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Reporting Childcare Expenses
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amother
Royalblue


 

Post Thu, Mar 28 2019, 2:21 pm
I'm in a sticky situation...

When I was looking for a childcare provider, I chose someone who said that she reports her income and would provide SSN at tax time, especially since I have a benefit at work wherein I have a Dependent Care FSA, and the providers sign a sheet that confirms that they provided the service so I can be reimbursed from that FSA.

The longer I've worked with this provider, though, the more that I've seen her disorganization with finances, and that she pretty openly doesn't report everything to the IRS. She informed me that she got notice that her taxes were being "reviewed" (after she filed 2018), but admitted that it had nothing to do with me, since I hadn't filed yet. She asked that I speak with her before filing. We talked, and she said she didn't want me to report my expenses to her, because of her situation, and she would try to reimburse the difference in the Child Care benefit. I explained that it wasn't that simple, since I claimed reimbursements from the FSA (with her full knowledge - she signed the forms!), so I'm nervous about not including on my taxes, since it would be a bit suspicious that I maxed out the benefit, but then don't report it???? She wanted more time to think, but took more than a week to get back to me.

Since that time, I've gone ahead and filed. The program we used carried over the information from last year, so I didn't need to ask for her SSN.

She's now again asking that I not file until speaking with her, and that I don't report my childcare expenses paid to her on this year's return. (She doesn't know that we've filed already.)

So now I'm struggling with whether full-honesty is best in this case. At this point, I've already filed, and even if I could, I wouldn't change anything on my return. I can't see what I'd gain from telling her the truth, though. The only thing I would hope could come from that is that she wouldn't put us in that situation again (our child is signed up to be with her next year, and I doubt I could find somewhere else this late). But, I think she'd be more likely to "kick us out" if she did find out that we reported the income... and it certainly would destroy any shalom between us.

I also know that this is not my job, but she needs to learn to be more yashar with her taxes. Or at least, don't accept a child into your daycare with the full understanding that the parents have EVERY intention to report it, and then turn around at taxes and tell them not to.

What would you do? Do I tell her everything - that I filed and already had her SSN? Do I tell her that I filed but don't need her SSN? Do I just pretend I haven't filed and am okay with going along with it...? (I don't like the final option - because then what happens next year, if it seems I'm okay with it this year...)
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amother
Aquamarine


 

Post Thu, Mar 28 2019, 2:30 pm
Are you paying significantly less to this woman for child care then you would to some who pays tax on her income?
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amother
Royalblue


 

Post Thu, Mar 28 2019, 2:39 pm
amother wrote:
Are you paying significantly less to this woman for child care then you would to some who pays tax on her income?


It's complicated...

She has 2 of my children, and has made deals "If you pay all in advance, you get 1,000 off" for the older child, and then she was in such a bind last year that she asked me to pay something else in advance and then the 2nd child would also be cheaper ($100 off per month). Generally speaking, I think her rates are similar to others in town. The ones who don't report at all are sometimes cheaper, though (but it was much more economical for me to be able to report and/or use FSA, which is why I switched!).

Many people where I live give their SSNs, but aren't actually licensed. The licensed places are WAY more.
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amother
Plum


 

Post Thu, Mar 28 2019, 2:42 pm
I would very factually tell her, I filed and reported $x amount paid in childcare expenses.

From what I understand, you told her ahead of time that you would be reporting the expense and she agreed. She asked you to hold off with it and you filed after a week. I don't have experience with FSA, but it sounds like not reporting this expense could mess up your taxes.

The only thing that I see you did wrong was file when she asked you to wait. But taxes are due in 2 weeks in any case. So you would have had to file by then, and you would have had to report this expense by then.

The IRS has the information. THere's no point in pretending that it didn't happen. Might as well tell her straightforwardly and simply. Maybe in a way of "I waited as long as I could but I had to file already."

It sounds more like she's completely disorganized than she has bad intentions.
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amother
Pink


 

Post Thu, Mar 28 2019, 3:49 pm
I also do FSA. I don't think the provider needs to be licensed to sign. They don't even need to provide their SSN, they just need to sign.
In terms of your tax return, my accountant never asked for the providers SSN and just put a number in as a place holder. I don't think IRS cross references what you put down and what she puts down.
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amother
Royalblue


 

Post Thu, Mar 28 2019, 3:49 pm
amother wrote:
I would very factually tell her, I filed and reported $x amount paid in childcare expenses.

