Claiming Child Care Expenses?

Mariah - posted on 01/28/2010 ( 7 moms have responded )

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I'm trying to figure out if it's worth it to claim my child care expenses. Does anyone know about how much it means in extra refund money or extra headaches in filling out additional forms? Also what kind of documentation would I need to provide?

Also my child care provider isn't currently paying taxes on the money I pay her. I consider her an independent contractor & I do not pay any taxes on her behalf. What does she need to do in order to not get in trouble w/ the IRS if I were to claim the deduction?

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Susan - posted on 01/29/2010

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If you claim the amount that you pay for childcare then she will have to claim it as money she made for the year. It isn't a hassle for you,but it will be for her. You will need her social security number and address. She will have to pay self employment taxes on the money you paid for daycare. If you have any more questions let me know, I do taxes for a living year round at a CPA firm.

Rachel - posted on 01/30/2010

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Regardless of whether she claims the income, you may still do so. The problem is that the IRS may audit her and she may get in trouble. But, that is no different than an employer filing their W-2s and W-3 (which is the summary of all W-2s filed) and then the employee not claiming that income. The choice is up to the person making the money whether or not they want to follow the law and claim all income.



You will need your childcare providers social security number to claim her services on your tax return. That is probably the biggest barrier to claiming if she doesn't want the money on her tax radar. Otherwise, how she handles her finances is her business, but you should definitely claim those funds on your taxes. (Note: childcare providers are able to claim a lot of deductions from running this business out of their homes, so there really isn't a good excuse to not claim the taxes. Toys, food, utility bills and even a portion of their mortgage all offsets the income they receive.)



As far as how much it will affect your tax return, that greatly depends on your own financial situation. I can tell you that it often makes the difference between owing and getting money back in our household. We spend around $3600 - $4000 a year on childcare, which is a big expense! There is a maximum amount one can claim, so be sure to talk to your tax accountant or visit irs.gov for more information.



Here is a link I found pretty quickly regarding how to claim the credit: http://www.irs.gov/taxtopics/tc602.html



Also, you do not need to give her a 1099 or anything like that. I will print out a copy of how much I paid my childcare provider, since it is pretty convenient to do so. I manage our finances in Quicken, so it is really easy to pull up a report on how much we paid our childcare provider. She then uses that when she files her own taxes (for her own records, not to send to the IRS).



I hope that helps!

Christina - posted on 01/28/2010

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As far as I know, you can't claim the expense if she doesn't claim the income. A licensed day care facility would be able to provide you with a document for tax purposes but it sounds like you do private daycare with someone that works from home. You cannot claim the expense if she does not have a license or tax-id # and it might be a red flag for her if you did.

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Loni - posted on 10/28/2014

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Would you be willing to help me figure out what I need to do? I am a provider but I am not licensed.

Mariah - posted on 02/24/2010

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Thanks for all the tips & info. They're really helpful. I decided to let her know I plan on claiming the expense next year so she can get the info she needs to take care of things on her end.

Mel - posted on 01/30/2010

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i claim my daycare, but mine are both state certified and have a tax number. to claim it you have to have a receipt with their name and tax number and address on it. I think i get 600 for claiming my daycare.

Cheryl - posted on 01/28/2010

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If you claim it she needs to as well. If you plan to claim you can make a year end summary receipt that has her tax ID number (SSN) and lists dates you paid her and how much. Both of you sign it and give her a copy for her records so she knows how much you're claiming. They she can decide if she wants to claim or risk not claiming. You have a right to claim unless you agreed in advance that you would not. It is an income to her and an expenditure for you. You can attach this year end summary to your taxes with your W-2's and other documents and claim it where appropriate on the forms. Hope that helps. I personally believe it's worth claiming to get the biggest tax break possible (child care is SO expensive).

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