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Babysitter Doesnt Claim Taxes & Dependent Care Account

Bareborn 6,557 482 October 12, 2016 at 11:50 AM
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Hi-

I'm just wising up to alot of opportunities I might be missing out on.

We pay $240/wk for two kids in a ladies in-home child care, I pull this money straight out of my checking account.

I was under the impression that since she doesnt file taxes showing the income, we can't claim it as a deduction. Is this true?

Also, since she doesnt claim it on taxes we cant file it to do a DCA either?

Can somebody please help me clarify what I can, and can't do. I believe $240/wk to be on the low end for childcare if that matters.

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#2
Quote from Bareborn View Post :
I was under the impression that since she doesnt file taxes showing the income, we can't claim it as a deduction. Is this true?
Pretty sure you can deduct it, but they will probably catch up to her and she will owe a bunch of back taxes.
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#3
when you deduct dependent care expenses, you need a tax id or ss# for the provider. i don't know about whether or not they are required to claim it as income, but i wouldn't be surprised if that is the case.
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#4
Quote from Bareborn View Post :
Hi-

I'm just wising up to alot of opportunities I might be missing out on.

We pay $240/wk for two kids in a ladies in-home child care, I pull this money straight out of my checking account.

I was under the impression that since she doesnt file taxes showing the income, we can't claim it as a deduction. Is this true?

Also, since she doesnt claim it on taxes we cant file it to do a DCA either?

Can somebody please help me clarify what I can, and can't do. I believe $240/wk to be on the low end for childcare if that matters.
Looks like you can deduct it, assuming you meet a few requirements (both you and your spouse work, the provider is not your dependent, etc): https://www.irs.gov/publications/...1000203328

You'll need the provider's SSN or EIN, but it looks like there are provisions if the provider won't furnish that information for you (see Provider Identification Test, about halfway down).

Deducting these expenses on your own taxes may cause the IRS to take another look at the provider's returns, if she is not already filing with that income.
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Marshall: Have the rest of you guys figured out by now that mmathis is the smartest guy on SlickDeals?
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#5
Quote from Jabbit View Post :
Pretty sure you can deduct it, but they will probably catch up to her and she will owe a bunch of back taxes.
Quote from tresh View Post :
when you deduct dependent care expenses, you need a tax id or ss# for the provider. i don't know about whether or not they are required to claim it as income, but i wouldn't be surprised if that is the case.

Indeed. You need her TID/SSN to be reimbursed for the care from the FSA. So long as you can get it, it's not your problem HOWEVER I'd believe at some point, if she doesn't claim it as income, she's going to get in trouble. The IRS sucks but I think they can put 2 and 2 together sometimes.

IOW, not your problem immediately, although you could use this as leverage to get a better rate if they are doing things under the table.

[And yes I've used FSA for 8 years now - centers, 2 home daycares, etc]
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#6
Without her cooperation, you will not get anything from FSA. I would move to a daycare provider that you are able to deduct from or accept that you will not be able to deduct some of the payments. I think the max is $5k. If you get her in trouble with the IRS, she is going to drop you most likely.
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#7
you do realize as the employer you are likely required to pay social security for her if you want to go by the book.
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#8
Quote from Averwind View Post :
you do realize as the employer you are likely required to pay social security for her if you want to go by the book.
I read it as the lady has her own in-home care...thus they are not employers. If this was a nanny relationship I would agree with you.
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#9
Quote from PiratesSayARRR View Post :
I read it as the lady has her own in-home care...thus they are not employers. If this was a nanny relationship I would agree with you.
ah true. all these should have been established at the start. obviously she agreed to that pay because it is off the books and I doubt OP thought about claiming credit at the beginning as she didn't ask for SSN at the beginning... I would say stop trying to nickel and dime...
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