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Sitch with childcare tax credit
Ugh. A little sitch came up this morning that got me thinking. We have always claimed our daycare costs on our taxes. I dont do our taxes, H handles all of that with our accountant, but I know that in the past we have claimed it. I have NO idea what claiming it translates into when it comes to our actual refund, but we have an appt this Sat with our accountant. Isaiah was in a daycare center from January 2010-June 2010. Then he was home with me over the summer, and he started with his in home babysitter in August when I went back to work. Anyhoo, H did some research and found out that even though he goes to a babysitter we can still claim the money we pay her, even if she doesnt claim it on her taxes and does it under the table. So, I reminded my friend this morning that she needed to add up how much she paid her this year so she could claim the money. She got all bent out of shape and said that our babysitter doesnt want us to claim it because she does it under the table. The convo came up because I was going to ask for her SSN to put on my taxes. She said that our babysitter wouldnt give it to us because she doesnt want it claimed. You can still claim it without the SSN, but I am pretty sure you still have to list her name and address. H is adamant about claiming it. I tried to ask him how much money it would translate into on our refund (we have paid her about 1500$ so far this year) and he couldnt tell me. My friend said she doesnt feel comfortable claiming the money bc she doesnt want to write her name down. H says, "guess what! If it is going to get me a bigger refund I am claiming it, if it doesnt then we wont."
Thoughts????
Re: Sitch with childcare tax credit
I would claim it, no matter the end benefit to you - whether it is all of that expense or just $1. Basically, I'd want to tell the gov't that I spent X on childcare alone in 2010, and none of that was for jet skis or Prada bags.
I would, however, talk it over with your CPA. You may be liable for employer taxes.
http://www.irs.gov/newsroom/article/0,,id=106189,00.html
HEHE Nicole, you sound like my H! I think you are right tho...but, I did read over the link and she doesnt come to our house...she picks them up from us at school and then we pick them up in the pm at her house.
How much total did you pay for the day care between January and June? If it was at least $3k, you can just claim that and call it a day since $3k is the max you can claim for one child.
The maximum credit you can get (it phases out depending on your income) is 35% of your qualifying expenses. So for one child, the max would be $1050.
If you paid less than $3k to the day care, I would absolutely insist upon filing for the credit using at least her name and address. I would be honest with her that she is breaking the law by not paying taxes on what you pay her and that is her problem and not yours.
This woman does babysit from her own home and not in yours, right? Because if she watches your son in your home, she is considered your household employee and you have to withhold payroll taxes legally.
I'm pretty sure she'll end up having to pay taxes on those funds if you're giving her info as well if the IRS wants to audit etc. Which if she was under the impression that this was all under the table and I was her I'd be a little upset, but would also equate to a lesson learned. Granted she shouldn't have done it under the table to begin with if that was the agreement then I can see where this could raise and issue and you may have to go look for another sitter.
The SAME exact thing is happening to us. I almost made a post about it last week but I didn't. I worked for 12 weeks last year and our childcare costs were $2,800 which would be $600 in our pockets!! I called my babysitter asked for her address and social and basically she told me no. I was kinda of shocked. I paid her quite a bit of money to watch Macy and I felt entitled to my refund.
After a few days I called her back and we came to the resolution that we would split what she owed to the IRS based on what I paid her. IDK, maybe I am too nice but I felt partial responsible since it was discussed from the get go how we would handle taxes. To be honest, I didn't realize that we would get that much money back.
So the short version of the story is, yes, I eventual got her Social but it's going to cost us about $200. But hey, I guess it's better than nothing!
BTW, when I was researching online, I found an article about how you can claim the money without her social or address. But chances are you would get audited. HTH!
Baby Macy is here!
12/09 - Macy (daughter) | 4/10 - Began TTC Baby #2 | 12/10 - Chemical Pregnancy | 1/12 - Miscarriage at 14 weeks | DX - PCOS & Hyperthyroidism
See, I don't think you bear any responsibility for the fact that she was trying to cheat on her taxes at all. She watched Maci in her own home so, in the IRS's eyes, she was running her own business. Thus it was her responsibility to ensure that she was charging enough money to make a living while lawfully paying taxes. There was no need to have an upfront converation about taxes b/c you had no obligation to withhold or pay taxes on her behalf.
But you are a very nice person, Kathy. I know you always try to do the right thing. I just don't want you, or Kel, to feel guilty for the fact that someone else is cheating on their taxes and wants you to cover for them.
