No Daycare provider tax ID

A friend approached me with a question I thought I would post for help... they have been using the same home daycare for their child at another residence for all of last year. They had an agreement that upon tax time, the daycare provider would provide them with their tax id (ss#) for claiming what they paid. Recently, the daycare provider informed them that they will not be claiming the income and will not be giving any form of tax id. What should my friend do? Is there still a way for my friend to claim this expense? Thanks.

That's one stupid daycare provider.  I'd push them by MAILING them a letter and attaching a W-9 filled out to the extent possible and demanding that they cough it up.  Friend is free to note in letter that this person's personal SSN will do if they are a sole proprietorship and no other form of entity is set up (though that too is stupid in terms of a daycare, for liability purposes).  Friend shouldn't have waited all year, however.

Friend's presumably free to claim the expense and respond to IRS or whomever's query with proof that she demanded the W-9 and the provider refused to cough up.  Discuss with tax professional if need be.

Form to save to whomever's computer:

http://www.irs.gov/pub/irs-pdf/fw9.pdf

gooddad2011:

They had an agreement that upon tax time, the daycare provider would provide them with their tax id (ss#) for claiming what they paid.

Was the agreement oral or written? If it was oral, does your friend have any evidence of this agreement other than his/her own testimony?

When you hire a daycare provider ALWAYS get the tax ID information at the start. That's when the provider will be motivated to give it — if he or she wants the income, he or she needs to provide the information or lose out.

gooddad2011:

What should my friend do?

Not enough information to answer that question. Possibilities include suing the provider to get this information and/or for damages caused by the loss of the credit and reporting the daycare provider for possible tax fraud to the IRS. Whether a suit to obtain the information can be done in small claims court depends on the small claims court rules in whatever state your friend resides, and you did not indicate the state. Information on making the tax fraud report can be made on the IRS web site here: reporting tax fraud

gooddad2011:

Is there still a way for my friend to claim this expense?

Internal Revenue Code  § 21(e)(9) denies the credit unless the taxpayer provids the name, address, and TIN of the daycare provider. It allows the IRS to make an exception, however, if the taxpayer “exercised due diligence in attempting to provide the information.” So, I suggest your friend request the information IN WRITING and include a Form W-9 and self addressed stamped envelope to make it as easy as possible for her to comply. I suggest your friend remind her of the agreement in the letter and state that your friend may sue to enforce the agreement. Finally, I suggest the letter states that your friend will report the provider to the IRS no matter what happens anyway. Your friend should send that letter twice, once by regular first class mail and once by certified mail, return reciept requested. The former is to ensure she'll see it, the latter is to track her response. Your friend should keep copies of everything, of course. This way your friend can show the diligent efforts he has made to get the information. 

Tax makes a good point (and one I tend to use but this time didn't think to) about showing on the letter that it's going certified mail (or at least get a certificate of mailing by taking it to desk), and showing on the letter that a "cc" will be sent via regular mail or hand delivery as well.  (This way if she declines to sign for the certified piece, she can't reasonably claim not to have received the regular mail piece.)

Can't imagine it's worth the time off work to sue even if small claims entertains such non-monetary actions.  You wouldn't get the value of the time off work even if you sued for it.

Chancey1:

Can't imagine it's worth the time off work to sue even if small claims entertains such non-monetary actions. 

The credit when there is one child is potentially worth up to $1,050 depending on the taxpayer's income and the amount of the child care expenses incurred. Its double that if there are two (or more) kids. For a lot of taxpayers that may be enough to make it worthwhile to pursue.

Chancey1:

That's one stupid daycare provider.

I disagree.

It's the friend who was stupid for not getting that information at the beginning, before hiring the daycare person.

adjuster jack:

Chancey1:

That's one stupid daycare provider.

I disagree.

It's the friend who was stupid for not getting that information at the beginning, before hiring the daycare person.

What was stupid of the daycare provider was admitting to the plan to commit tax fraud. The daycare provider should have just said the word "no" when asked and not elaborate as to why the day care provider wasn't going to give the information. 

i know it is illegal for the day care provider to not report the income, but many don't and I think it depends how much they charge. If they are getting a good deal then honestly I probably would not push it. Understand this is probably going to sour their relationship now. Me and my ex did not bother with claiming tax credit whe we used home daycare providers as they were giving us good rates to begin with.

Taxagent:

Not enough information to answer that question. Possibilities include suing the provider to get this information and/or for damages caused by the loss of the credit and reporting the daycare provider for possible tax fraud to the IRS.

Couldn't the person give the provider a 1099 with a letter informing them that it is being submitted to the government?

Writer1:

Couldn't the person give the provider a 1099 with a letter informing them that it is being submitted to the government?

No. First, none of the Forms 1099 are for reporting this kind of income unless the day care was provided to a business owner (e.g. an employer offering a day care center for employees). Instead, the form 2441 serves that function. Second, even with a Form 1099, there is is the same basic problem: the OP need the TIN of the person he/she paid.

OliviasMom:

If they are getting a good deal then honestly I probably would not push it.

If you agree not to report it to the IRS in exhange for getting a low rate from the provider knowing that the provider won't report the income on her return, you are aiding in tax evasion and that could create legal problems for you. I understand that a number of parents simply turn a blind eye and simply don't ask questions in order to get cheap child care, but you might want to remember that each person who doesn't pay their share of tax means that your taxes go up to compensate. In the end, we all end up having to help foot the bill for the savings you got from the tax evading day care provider.

I'll bet thousands of day care users and providers operate on the cash side of the equation --that does not make it right--I doubt its a high priority item for criminal prosecution at IRS  but then agains IRS may need to rattle a few chains. .

If you were to run for public office or some position which requires a background check  then to have  used an unreported day care provider or have paid your household staff in cash could turn into a major problem and cost you a job.  Might be smart to clean it up at least going forward.

I can assure you from personal experience that to ask too many questions about day care will make you persona non grata in many circles --as a political reality its akin to a sacred cow  and I suspect more than a handful of welfare recipients or some other public benefit  use being a day care provider as a means of making ends meet  and at least locally to provide a day care service is defined as a non activity so that folks in homes and apartments everywhere can do it w/o code or zoing issues and even my local public school has backed into commercial day care operation in areas expressly NOT zoned for any such stuff. .

Drew:

I can assure you from personal experience that to ask too many questions about day care will make you persona non grata in many circles

That depends on what sort of questions are asked and who it is that is asking them. Certainly I can see that if you have a home in your neighborhood providing day care to a few of the neighborhood kids and you raise stink over it trying to get the child care closed down over, say, a claimed zoning violation you may well become very unpopular in your neighborhood.

The IRS, however, won't have any hesitation going after day care providers who it discovers have failed to report their income from that business. And with the right evidence, it would go after parents who collude with day care providers to commit tax fraud, too. Criminal prosecutions for tax offenses are not common, but they do occur. In my view, that's not a risk parents ought to take just to save a few bucks on day care. Of course, most parents don't actually collude in tax fraud. Instead, they simply turn a blind eye to what they suspect might be going on to save a few bucks. I don't like that either, but then I don't have kids.

I have no doubt IRS could go after  day care providers who work off the tax grid and I'd venture to suggest it should do so ......but I suspect that a disproportionate % of the providers who forget to address taxes are going to be  female minorities and thats going to be a hot potatoe in some circles and if it fell near my desk I'd sure hope it went to another desk. .