Generally speaking, when working with a private daycare provider, you need to discuss ahead of time whether they will be reporting their income “above the table“, or whether they are working “under the table“. They may not want to report their income so they don’t have to pay taxes on it. This is not legal, but many people will get away with it. If you claim the dependent care credit, this will trigger an investigation and possibly an audit of your provider if they do not report corresponding income. This could cause them to drop you as a customer.
Generally speaking, you need to work out your expectations in advance, and if you plan to claim the credit or use an FSA, you should give the provider the W 10 form and collect their tax ID number or Social Security number before you start paying them for services.
to claim the credit without a Social Security number, you must attach a written statement to your tax return that gives as much contact information about the provider as you can, such as their name, address, and phone number. You must also explain your diligent efforts to collect their Social Security number. It will help you prove your case if you show that they refused to return a W-10, but that may not be enough by itself.
