Yes, include on your 2021 return only those au pair agency expenses you paid in 2021. The question you raise deals with the issue of cash basis accounting versus accrual basis accounting. According to the IRS:
- A cash basis taxpayer reports income when it is actually received, and reports expenses when they are paid. The majority of people who file individual income tax returns are cash basis taxpayers.
- Accrual basis taxpayers compute income when they actually earn it or became entitled to it. Their deductions are computed based on when those debts were incurred, but not necessarily paid.
Most individual taxpayers are cash basis taxpayers. While taxpayers on a cash basis may choose to use the accrual method to determine the foreign tax credit, because the foreign tax credit is not an issue here, you would report on your 2021 return the au pair agency expenses you paid in 2021. Report the expenses you paid in 2022 on your 2022 return.
[February 8, 2022 @ 7:46 PST] @ md1monn
To supplement our previous response, the instructions for Form 2441 Child and Dependent Care Expenses, further underscores the fact that the expenses you paid in 2021 should be included on your 2021 return, whereas, the amounts you paid in 2022 should be included on your 2022 tax return. In this regard, the instructions for Form 2441 at pg. 5 state the following:
"Enter the total amount you actually paid in 2021 to the care provider...It doesn't matter when the expenses were incurred..."
Thus, regardless of when you might have incurred au pair expenses, for those au pair expenses you paid in 2021, include such expenses on your 2021 return. Any such au pair expense paid in 2022 will go on your 2022 tax return. For your review, below is the link to the Form 2441 instructions.
Instructions for Form 2441
**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
