Child and Dependent Care Credit for Providers under 18

[kleinerwolle]

Can filers receive credit for underage provider care?

When entering providers, a social security number for the provider is required. However, providers under 18 do not have to pay taxes on their income if it is under a certain amount. How do I enter an underage provider without a social security number? Or is one required for underage providers? I pay several long-term sitters who watch my son when I work, so I'd like to get credit for this.

[xmasbaby0]

Not sure where you are getting the idea that "underage" childcare providers do not pay tax on their earnings.   If you paid someone to take care of your child so you could work then you have to provide their Social Security number or Tax ID in order to get the  childcare credit.   If the childcare provider made more than $2200 in YOUR home then they are a household employee; if they provided the care elsewhere then they pay self-employment tax for Social Security and Medicare on their earnings.   You cannot use your own dependent child as your childcare provider, however, in order to get the childcare credit.

https://ttlc.intuit.com/community/tax-topics/help/who-is-considered-a-household-employee/00/26770

[kleinerwolle]

I saw this information, in combination with the threshold, on care.com. They made less than $2,200 each over the summer. So I would still need to enter their SSN under "Providers" to get the dependent care credit?

[xmasbaby0 · Accepted solution]

Yes, that is correct.   And....they can get a Tax ID if they do not want to give out their Social Security number to you.    It would have been better if you had explained to your teenage babysitters that you intended to use the money paid to them as a tax credit so that they could have anticipated the tax they will owe.   They will pay about 15% for Social Security and Medicare, even if they did not earn enough to owe ordinary income tax.

https://www.irs.gov/individuals/individual-taxpayer-identification-number

[Critter-3]

@kleinerwolle 

You are mixing up the rules ... YOUR child under the age of 18 who works for you in your BUSINESS is  exempt from SS/Medicare taxes when you pay them thru your business' payroll system and provide them with a W-2 at the end of the year.   This is not the same as paying a non related  "babysitter". So if  you claim you paid them on the form 2441 for the day care credit then the IRS will require that income to be reported either on the provider's tax return Sch C  OR   on your tax return as a household employee (Sch H)   if they reach the min requirement for you to file that form. 

[xmasbaby0]

@kleinerwolle When you report the amount you paid for childcare while you worked on your tax return so that you can get the childcare credit, you have to enter information about the childcare provider.   Then the IRS matches that information up with the information on the childcare provider's tax return.  Apparently you thought minors do not pay tax--which is incorrect.    So now you have several teenage babysitters who you paid, and you want to use the childcare credit, which you certainly can do.   But those teenagers are unlikely to have known that they will have to pay self-employment tax, so you can expect a couple of upset babysitters and maybe their upset parents who will find out that the teenagers have to file tax returns and pay tax.  Even if the babysitters owe a couple of hundred dollars ---that will be a lot for a teenager who did not know to plan and save for it.

Going forward, if you use teenagers who are unlikely to understand how income tax works, be upfront with them so they know to save part of their earnings to pay the tax they will owe.   And ask upfront for the SSN or Tax ID before they babysit for you.

[Critter-3]

Funny thing about the "day care credit" ... although it gives the parents a tax break by way of a credit  what it really was meant to do is catch all the non filing day care providers. The parents  report how much they paid and to whom ( why the tax ID numbers are needed on the form 2441)  so the IRS can catch the ones who were not filing a return on what they were making.  Sadly this was not really meant to catch the "little fish" like the teenage neighbor who babysits occasionally but this was an unintended side effect to catching the larger prey.