From what I understand, you told her ahead of time that you would be reporting the expense and she agreed. She asked you to hold off with it and you filed after a week. I don't have experience with FSA, but it sounds like not reporting this expense could mess up your taxes.

The only thing that I see you did wrong was file when she asked you to wait. But taxes are due in 2 weeks in any case. So you would have had to file by then, and you would have had to report this expense by then.

The IRS has the information. THere's no point in pretending that it didn't happen. Might as well tell her straightforwardly and simply. Maybe in a way of "I waited as long as I could but I had to file already."

It sounds more like she's completely disorganized than she has bad intentions.


Thanks. I'm just worried she won't let me send to her anymore, and will be also be very upset with me.

Yes, taxes are nearly due, and with Pesach coming up, there wasn't much longer we could wait.

She is definitely completely disorganized (in pretty much every area of life), but this is more than that. For example, she told me a ma'aseh that someone from the government came for something unrelated, noticed her daycare, and reported it. She proudly told me how the lady who investigated "bought" her story of having a large family (which she does have) as what the other person must have "misinterpreted." She has also told me that she doesn't report all of the childcare income because she pays assistants, so she doesn't feel she has to. (On top of that, many of them are still owed money.) We once spoke to her husband about some of the financial stuff (there was a shailah about ribbis - that's for another time - so we thought he'd be the better avenue with discussing halachic aspects), and he was surprised to hear about what was going on, and she told us in no uncertain terms not to discuss with him, just as we don't know the ins-and-outs about each other's jobs, neither does her husband. So, all that being said, I think it's more than just disorganized.
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amother
Royalblue


 

Post Thu, Mar 28 2019, 3:51 pm
amother wrote:
I also do FSA. I don't think the provider needs to be licensed to sign. They don't even need to provide their SSN, they just need to sign.
In terms of your tax return, my accountant never asked for the providers SSN and just put a number in as a place holder. I don't think IRS cross references what you put down and what she puts down.


They don't need to be licensed - that I know. On the FSA form, they don't provide SSN, either, but my understanding is that when I report my child care expenses on tax returns, I can either given the SSN (never heard of a placeholder) or "Refused to provide SSN" (which we always assumed would be more of a red flag to the IRS).

Normally, I assume the IRS wouldn't cross-reference, but if she's already on their radar...
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amother
Lime


 

Post Fri, Mar 29 2019, 2:13 am
If she is being so shady with her taxes, business dealings etc do you really trust her with your kids? Especially as if you have two going to a daycare, I assume they are not very verbal (at least one won't be) and anything the kids do report can be a "misinterpretation by a toddler".
The fact that her husband doesn't even know the full story scares me as well...
My kid's preschool is fully licensed and reports all income. That means she knows CPR, meets all safety requirements, staff to child ratios etc.
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amother
Maroon


 

Post Fri, Mar 29 2019, 3:48 am
To answer your q, I think you should tell her that you filed so that she knows what's going on. I would sort of feel obligated to at least inform her. Yes, she may be upset and not take you back, but this seems like the type of situations where she won't easily come to an agreement with you and its time to terminate the relationship. I don't say this lightly: I also look for providers who can assure me that I'll be able to take full advantage of my rightfully earned childcare expenses, but this situation doesn't seem tenable to me.
Also,this seems like a messy situation to begin with, so I can see why things went totally wacky, but when she discussed it with you, why didn't you tell her that this is what you're doing? I know you didn't mean ill, and were probably really frustrated by her lack of willingness to be straight with you when she said she would, but it sounds like you didn't tell her you'd be filing and she took that as a tacit agreement that you're trying to work with her demands. Why didn't you at least tell her 'I'm filing tomorrow: If you want to discuss with me, make sure to do it now'? Then she has the ultimatum.
Re: SSN or placeholders. I had a legal provider who promised to give me a signed statement about childcare expenses, and detailed receipts for all my payments. She did that, but refused to provide her SSN. My accountant said there's no way to file w/o. She insisted that other parents are putting placeholders. (Yeah, I was super annoyed). We ended up going to another accountant who said he could file without the SSN. But, after we filed we were asked to provide proof of childcare expenses for ALL of our children and the proof they asked for was canceled checks.
We generally paid with checks, but had used credit card for our older children's day camp and I think we used cash for one month for childcare provider(can't remember why). In any event, though we provided canceled checks and cc statement, I think they only used checks as proof and only used that amount as childcare expenses. IIRC they didn't accept cc statements as valid proof even though I also got letter from the daycamps with letterhead that matched charge on cc statement. They definitely didn't count cash we paid as we couldn't prove it.
Now, I don't know if our inability to provide SSN is what triggered them to ask us for proof, but it's possible. It was the first and last time I ever had to provide this type of proof.
My point of this long megillah? Know what you're up against and see if you can ask for SSN or Business ID while enrolling so that things don't get sticky in April.
(Anon bec. of identifying details in story)
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ces




