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R. Greg Paszkiewicz
R. Greg Paszkiewicz, Enrolled Agent
Category: Tax
Satisfied Customers: 357
Experience:  9 years preparing tax returns - Marietta, GA
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Dependent Care (Tax Question)

Customer Question

We paid my mother in law for dependant care. How much can we claim as a write off without her having to report it as income and pay taxes.
Submitted: 11 years ago.
Category: Tax
Expert:  R. Greg Paszkiewicz replied 11 years ago.
The problem is the Dependent Care Expenses form (2441) requires you to report her social security number as the provider to take the credit so there is no way to claim any amount without it being "reported" to her. The question is whether the credit is worth more than the tax she will have to pay.
R. Greg Paszkiewicz, Enrolled Agent
Category: Tax
Satisfied Customers: 357
Experience: 9 years preparing tax returns - Marietta, GA
R. Greg Paszkiewicz and 2 other Tax Specialists are ready to help you
Customer: replied 11 years ago.
Reply to R. Greg Paszkiewicz's Post: i was just checking because my Brother in law was told and went on to report up to $3000 when he paid my Mom to watch his children. He was told anything uder $3,000 would not need to be reported by my Mom. Does this make sense.
Expert:  Jon Andrews replied 11 years ago.

In reality, each person is supposed to report all of their income regardless of amount. That would apply to your Mom and your mother in law.


Whether they actually report it or not, if you put their name, social security number, and amount paid on the Form 2441, the IRS has the information and has the ability to see whether or not they reported it.


So the question really becomes - is your mother in law going to report it as she should? If she is not, do you want to alert the IRS as to the fact that she received the income? If she is, then you definitely should take the benefit.


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Expert:  R. Greg Paszkiewicz replied 11 years ago.
I'm not sure who told him that but there is nothing in Pub 503 (Child & Dependent Care expenses) that provides for some minimum level of payments under which the income isn't taxable. For you to claim the credit on 2441 you're going to have to put her name, address, SS#, and amount paid down which will effectively report it. Whether the IRS has the ability to cross-reference from 2441s and check up on her is questionable but that doesn't make it non-reportable.
Customer: replied 11 years ago.
Reply to Jon Andrews's Post: Since they are on Social Security and retired isn't their a limit they can make without being taxed???
Expert:  Jon Andrews replied 11 years ago.

Any amount they make is "reportable income" - all or a portion of it may not be "taxable" depending on their specific circumstances.


If they were my clients, I would have them complete a tax return that showed the income and showed that they did not owe tax (assuming that is how it turned out). That way they are protected from an overzealous IRS inquiry should one occur.


[email protected]

Expert:  Sandi Hargrove, SkyHawks replied 11 years ago.

 She is eligible to receive up to 400 in self employment without reporting the income on her own tax return as long as her total income does not exceed her standard deduction and exemption allowance total. 


If she babysits in their home and they withhold her portion of ss/medicare tax, she need not file a return(or pay income tax) until her income exceeds her standard deduction and exemption allowance total.


Since you mention she receives ss benefits, I assume she is a single person over 65.  In that case, she can earn up to 6050 in wages, and other income before she would be required to file an  income tax return.

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