to a babysitter we can still claim the money we pay her, even if she doesnt claim it on her taxes and does it under the table.  So, I reminded my friend this morning that she needed to add up how much she paid her this year so she could claim the money.  She got all bent out of shape and said that our babysitter doesnt want us to claim it because she does it under the table.  The convo came up because I was going to ask for her SSN to put on my taxes.  She said that our babysitter wouldnt give it to us because she doesnt want it claimed.  You can still claim it without the SSN, but I am pretty sure you still have to list her name and address. H is adamant about claiming it.  I tried to ask him how much money it would translate into on our refund (we have paid her about 1500$ so far this year) and he couldnt tell me.  My friend said she doesnt feel comfortable claiming the money bc she doesnt want to write her name down.  H says, "guess what!  If it is going to get me a bigger refund I am claiming it, if it doesnt then we wont."

 Thoughts????

Temp206787500007404

Without going into the ethical implications of not paying taxes...

Your DH should be prepared to lose your daycare provider.  If she gets audited due to you guys putting her info down, then she will probably drop you.  How does your H think that the IRS tracks how much daycare providers make if not by each parent who uses her putting down $x-amount and her name address?  They will add it all up...

Did you guys start using her knowing she doesn't claim it on her taxes or is this news to you?  If you went into knowing she doesn't, then he needs to give in and not claim her or be prepared to start looking for someone new.  If I were in her position and told you up front I didn't claim it and then you put it on your taxes, I would not be happy with you.

GLynn2009

You should discuss with the childcare provider before you do anything. I would not want to get my provider in trouble.

When my older to kids were kept by a lady that lived across the street from us we claimed the deduction and she gave us her SS#. I then told her how much I claimed and she claimed the same on her taxes. She did not do this with all of her kids.....

I would talk to her this year and if she doen not want you to claim it this year I would not then I would find another provider. It gets sticky but I would be very nice to the person keeping my child.

CaptainSerious

This is why we decided to pay our nanny's portion of her taxes/SS/etc. as well as our portion.  I agreed to pay her an hourly rate and didn't want to have to figure it out each week and take it out of her paycheck.  For us, the convenience is well worth just paying both portions at the end of the year.  It's a win-win.

MyColonyNJ

this is a credit.  the credit is between 20% and 35% of the cost you paid, based on income.  So, on $1000 in cost, you will get a credit of between $200 and $350.  There is also a max of $3000 in expenses for 1 child, or $6000 for 2 or more.

You MUST provide either a ss# or a EIN, if you don't, your claim will be returned.

The person (or facility) must also claim the payments as income - so YES, she would have to provide her ss#.

If she is *just* a babysitter, I seriously doubt she is claiming this income.  If she is a licensed provider, then she should no problem giving you this info.

You can be considered a Household Employer, but then would have to pay employement taxes.

Her is detailed info

https://www.irs.gov/pub/irs-pdf/p503.pdf

amberfernandez

PP is correct, you can only claim up to $3,000 in expenses, and then based on your total adjusted gross income, you only get 20% - 35% back as a credit.  The income phase out levels on this credit are fairly low, if you make less than $15,000 you get 35%, which equates to $1,050 in actual tax refund dollars, and if you make more than $43,000 you get 20%, which equates to a maximum of $600 in actual tax refund dollars.

In the OP's situation, it seems like they may have hit the $3,000 limit with their first day care provider given the number of months, so there is no point in claiming the money paid to the babysitter, because it won't get you any additional refund.

If you do need to claim the babysitter payments to get to the $3,000, yes, you can claim it without her social, there is a box that states provider refused to provide information, but you can guarantee the IRS will track them down, and audit their taxes for all unclaimed income.  The IRS can go back an indefinate number of years because it is considered fraud not an error, by not claiming income.  In addition, once you're on the IRS audit list, it's almost impossible to get off regardless of the number of years that go buy.

So bottom line, if you've already paid $3,000 to the first provider, forget about the babysitter, it won't get you a larger refund.  PLUS, let's say you're in the 20% credit, which most people are, the MAX you'd get from the $1,500 you paid her is $300, and that's assuming you paid the first provider $0.

Good luck.