Doing My Taxes - Qualified Childcare Expenses

Updated on January 09, 2012
T.K. asks from Grand Prairie, TX
18 answers

I am filling out my return and hit a bit of a wall. I changed child care providers this year. The in-home lady that has always kept my children was fine with me reporting my childcare expense and listing her as my provider. Due to family illness, she is no longer able to care for my littles.

I found another warm, welcoming family for my children. They are wonderful and I'm lucky to have them. I realize I should've asked before we all got attached to her, but it didn't occur to me - she doesn't report her income! So, I can't report it. I can't get the tax deduction that I have absolutely earned. It feels unfair.

On the other hand, she is a great deal cheaper than any traditional facility and she's like family. If I had to choose the deduction or her, I choose her. Is there another way? I don't want to get anyone in trouble. I have no intention of committing fraud on my tax return. BUt missing out on that $6,000 deduction is going to eat away at me!

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So What Happened?

Her husband makes good money and she does keep 2 other children. I just did the numbers on Turbotax. If I claim the whole $6,000 I get $1200 cash. If I claim $3,000 I get $600 cash! That's alot of money to throw away! I rightfully deserve that $1200! I pay $7800 a yr for both kids. I have a right to claim that on my taxes. Bottom line, I should've asked this before we got attached to her. It's important to me that my children be in a home, being loved consistantly by the same people. This isn't something I would change providers over.

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answers from Portland on

Seems obvious to me. She doesn't claim the income. You can't claim the expense. There is no alternative way of claiming the expense. If there were it would be in the filing instructions. You could call an accountant who does taxes to ask but I'm almost positive you're out of luck.

You are not committing fraud by not claiming the expense. You have a choice. She is the one filing a fraudulent tax claim. And she will likely be caught if you claim the expense.

4 moms found this helpful

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answers from Dover on

Claim the amount you paid to the first woman up through when you stopped using her for this calendar year. After that, you're out of luck.

You aren't committing fraud by paying the other woman under the table & then not claiming it on your returns.

*ETA* You said she's a great deal cheaper than a traditional facility. I suggest that you actually crunch the numbers & see if paying her under the table & not being able to write any of it off IS actually cheaper than paying a center & getting a (in my opinion, rather low) write-off. I'll bet you're right & that you're currently getting the best deal possible. ;)

*ETA*(again) Just so you understand, it's not actually a $6K deduction (unless you really are paying out the wa-zoo!), it's just lowering your taxable income by $6K. It honestly doesn't make an enormous difference in the long run. I assume you're doing your taxes online, so just for giggles, pop in the numbers both ways to see what the end result difference would be. Just be sure you don't submit them with the incorrect numbers attached!!
I worked as a bookkeeper for years at a CPA firm, btw, I'm not just pulling this info out of my butt, lol!

9 moms found this helpful


answers from Washington DC on

I'd probably figure out how much cheaper she is than what you'd spend sending your child somewhere else. Are you saving $100 a month? That would offset the $1200 you'd have gotten back if you'd gone somewhere else... so...

7 moms found this helpful


answers from Chicago on

Just think of it as getting a small part of your deduction every month when you are paying her so much less than a traditional facility. You can't have your cake and eat it too in this situation.

ETA: She is able to charge you less since she is not paying taxes on it. If she was claiming it and paying taxes she would charge a lot more. Easily $1200/yr more in order for her to come out ahead. I think in the end, even without the deduction, you are getting a good deal.

6 moms found this helpful


answers from Albuquerque on

You pay $7,800 a year for someone to watch two children full time? If that's the case, you've already gotten the tax credit and then some. That's an unbelievably low rate. I say consider yourself lucky to have an awesome provider who doesn't charge much, and get over the tax credit. We don't get it either because we earn over the limit. And every year it makes me mad. But you know what? I'd rather have my income than the credit. Try to think of your great day care lady that way too...

5 moms found this helpful


answers from Minneapolis on

But isn't SHE commiting tax fraud by not disclosing income she is earning??

And the person who said housekeeper expenses?? Umm..I am not a tax whiz, but pretty sure a housekeeper expense does not fall under a parents deductable child care related expenses???

Another question I have for you for the future..does your workplace do a pre-tax childcare account? If she is not counting the income legally, than I do not think you can do that either...I do home childcare and its all tied to a EIN or SS#.

Good luck.

4 moms found this helpful


answers from Seattle on

How are you not getting a tax deduction that you "earned"? If you're saving more by using her than you would get back on your taxes, stop your crying.

4 moms found this helpful


answers from Honolulu on

How Much is the Child & Dependent Care Worth?
The child and dependent care tax credit is worth 20% to 35% of your day care expenses. The percentage of the credit depends on your adjusted gross income. A full chart of the percentage rates is found in Publication 503.

2 moms found this helpful


answers from San Diego on

I am considered cheap by most peoples standards and I would need 225 per week for 2 children. So if you were paying the standard rate for 2 full-time kids, you would be paying almost 4000 more per year or more. So I say, hand her 4000 more dollars in exchange for her social security number LOL! .... NOT really. You are right. You should get the deduction and change providers. After you deduct this on her taxes, she'll likely quit anyway because she's going to be needing a better job in order to make the tax payments with penalties and interest.