 
 
    
 

Post Fri, Mar 29 2019, 7:34 am
I'm a little confused. With an FSA the funds are withheld from your paycheck pre tax and then reimbursed for qualifying expenses. How are you then filing those same childcare expenses as deductions on your taxes when you already paid them with pre tax funds?
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amother
Coral


 

Post Fri, Mar 29 2019, 7:59 am
I responded in the OP’s second thread.
If there are 2 or more children in childcare, you can claim an additional 1k for the childcare expense deduction (6k max childcare expense-5k FSA).
If the op’s Tax rate is 20% this amounts to $200 tax savings.
I suggested she amend her return to remove the claim for the childcare deduction and request the provider to compensate her for the $200.
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amother
Royalblue


 

Post Fri, Mar 29 2019, 8:55 am
amother wrote:
If she is being so shady with her taxes, business dealings etc do you really trust her with your kids? Especially as if you have two going to a daycare, I assume they are not very verbal (at least one won't be) and anything the kids do report can be a "misinterpretation by a toddler".
The fact that her husband doesn't even know the full story scares me as well...
My kid's preschool is fully licensed and reports all income. That means she knows CPR, meets all safety requirements, staff to child ratios etc.


One is VERY verbal, b"H (and super accurate - it surprises me at times). But he's aging out...

I do think that she takes good care of the kids, and I don't think that the way she handles her finances has a direct impact on the child care. What makes me more comfortable, as well, is that I have a personal relationship with the assistants (they're not there 100% of the time, but at least many parts of the day).

Licensed would be great and definitely less of a headache all around, but there are very few options where I live, and they're also very expensive. We've definitely looked into them.
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amother
Royalblue


 

Post Fri, Mar 29 2019, 9:00 am
amother wrote:
To answer your q, I think you should tell her that you filed so that she knows what's going on. I would sort of feel obligated to at least inform her. Yes, she may be upset and not take you back, but this seems like the type of situations where she won't easily come to an agreement with you and its time to terminate the relationship. I don't say this lightly: I also look for providers who can assure me that I'll be able to take full advantage of my rightfully earned childcare expenses, but this situation doesn't seem tenable to me.
Also,this seems like a messy situation to begin with, so I can see why things went totally wacky, but when she discussed it with you, why didn't you tell her that this is what you're doing? I know you didn't mean ill, and were probably really frustrated by her lack of willingness to be straight with you when she said she would, but it sounds like you didn't tell her you'd be filing and she took that as a tacit agreement that you're trying to work with her demands. Why didn't you at least tell her 'I'm filing tomorrow: If you want to discuss with me, make sure to do it now'? Then she has the ultimatum.
Re: SSN or placeholders. I had a legal provider who promised to give me a signed statement about childcare expenses, and detailed receipts for all my payments. She did that, but refused to provide her SSN. My accountant said there's no way to file w/o. She insisted that other parents are putting placeholders. (Yeah, I was super annoyed). We ended up going to another accountant who said he could file without the SSN. But, after we filed we were asked to provide proof of childcare expenses for ALL of our children and the proof they asked for was canceled checks.
We generally paid with checks, but had used credit card for our older children's day camp and I think we used cash for one month for childcare provider(can't remember why). In any event, though we provided canceled checks and cc statement, I think they only used checks as proof and only used that amount as childcare expenses. IIRC they didn't accept cc statements as valid proof even though I also got letter from the daycamps with letterhead that matched charge on cc statement. They definitely didn't count cash we paid as we couldn't prove it.
Now, I don't know if our inability to provide SSN is what triggered them to ask us for proof, but it's possible. It was the first and last time I ever had to provide this type of proof.
My point of this long megillah? Know what you're up against and see if you can ask for SSN or Business ID while enrolling so that things don't get sticky in April.
(Anon bec. of identifying details in story)