Sometimes I am TOO nice! The whole childcare tax thing lead to some heated discussions between H and I. He felt the same exact way as you, and while I agree, the babysitter is my friend and I was worried that we wouldn't be friends anymore
I know, I need to grow a backbone but I did feel bad, even if I had no reason too. But it was a lesson learned, next time Macy is in a at home day care, I will be sure to address this situation from the get go, to avoid any issues like this!!
Baby Macy is here!
12/09 - Macy (daughter) | 4/10 - Began TTC Baby #2 | 12/10 - Chemical Pregnancy | 1/12 - Miscarriage at 14 weeks | DX - PCOS & Hyperthyroidism
I can completely understand how it would feel really awkward if you are friends with the person. Still, I would try to explain it to them this way. You are doing what is required of you and paying your taxes. If you don't claim this credit you are essentially overpaying on your taxes. Meanwhile, she simply isn't paying any taxes at all. Is it really fair for you to overpay on your taxes to make up for the fact that she doesn't have to pay at all? I don't think it is. This is basically her coming back after the fact and telling you "Hey, Kathy. You remember how I told you I'd watch Macy for $500/month last year? Well, I need you to give me another $200 because you weren't paying me enough." Sounds silly on her part, right? Just because you've already potentially given the money to Uncle Sam and are waiting on a refund, doesn't mean that she isn't essentially doing just that to you - renegotiating her pay 9 months later.
Changeof- did you know she was doing this under the table?
I not sure who "she" is? As for "paying under the table", if the person is working out of their own home, it is a home-run business and all taxes are their responsibility. Unless I explicitly had a conversation with a person where we agreed that, *wink, wink* *nod, nod*, I would get a discount on paying her if I agreed not to try to claim the tax credit so that she could get away with tax evasion, I don't think it is the parents' problem that the provider might get in trouble for not paying their taxes.
This is the stand my friend takes I think...she asked the babysitter last year at tax season for her SSN etc, and that was when she basically told her that she didnt want to provide it because she was doing this under the table and gets other money from the government so she doesnt want to "mess that up." I feel bad (because I am ALWAYS too nice) and I agree with what she is saying and I dont want to lose her friendship...I think she just assumed I would feel the same as my friend did and just NOT file it. My friend wont even put her name down or claim any of the money...not sure if she realizes how much she would get back and that it could be up to 35% of the 3000 paid based on her income. I dont want to stir the pot, but my husband feels just like you do. we DIDNT have a wink wink convo with her that expllcitly said we would just let it go. I know my friend feels that our babysitter does a lot for us (which I am NOT disputing, because she DOES), and she charges us less than I paid to isaiah's old daycare...but really it is only a 5 dollar per week difference, so 20$ a month isnt TOO huge of a difference for me to not want to claim it. Plus, to make up the difference and since she picks the kids up at school in the morning, I was tacking on an extra 20$ a month for gas per her request. the only big difference in her cost is that she provides them food during the day (breakfast, lunch and two snacks), but we try to send stuff here and there to help out. Also, she doesnt charge us when one of our kids isnt their...but the daycare did. So that is where my biggest saver is. UGH, i just HATE being in weird predicaments. I am currently sitting here trying to figure out how much we paid to the older daycare...but I want to say it was about 2500, so then I have to look at whether or not it is worth it to put our friendship on the line. *SIGH*
If you paid $2500 to the other place then the most you have to lose from not reporting what you paid her is $175. In that case, I personally would let it go for last year. However, I would let her know that you will absolutely be filing next year with her name and address and that if she has a problem with that you will need to find a new care provider. Her asking you to give up over $1k of your hard-earned money while she cheats the system is not ok in my book.
I know this must be really tough for you since you care about this person but people who lie and cheat burn me up. You are obviously paying your fair share of taxes. What entitles her to not only not pay taxes on her income but to not report it so that she can cash in on the government benefits that she is also not paying for? I am all about people who need them getting access to temporary benefits but this kind of fraud and abuse angers me b/c it takes away from the people who really need it.
I agree with you 100%. We are not going to claim her this year since we are only losing about ~200$$, but I will have to let her know that we will be filing next year. My friend and I discussed it yesterday and I told her what my decision was. They did not claim her last year, and I told her she lost ~1,000$ by not doing so, and in my book that is NOT ok. I am not sure what they will end up doing, but they are meeting with their accountant this weekend too!