She should be claiming it. If she isn't, it's probably because she's not well educated on how many deductions she can take and or she simply is not earning enough money to put aside tax money and still make a living. On one hand, it's not fair that she should make under the table money. But on the other hand, I understand what it's like to be a low income provider and not have anything left over after bill.

I have my husband claim zero deductions at work so that they take out too much. Then, I'm open 24 hours per day, 7 days per week. This allows me to take bigger deductions for my business than if I was open only traditional hours. I work my arse off for my tax savings and I'm not doing anything illegal.

If it were me, I would not want to help someone else commit tax fraud. But at the same time, I don't know enough information. Are you paying her enough money? Maybe you could compromise this year and claim less and next year pay her a little more. How many other kids does she have? If she is alone and without a spouse, her taxes should be pretty low if she has a few kids of her own to deduct. But if she is like me, ouch.. My husbands income is pretty good. He pushes me up into a higher tax bracket, my kids are moving out and our mortgage is paying down. Our deductions are slipping away and yet my living expenses only seem to go up. My husband is only willing to do so much. At some point in the next few years, I have to figure out a way to pay quarterly taxes and my daycare parents are going to have to start paying me more than they do now.

2 moms found this helpful


answers from St. Louis on

I don't practice tax so I can't remember if that is a for or from AGI deduction but I think it is from which means it only yields you a small amount of real savings. In the end someone has to pay the taxes on it, either you are her. There is no way the IRS is going to let income go untaxed, they are good like that. :(

Just glancing you will only be able to deduct 20 to 35 percent of the 6,000 and then from that your real cash savings depends on your marginal rate. So like 35% at 10% will save you only 210 dollars. Is that really worth finding a provider you can deduct?

20% 20% = 240 dollars
20% 35% = 420 dollars

The second number is your tax rate.

Just doesn't look worth it to me.

I was looking at your what happened, no one gets 7 to 8 hundred. The 20/35 is the max someone making over 43,000 a year can get using that deduction. I could play it out with all the tax brackets if you like. :)

2 moms found this helpful


answers from San Francisco on

If she's cheap and a great provider, I guess you have to eat the deduction.

2 moms found this helpful


answers from Bismarck on

A person can earn up to a certain amount (I think it's either $400 or $600) before they have to claim it on taxes. You could claim just that amount and still not get her into trouble. I know I pay both my niece and nephew throughout the year to babysit my kids and I simply make sure I claim less than $400 per provider so they don't have to file taxes (they are both kids so they have no other income). A tax consultant would be able to give you the exact numbers.

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answers from Oklahoma City on

You have the right to report the expense. She is the one breaking the law and you should not allow her to pull you in to this.

I worked in child care for years and sometimes I didn't report it either. They just went ahead and rounded the figures up and put down they paid various babysitters and the amount was $XXX.xx. The accountant did it and they did not get audited. No one goes back through the year and calls each and every teenager they had babysit on the weekend evenings but they do add that into their child care payments. It is okay as far as I know to claim a random amount for various child care providers.

As a tax accountant.

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answers from Dallas on

I am an in home daycare provider and I claim all income. She is suppose to claim her income. She is breaking the law. I would claim it and let her have a problem in the future. You might want to look again for a different sitter for this year.

1 mom found this helpful


answers from New York on

For last year you are kind of screwed if she isn't cooperative or you could screw her by putting down her information without her identifying number. You may want to include canceled checks or money order stubs with your return which will get pulled because of the missing information.

For next year other child care expenses would include but are not limited to: Before and After care, Summer camp, housekeeper, tutoring, etc.

Get prepared for the 2012 year return by know what you can claim in the way of expenditures for childcare.

1 mom found this helpful


answers from Dallas on

Someone else said it, and it was exactly what I was gong to mention - if you want your cake and eat it too - you can. Pre-tax deductions for dependent care:) It is typically something offered through your employer benefits. I also believe it is not limited to open enrollment periods and even if you don't use the health insurance offered, you can access the program.
I am not sure if you have to declare who you are using for child care, if so, I guess you are in the same boat. . . but worth looking into.


1 mom found this helpful


answers from Dallas on

A couple people mentioned using pre-tax deductions to pay for dependent care - just wanted to point out that wouldn't work in this case. In order to get reimbursed from your Flexible Spending Account (FSA) you have to have the provider SS# or tax ID # - so it's going to have the same affect on your provider as claiming the payments on your taxes, she's going to get in trouble for not reporting the income.

I do an FSA and we send the kids to a couple camps over the summer that aren't approved for reimbursement, so we just have to take a loss tax-wise on those. FSAs are great, but you can't use them for all childcare providers/arrangements, there are rules as to who qualifies.

1 mom found this helpful


answers from Dallas on

So,I am guessing here she has no EIN #.Do you get receipts from her,you can use those.

Also,I agree with Gamma G.
You just do the right thing for you and your household.

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