Today TaxMama® hears from someone else in the TaxQuips Forum who is being audited. “This person is being audited by IRS for a child tax credit. At this point, she can no longer locate the care provider to get her Social Security Number – the woman’s phone is disconnected. She didn’t get receipts for her payments. What can she do now?”
Well, my friends, this is one of the few times TaxMama probably cannot help.
First of all, I am amazed that her tax software would even let her efile a tax return with a Form 2441, Child and Dependent Care Credit, without a taxpayer ID number (TIN) for the care provider.
So, my first warning is – if your software won’t let you efile because something is not complete – get the missing information. Don’t just file a paper tax return. There’s a reason the program won’t let you efile.
When it comes to forms like the Child and Dependent Care Credit, that ask for a name, address and TIN, be sure to gather all those things from the care provider. Rita Lewis, our EA in Fairfield County, CT points out that there is a special Form W-10 designed specifically to collect information from care providers.
Preferably, get those things at the beginning of the relationship. If they are not willing to provide those bits of information, you know that they are not planning to report the income. If you don’t mind hiring someone on that basis, fine. But, don’t waste your time trying to claim the credit. That missing TIN guarantees an audit (unless the care provider is a non-profit organization, like a church, YMCA, public school…).
Also, be sure to pay care providers with checks, credit cards or PayPal (if they accept them) to ensure you always have proof of the payments.
This is one of those rare instances when even TaxMama can do nothing to salvage this audit. Without the TIN or proof of payments, this is a costly lesson. The loss of about $1,200 – and the assessment of penalties for negligence, plus interest on the tax and the penalties. If the IRS auditor is merciful, she won’t assess the negligence penalties. Maybe.
And remember, you can find answers to all kinds of questions about avoiding audit and other tax issues, free. Where? Where else? At www.TaxMama.com.[Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the join TaxMama.com link – it’s free!]
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One thought on “Get All the Paperwork”
The Instructions to Form 2441 tell the parent what to do if they don’t have an identification number for their child care provider. The parent should write on the back of the form what they did to try to get the number. If the parent makes a good faith effort to get the number, they are entitled to claim the credit. Giving the provider the Form W-10 is enough evidence. If the parent did nothing to try to get the number, then the parent should try to produce evidence that she paid for child care (checks, receipts, etc.). Only after trying all of this should the parent give up.