DAYCARE

[10409000]

Question, I have recently had 2 clients this year stating that they pay childcare to their teenage son they told me they paid their son $7,200 for the year. I feel like they are lying just to get the credit. What do other tax preparers do to protect themselves? I asked them how did they pay and if they can provide proof if they were audited they told me they paid cash.. do i tell them sorry cant help or just have them write a letter.? What is everyone else doing? I also had one client tell me they always do this an no one ever questions them and I told her if shes paying her mom her mom has to report that as income and she said for the past 8 years her mom has never reported it as income. what are your thoughts and should i stop questioning people and just do as they say? These people end up going somewhere else and not filing with me.

[Just-Lisa-Now-]

The SSNs we put on the 2441 for care providers seem to fall into a black hole. IRS doesn't cross match these with income reported on their return.

That being said, If you read the 2441 instructions, paying your teenager to watch younger children doesn't qualify for dependent care credit.

[Jim-from-Ohio]

nothing to see here.. i mis-read the original question.. but have a good day all the same. 

[sdudley]

As a tax professional you are gathering all the information that the tax payer is providing and hopefully you have an application or agreement form that they signed stating all information they are providing is true......that statement right there would dissolve you from any false information they provided. They will have to deal with the audit and fraud department for false documents.

I would ask for the same document requirements that the IRS would ask for the credit....SS for the provider, full name, address etc. if they are not willing to provide the documents let them know you will not be able to submit the credit. It's better to lose a client that you feel is not being honest than to ruin your prepares status for filing false returns.

I hope this helps! Good luck! 

[qbteachmt]

The IRS knows what qualifies:

"The person who provided the care wasn't your spouse, the parent of your qualifying child, or a person whom you can claim as a dependent. If your child (including stepchild or foster child) provided the care, he or she must have been age 19 or older by the end of 2021, and he or she can't be your dependent."