I most definitely was trying to work with her, but she wouldn't return my calls or texts, and by the time she did, we had already filed. There's only so much one can wait. The person who filed our taxes is frum and is making Pesach...
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amother
Royalblue


 

Post Fri, Mar 29 2019, 9:00 am
amother wrote:
I responded in the OP’s second thread.
If there are 2 or more children in childcare, you can claim an additional 1k for the childcare expense deduction (6k max childcare expense-5k FSA).
If the op’s Tax rate is 20% this amounts to $200 tax savings.
I suggested she amend her return to remove the claim for the childcare deduction and request the provider to compensate her for the $200.


Thanks Smile

I replied on the other thread.
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amother
Mauve


 

Post Fri, Mar 29 2019, 9:01 am
I also have an FSA and my accountant always asks for the providers name address and tax ID # for my tax return to back up the deduction. This is separate from the documentation I provide in order to get the funds from the company that administers the actual FSA account.
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amother
Royalblue


 

Post Fri, Mar 29 2019, 9:23 am
amother wrote:
I also have an FSA and my accountant always asks for the providers name address and tax ID # for my tax return to back up the deduction. This is separate from the documentation I provide in order to get the funds from the company that administers the actual FSA account.


Thank you - this is a great support for what I've been saying. I report the expenses that I used my FSA for so that the #s align. The extra 1K (as another amother supported) is what becomes eligible for the deduction. It doesn't end up being a lot, and I have other providers listed, too. I would have considered not reporting the expenses that I didn't use FSA money for, but her lack of communication was too big of an obstacle to actually hash out the details. (Babysitter later tried accusing me of "double-dipping" - she's really one to talk...)
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amother
Gray


 

Post Fri, Mar 29 2019, 9:40 am
I don't think I'd trust her enough to continue sending there. I'd be concerned for how she treats my kids. I definitely wouldn't continue sending her there after telling her. I'd be scared she'd take it out on my kids. I also probably wouldn't lie about it.
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amother
Maroon


 

Post Fri, Mar 29 2019, 9:49 am
amother wrote:
I most definitely was trying to work with her, but she wouldn't return my calls or texts, and by the time she did, we had already filed. There's only so much one can wait. The person who filed our taxes is frum and is making Pesach...

ok.
Thinking about the future. Don't worry about her not taking you back. She's not worth the trouble and if she doesn't cooperate with you, you're not getting the true benefit of why you chose to send to her in the first place. Technically maybe you're getting it, but all that agmas nefesh...
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amother
Khaki


 

Post Fri, Mar 29 2019, 9:51 am
ces wrote:
I'm a little confused. With an FSA the funds are withheld from your paycheck pre tax and then reimbursed for qualifying expenses. How are you then filing those same childcare expenses as deductions on your taxes when you already paid them with pre tax funds?


CPA here explaining (yes, I am taking a break from work right now!)
Your w-2 shows that you took FSA funds for dependent care expenses on box 10.
You then have to file a form with your taxes that shows where those funds were expended. Basically, you are proving you used those funds throughout the year for its intended purpose (childcare). You have to provide SSN or EIN of organization that provided child care on that form.
If you take FSA funds throughout the year and your W-2 shows that you did so and you DON"T file this form with your taxes, the IRS assumes the FSA funds were used for a not qualified reason and then taxes you on the benefits you took throughout the year.
Kapish?

And I never heard of not providing an SSN or a "placeholder" number. And I have been a tax accountant for 20 years.
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amother
Khaki


 

Post Fri, Mar 29 2019, 9:54 am
amother wrote:
Thank you - this is a great support for what I've been saying. I report the expenses that I used my FSA for so that the #s align. The extra 1K (as another amother supported) is what becomes eligible for the deduction. It doesn't end up being a lot, and I have other providers listed, too. I would have considered not reporting the expenses that I didn't use FSA money for, but her lack of communication was too big of an obstacle to actually hash out the details. (Babysitter later tried accusing me of "double-dipping" - she's really one to talk...)


As I just explained above, you don't even file the form with your tax return to get an extra deduction (although it may work out that way). You file it to prove you used FSA funds for a valid childcare expense. If you don't file this form, you will be taxed on all your FSA disbursements.
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