Child expense credit

[Brandyjo2022]

Am I responsible if my baby sitter does not file her taxes. If I claim the child expense credit of $8000. She does watch my children at her home.
Also why am I responsible to pay since I pay my babysitter in cash payments totaling to $8000! She does watch my children at her home. 

[HelenC12]

No, you're not responsible if your babysitter does not file her income tax return(s). She is considered self-employed.

If she was providing the care of your children in your house, she would be considered a household employee and you would have to pay part of her Social Security and Medicare. 

• Per IRS Topic No. 756, Household employees include housekeepers, maids, babysitters, gardeners, and others who work in or around your private residence as your employee.

[Carl]

I don't know if this may be an issue for you or not, but without the caregiver's SSN or EIN, you can't claim the child care credit.  But never say never. Here's the procedure.

Caregiver refuses to supply SSN or EIN

I can understand why someone would not want to give you their SSN. You understand too. But maybe the caregiver isn’t aware of just how fast and easy it is for them to get an EIN (Employer Identification Number)?  Make them aware that they can go online to http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Apply-for-an-Employer-Identification-... and it will only take them about 10 minutes to get an EIN – which they can then provide to you as required by federal law.

Assuming you have already requested this information from your dependent care provider, and they still refuse to provide it. here is the procedure that you must follow, in order to claim the dependent care credit without the provider’s SSN or EIN.

First, understand that you can not e-file your return without the caregiver’s SSN or EIN. You will have to print, sign and mail it to the IRS. There is no alternative or workaround for this.

Next, print out a form W-10 (Dependent Care Provider’s Identification and Certification) from the IRS website at http://www.irs.gov/pub/irs-pdf/fw10.pdf.

Fill out the W-10 form with all the information that you know.

Make 2 additional copies of the filled out W-10 for your own records.

Mail the form to the caregiver via certified mail. Don’t lose your post office receipt.

The caregiver has 10 calendar days to respond. If they respond with the information you need, then you’re good to go. If they have not responded, then on the 11^th day after you mailed it certified mail:

Select the “print and file” option for your tax return. This will print only the documents required for filing, along with an instruction sheet that contains the address of the specific IRS processing center you will mail it to.

Include in your mailing a copy (not an original) of your proof of notification (the certified mail receipt you got at the post office), and a copy of the W-10 that you sent to the caregiver.

That’s it. While this will delay your refund (it’ll be 6-8 weeks before you get it), you’ll still get the credit. At this point, it’s no longer your problem – it’s the caregiver’s.

[Opus 17]

If care is provided in the provider‘s location, they are self-employed or an independent contractor and you are not responsible for their tax return in anyway. However, you must provide their Social Security number when you claim the credit. If the IRS does not see matching income from them on their tax return, the IRS make investigate them. But you would never owe their taxes.

If you don’t have their Social Security number and they refused to give it to you, the IRS may allow you the credit, but they judge this on a case by case basis. And they will use the information you provide to identify the provider and investigate them.

Whenever you engage a private daycare provider, you should always have a talk up front about taxes. If the person wants to be paid under the table, and you are not OK with that, you should not use them. They may be charging you a lower rate because they expect to not pay taxes. If you insist on claiming the credit, you need to agree up front and get their Social Security number up front, and if they know they are going to have to pay taxes on the income they may charge you more for daycare.