Postpartum Doula services and childcare tax credit/dependent care expense

[blissfulsleepacademy]

I am a certified postpartum doula who provides families with support in their homes, overnight.  My typical hours of support are between 8PM and 7AM.  This support is generally provided while one, if not both parents are on family leave.  Sometimes the spouse (father) is not on leave and is working  during the day, however both parents are typically home and sleeping during the hours I am present and providing this support.  As a doula, I am there to not only take care of the newborn but also provide physical and emotional support to the mother, provide education and guidance on a wide variety of newborn care topics to both parents and occasionally provide light housekeeping assistance (such as washing baby bottles or doing infant laundry).  While providing overnight support, I am able to sleep while the baby is sleeping.  

My question is: does this type of support qualify for the childcare tax credit or dependent care expense? Is it considered "work related" since sleep is necessary to function at work and do their jobs?  If only one parent works during the day and the other is on medical leave, does overnight care qualify? If BOTH parents work during the day but are in the home, present but sleeping while I provide support, does my support qualify?

[DoninGA]

The Child Tax Credit and the Dependent Care Credit can only be claimed on the taxpayers tax return who has entered the child as a dependent on their tax return.

Your care for the child does not mean you can claim the child as a dependent on your tax return.

[xmasbaby0]

Are the parents trying to call your services childcare so that they can use the childcare credit on their own tax return-----that is a credit that can only be used by parents who paid for child care so that they could work.     Wondering why you are the one who is asking about this......

[blissfulsleepacademy]

The PARENTS are trying to claim my overnight doula services are "childcare" and have requested documentation from me to file with THEIR taxes to use for the childcare credit on their OWN taxes.  I am NOT trying to claim these children as my own dependent. 

As a former child care center director, I am familiar with the statement we used to give parents as a curtesy each January that had our EIN and the total they paid the center, to claim the expense on their taxes. As a parent, I myself have claimed care provided at a child care center, home based center or before/afterschool program once they were school-aged.   However, I am almost certain the services I provide in the parent's homes, while they are there sleeping, does NOT qualify as "child care", since both parents are present and not working while I am there (they are sound asleep).  Besides the fact that one of the parents is technically on maternity leave. 

They are first time parents and have tried to argue that since they need sleep at night in order to function at their jobs, that meets the definition of "work related" since they can't "work" if they don't sleep.  I am almost certain the IRS will not see it that way.  Even if they DO have their own registered LLC businesses, and could theoretically claim to be "working from home", the hours that I am in the home providing support they are both sleeping, not actively working.  Even if it was daytime doula support, and one parent was working (either in the home or outside the home), I don't know if DOULA services would be considered "child care" since we are not babysitters or nannies, we provide nonmedical support to the infant AND the mother, at least one parent is present, and almost always at least one parent is on medical leave (either paid or unpaid).  

If I am wrong and it WOULD qualify as "child care" for tax credit purposes, that would be wonderful, but I don't think that is the case.  If I supply the parents with the requested statement and describe it as "child care" or "nanny services", f they file for the credit and it's found to be fraudulent... who is liable for that?

[blissfulsleepacademy]

See my reply below.  I am not trying to claim the expense, the parents are. 

I was questioning if doula services provided in the home while both parents are also in the home but are both sleeping (and not actively working while I am there) would qualify as "work related child care". 

[NCperson · Accepted solution]

@blissfulsleepacademy  if both parents are sleeping, that isn't covered for the credit.  The expense is permitted if it "allows" you to work, and since the expense is occurring when neither parent is working, it isn't covered by the tax credit.   In effect, simply having a job doesn't make the expense covered under the credit; rather, the parent has to be working when the expense is occurring. 

see the link below and read through "work related" expenses on page 6.  Esp. see example 2;  if one person is working while the other is sleeping, then the expense is covered for the tax credit, since the expenses "allow" one parent to work.  But the implication is if both parents are sleeping, the expense doesn't "allow" either parent to work! 

https://www.irs.gov/pub/irs-pdf/p503.pdf

[blissfulsleepacademy]

@NCperson Thank you so much for your answer. And YES, I had found that publication and example and even shared it with the parents, who interrupted it differently and felt that since the example had one parent sleeping it must be OK if both parents were sleeping. 

AT this point I have told them that they have their weekly invoices marked as "PAID" that also has my EIN and NPI numbers on it.  That's really all they need to file for the credit on their return.  It's then up to their CPA or IRS to allow it or not.  

