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Dear Tax Talk,
I had a baby last year, and this year I went back to work. I work odd hours, so a regular day care center was not
available for us. I am paying for friends to watch him for me. I pay them with a check to keep records of how much
I spend on child care. Is there a way I can get credit on my taxes without getting a Social Security number from
all my friends?
--Ally
Dear Ally,
Individuals who work -- and married couples where both spouses work -- can claim a tax credit for child care expenses.
A tax credit is more valuable than a deduction, as it dollar-for-dollar directly increases the amount of your refund
or reduces the amount you owe.
Depending on your income level, the credit can be as much as 35 percent, or, at a minimum, 20 percent
of the amount you spend for child care up to $3,000 per qualifying child, for a maximum of $6,000 for two or more
children.
Among other rules, you must identify all persons or organizations that provide care for your child or
dependent. Use Part I of Form 2441 to show the
information.
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| Required identification from care providers |
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| 1. |
Name |
| 2. |
Address |
| 3. |
Taxpayer identification number |
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If the care provider is an individual, the taxpayer identification number is his or her Social Security
number or individual taxpayer identification number. If the care provider is an organization, then it is the employer
identification number, or EIN. You can use Form W-10,
Dependent Care Provider's Identification and Certification, to request the required information from the care provider.
You do not have to show the taxpayer
identification number if the care provider is
one of a group of tax-exempt organizations (such
as a church or school). In this case, enter "tax-exempt"
in the space where the tax form calls for the
number.
If the care provider information you give is incorrect or incomplete, your credit may not be allowed. However,
if you can show that you used due diligence in trying to supply the information, you can still claim the credit.
You can show due diligence by getting and keeping the provider's completed Form W-10 or one of the other
sources of information listed earlier. Care providers can be penalized if they do not provide this information to you or if
they provide incorrect information.
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