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Can I claim child care expenses if I paid cash?

Customer Question
If I pay my sitter...

If I pay my sitter in cash and she refuses to give me her social security number and I write down her name and address on my taxes in order to get the credit, will the IRS go after her? If I get audited in the future, how would I be able to prove that I did pay her this money?

Submitted: 9 years ago.Category: Tax
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10/1/2008
Tax Professional: Lev, Tax Advisor replied 9 years ago
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 30,141
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What is the reason for payment?

Do you pay her for services?

Are you in the business?

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Customer reply replied 9 years ago
She provides before and after school care for my child every day while I work. I drop of my child at her house in the morning, she takes him to school and picks him up, then I pick him up at her house after I get out of work.
Tax Professional: Lev, Tax Advisor replied 9 years ago

If she is in the business of providing child care - she might need to provide you with business tax ID.

If she provides the service as a person - she should supply you SSN - so you may use it for deducting your child care expenses.

Is that a reason - why you are asking for SSN?

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Customer reply replied 9 years ago

She is not running a business; she only takes care of my child. I want to write off my child care expenses but she doesn't want to give me her SS because then she would have to pay taxes on the money she is earning. My question is will the IRS go after her if I provide her name and address instead of the SS that I don't have, and if I should get audited for this write off in the future how can I prove that I am paying her if I do it in cash. She can say that I never paid her anything and then the IRS would be going after me for taking the credit in the first place.

Tax Professional: Lev, Tax Advisor replied 9 years ago

Under the tax law - babysitters are required to report their income on tax returns regardless if you reported that income to the IRS or not.

In additional - such income is generally classified as self-employment income and both self-employment and income taxes may be due.

My babysitter refused to provide me with her social security number. Can I still claim the amount I paid to the babysitter for child care while I worked? If so, how do I claim these child care expenses on my tax return?

Yes, if you meet the other requirements to claim the child and dependent care credit, but are missing the social security number or other taxpayer identification required ID number of a provider, you can still claim the credit by demonstrating "due diligence" in attempting to secure this information.

If a provider of child care refuses to give the identifying information, the taxpayer can still claim the credit however, the taxpayer must provide whatever information is available about the provider (such as name and address) on the form used to claim the credit Form 2441, Child and Dependent Care Expenses, or Form 1040A, Schedule 2, Child and Dependent Care Expenses for Form 1040A Filers). The taxpayer should write "see page 2" in the columns requesting the missing information. The taxpayer should write at the bottom of page 2 that the provider refused to give the requested information. This statement will show that the taxpayer used due diligence in trying to secure and furnish the identifying information.

source - http://www.irs.gov/faqs/faq7-1.html

I hope that helps. Without SSN - you likely will not be able to file electronically - but should submit a paper return. I can't say for sure if that will trigger audit - but it is possible and you will be ask for record or other prof of your payments.

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