Thanks for taking the time to answer me.  Truly appreciate it!

[NCperson]

@blissfulsleepacademy by their logic, then going out to the movies and hiring a baby sitter is an eligible expense as neither are working (unless one is a paid film critic 😀) 

[xmasbaby0]

I think they are incorrect to try and claim the childcare credit for your services----the logic of having to sleep in order to be able to work is flawed------all new parents wish they could get a full night of sleep so they will not be tired when they are trying to work.     But----from your standpoint....you will be reporting your income on your own tax return anyway.    If they enter the amount they pay you and say that it was for childcare---then they are the ones who might be subject to scrutiny by the IRS.    If the amount you enter on your tax return matches the amount they say they paid you, you have met your own requirement to report your income.  They can take their chances with the IRS.    As long as you prepare your own return correctly, what the parents do on their tax return is in the category of not your problem.   They are not paying you to be a tax advisor.

[AmeliesUncle]

I haven't looked up an court cases on the matter, but at first glance, I somewhat disagree with the prior conclusions.

I think it comes down to this:  If you were not there, would they both be working?

If the answer is yes (they would still be working), they don't qualify for the credit, even if they would be really, really tired.

If the answer is no (one would no longer be working if you were not there), I think they qualify for the credit.

[Opus 17]

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@AmeliesUncle wrote:

I haven't looked up an court cases on the matter, but at first glance, I somewhat disagree with the prior conclusions.

I think it comes down to this:  If you were not there, would they both be working?

If the answer is yes (they would still be working), they don't qualify for the credit, even if they would be really, really tired.

If the answer is no (one would no longer be working if you were not there), I think they qualify for the credit.

---

Ultimately, @blissfulsleepacademy  is correct that it is up to the taxpayers to claim or not claim on their own risk.  The care provider should not provide any extra documentation, just the paid invoices and their tax number.

There are two situations discussed here that have different tax treatments (see the code below).

If spouse A and B are both working, and the child care is necessary so they can work, then the care can be eligible even if care is not provided during working hours.  For example, A works days and B works nights.  Care is provided during the day so B can sleep.  This is eligible.

However, if B is on family leave, B is not working, and the care is not eligible (See example 3 below).  Unless B is so debilitated they are unable to care for themselves.  It is not enough that B is unable to care for the child, B must be unable to care for themself.  

The code says

"The term “employment-related expenses” means amounts paid for the following expenses, but only if such expenses are incurred to enable the taxpayer to be gainfully employed for any period for which there are 1 or more qualifying individuals with respect to the taxpayer:"

The regulation says

(c) Gainful employment—(1) In general. Expenses are employment-related expenses only if they are for the purpose of enabling the taxpayer to be gainfully employed. The expenses must be for the care of a qualifying individual or household services performed during periods in which the taxpayer is gainfully employed or is in active search of gainful employment. Employment may consist of service within or outside the taxpayer's home and includes self-employment. An expense is not employment-related merely because it is paid or incurred while the taxpayer is gainfully employed. The purpose of the expense must be to enable the taxpayer to be gainfully employed. Whether the purpose of an expense is to enable the taxpayer to be gainfully employed depends on the facts and circumstances of the particular case. Work as a volunteer or for a nominal consideration is not gainful employment.

There is also a specific example for spouses who work day and night shifts:

Example 1.

D works during the day and her husband, E, works at night and sleeps during the day. D and E pay for care for a qualifying individual during the hours when D is working and E is sleeping. Under paragraph (c)(1) of this section, the amount paid by D and E for care may be for the purpose of allowing D and E to be gainfully employed and may be an employment-related expense under section 21.

Example 3.

G, the custodial parent of two children who are qualifying individuals, hires a housekeeper for a monthly salary to care for the children while G is gainfully employed. G becomes ill and as a result is absent from work for 4 months. G continues to pay the housekeeper to care for the children while G is absent from work. During this 4-month period, G performs no employment services, but receives payments under her employer's wage continuation plan. Although G may be considered to be gainfully employed during her absence from work, the absence is not a short, temporary absence within the meaning of paragraph (c)(2)(ii) of this section, and her payments for household and dependent care services during the period of illness are not for the purpose of enabling her to be gainfully employed. G's expenses are not employment-related expenses, and she may not take the expenses into account under section 21.

https://www.law.cornell.edu/cfr/text/26/1.21-1