Tax Question: Child Care Tax Credit

[ha98ed14]

I looked at the IRS publication to see if I could take the Child Care Tax Credit. It says you must pay for care so you can work or look for work. DH works. I go to school. We pay for child care so he can work and I can go to class. I only have a sitter on the days I have class. But going to school is not working. Does anyone have any experience with this?

Also, if anyone knows, how do you prove you paid X amount for the child care, I mean, other than the cancelled check written to the babysitter?

TIA for any replies :)

[kijip]

Education activity counts for the Childcare Tax Credit- we need to use that every single year! Your childcare provider (out of home) should give you a statement with their tax id number or SSN and the total for the given tax year. This is what you use in case of audit. If your provider is NOT reporting the income, this can trigger issues for them and you.

However, if the sitter is in your home there are employment/household employee laws to be followed if they make more than a certain amount in a quarter or year. It is still tax deductible, you just need to jump through more hoops. Someone that has an in home sitter or nanny will be able to provide better information here.

[ha98ed14]

Can I pm you to ask more detail? ...Please...

[kijip]

Can I pm you to ask more detail? ...Please...
Sure, I will answer what I can. :)

[ha98ed14]

However, if the sitter is in your home there are employment/household employee laws to be followed if they make more than a certain amount in a quarter or year. It is still tax deductible, you just need to jump through more hoops. Someone that has an in home sitter or nanny will be able to provide better information here.

I am in this camp, but it is only 2 days per week. Anyone have a similar set up? TIA.

[ha98ed14]

I PM'd you. Thanks.

[Momof3Labs]

We have an in-home nanny who we pay legally (we pay taxes). We have her sign a receipt each paycheck, and we also give her a paystub (we use nannypay - a desktop software - to track her income and taxes). I feel comfortable that the receipts + nannypay records + cancelled checks (we always pay her by check, never cash) would be suitable documentation should we be audited by the IRS.

[niccig]

I looked at the IRS publication to see if I could take the Child Care Tax Credit. It says you must pay for care so you can work or look for work.

DS is in preschool 3 days a week, and I'm looking to go back to work on those days. Could I use this Tax Credit for his preschool? Are there any requirements? Cut-off points if you earn over a certain amount?

TIA

[momtojack]

You are treated as working if you are a full-time student (see IRS publication 503, p. 5-6), but I don't think you can take the child care credit if you are just a part-time student. Even if you are a full-time student, the amount of child care expenses you can claim may be limited (see pub 503, p. 10).

Whether the babysitter works in your home or her own doesn't affect whether you get the childcare credit, but like a PP mentioned if she works in your home, you need to make sure you complying with federal laws for employers. If you pay your sitter more than $1600 per year, you have to pay social security and medicare taxes, and if you pay more than $1000 per quarter to household employees, you have to pay unemployment taxes. Also you should have a completed Form I-9 on file. IRS Publication 926 explains all this stuff.

You will have to have her SSN to claim the credit, and if she isn't reporting the income - or if neither of you is paying her SS/Medicare taxes - it might be a problem.

[momtojack]

Double post