Taxes and childcare

HisChamaoleGirl · November 2013

I'm a FTM and don't have a clue how claiming any dependent come taxis and time would work. Is it safe to say if we go through someone in the neighborhood as a private nanny who does not have a tax ID we won't be able to claim childcare on our taxes?

I am on numerous waiting list for child care centers and have been since the beginning of my pregnancy, but my maternity leave ends in two weeks and no one has availability. That being said I had nannies in the neighborhood offer to watch her.

Pips09 · November 2013

As long as the person you are paying is claiming the income, you can get the tax benefits. If she doesn't have a tax ID number, you'll need her SSN.

tarynh75 · November 2013

I think the OP is saying the potential Nanny doesn't have a ssn. SSN and Tax ID are synonymous. If the person you are paying doesn't have a ssn, you can't 1099 them, which means you can't write the wages off on your taxes, without running the risk of audit.

HisChamaoleGirl · November 2013

Oh I meant they don't have a county permit for daycare in their home and no tax id. If they have a ssn I can claim child care on my taxes? Did I understand that right ?

tarynh75 · November 2013

They will need to agree that you are going to 1099 them and they will need to complete a W-9 for you to do this. You will then need to issue a 1099 before 1/31 of each year that they provided services in the prior year. They may not want the income reported, as they will have to pay taxes on it. I would strongly recommend having this discussion and having them complete a W-9 before you start paying them for services. As long as the arrangement meets the guidelines of an independent contractor (ie they work for other people as well), you should be able to declare the expenses on your taxes. I would review with your CPA, though.

HisChamaoleGirl · November 2013

Thank you for the great info ladies. I don't have any intention of doing anything illegal. Especially since DH and I work for the federal government lol

tarynh75 · November 2013

To be clear, the OP said that they were not hiring the person as a nanny, but would be employing basically a home DCP, so I assumed other children would be present, thus making a 1099 arrangement permissible. Obviously, a 1099 vs. a w-2 arrangement is preferable, both from a tax reporting and cost perspective. Your CPA is your best source of tax advice.

financialdiva · November 2013

Good Lord this whole post is full of incorrect tax advice.

I promise you, I am not trying to be snarky. Please speak to a tax professional about this.

JJ_13 · November 2013

Ditto what financialdiva said; there is a difference between a nanny in YOUR home and an in-home (i.e. in their home) day care provider and the tax implications are quite different.

KKCARLS · November 2013

This being your first year to claim a child (I'm assuming) you can get a dependent care credit on your tax return using the provider's SSN (assuming they are not a nanny in YOUR home). Before next year look into setting up a Dependent Care Reimbursement Account through your payroll. It is usually a better tax savings for one child than taking the Dependent care credit on your tax return.

mom2be614 · November 2013

What @financialdiva said - please talk to a tax professional. This stuff is confusing.

BUT as a federal employee, you should look into setting up a Dependent Care FLEX account for next year - as @KKCARLS said, it's usually a better tax savings. Ask your tax professional ;-)

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Taxes and childcare

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