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Last year we signed our daughter up for in home daycare. We drive her to a woman's house who watches her and ~6 other kids for $65 a day.
The cost for our area is very reasonable as typically places charge $85 a day or more and they don't have flexibility to not pay for days you don't need them to watch your kids. My wife is a teacher so she gets summers off and lots of holidays and this woman doesn't charge us for that time.
I asked her about claiming our child care costs for our taxes and she casually mentioned that with cash customers she doesn't report the income. She asked if we wouldn't claim it. We really like her, as does our 1 year old. She has taught her sign language and is overall really good and comes highly recommended among local parents.
Moral stance aside and speaking strictly financially, what would you do?
1) Demand she allow us to claim the costs for a refund on our taxes
2) Give her a break and don't push it since she is convenient, close, does a great job, and other places are more expensive.
3) Other - Work out a compromise, switch providers all together.
Why did you think she was cheaper? Tax fraud and/skipping out on other compliance for health and safety other businesses must follow.
You want to unfairly price arbitrage and pay less than everyone else and get a tax deduction too?
We had no reason to think it was cheaper other than being an at home daycare situation. She wasn't upfront about skipping claims and just said she preferred to be paid in cash, which we did.
She is also licensed and insured, we made sure of that before signing up with her. The only thing she doesn't have is the certification on her home to be certified safe for daycare (home is pretty old).
We had no reason to think it was cheaper other than being an at home daycare situation. She wasn't upfront about skipping claims and just said she preferred to be paid in cash, which we did.
She is also licensed and insured, we made sure of that before signing up with her. The only thing she doesn't have is the certification on her home to be certified safe for daycare (home is pretty old).
You know now.
It’s kind of a “if it sounds too good to be true, it’s probably is” type of thing. You know she’s cheaper. You know she’s asking for cash. You know she’s more lenient on no shows (because she’s not running a real, business).
I don’t know the significance of the home not being certified, but hypothetically, maybe without that certification, she’s also skipping out on home insurance/liability costs. That’s another red flag to me.
The answer I’d say, is given what you know, it’s best to end that customer relationship (if you want to rope moral considerations back in) or expect to lose out on the legitimacy of the tax deduction in leu of your artificially lower cost since you’re already inadvertently/indirectly benefiting from her felony tax evasion (if you want to strictly look at dollars and cents).
Last edited by Thatsright19; 01-13-2022 at 03:52 PM..
We had this happen with a sitter who was just minding our 2 kids. We used her for like 3-4 years and it started to add up. My husband let her know that we'd be claiming her and the next day she quit.
Let's see, if you claim the costs and she drops you as a customer, what will it cost to place your child somewhere else and will you like them as much and will they have the same flexibility?
Last year we signed our daughter up for in home daycare. We drive her to a woman's house who watches her and ~6 other kids for $65 a day.
The cost for our area is very reasonable as typically places charge $85 a day or more and they don't have flexibility to not pay for days you don't need them to watch your kids. My wife is a teacher so she gets summers off and lots of holidays and this woman doesn't charge us for that time.
I asked her about claiming our child care costs for our taxes and she casually mentioned that with cash customers she doesn't report the income. She asked if we wouldn't claim it. We really like her, as does our 1 year old. She has taught her sign language and is overall really good and comes highly recommended among local parents.
Moral stance aside and speaking strictly financially, what would you do?
1) Demand she allow us to claim the costs for a refund on our taxes
2) Give her a break and don't push it since she is convenient, close, does a great job, and other places are more expensive.
3) Other - Work out a compromise, switch providers all together.
Curious to hear everyone's thoughts!
Sometimes doing the right thing is not necessarily the easiest or cheapest method.
How do you feel that she's not contributing to the greater good by not paying her fair share in taxes?
If she's being dishonest with her taxes, what else is she lying about?
Stop paying cash and instead with a credit card that can be tracked.
Sometimes doing the right thing is not necessarily the easiest or cheapest method.
How do you feel that she's not contributing to the greater good by not paying her fair share in taxes?
If she's being dishonest with her taxes, what else is she lying about?
Stop paying cash and instead with a credit card that can be tracked.
In a way, it’s not actually her that’s getting the (majority of the) benefit of not paying the tax, it’s the person buying the service. If she had a real business, she would budget in the full cost of providing the service, including the income tax liability of doing so (assuming the service had enough market power to get cost plus profit).
So, by just charging the cost net of tax to attract unearned business, she’s still most likely materially getting what she would after tax anyways. The person benefiting is the one paying less than other people struggling to pay for their own kids daycare honestly. It’s the OP who is ultimately reaping the lower cost than the rest of society. Now, I’m not saying that as an accusation, just a simple accounting of the flow of the value. The daycare provider may be taking some of this value back depending how much they’re being paid, but most of the savings actually falls to the buyer of the service. Also the value would be altered by the marginal tax rate of each side.
If they actually did it intentionally, now they’re wanting to double dip with a tax deduction/credit on top of it. Again, not saying that’s the Ops intent.
As for the OP, when you deduct child care costs, you have to provide the name, taxpayer ID, ect. You can report without that assuming you’ve done your due diligence. So, since this could very well be not something you wanted to take advantage of, you could probably claim the legitimate expenses you made for this 1 tax year…but now that you’ve done your due diligence and realize they’re not going to provide this going forward, you should seek a new provider. That’s pretty much your moral and legal “out”.
Last edited by Thatsright19; 01-13-2022 at 06:34 PM..
I would let it go. This is something that should have been talked about when you first interviewed her, not at tax time.
How much money would you get back if you take the credit? By taking the credit, you are essentially just transferring the tax burden to her. If she knew you wanted to claim the credit last year, I'm sure she would've adjusted her prices to cover that tax.
I know a lot of very good in home child care providers that closed their doors when this credit came about 30 years ago. I just have a soft spot for moms that stay home and care for other people's children 9-10 hours a day.
Last year we signed our daughter up for in home daycare. We drive her to a woman's house who watches her and ~6 other kids for $65 a day.
The cost for our area is very reasonable as typically places charge $85 a day or more and they don't have flexibility to not pay for days you don't need them to watch your kids. My wife is a teacher so she gets summers off and lots of holidays and this woman doesn't charge us for that time.
I asked her about claiming our child care costs for our taxes and she casually mentioned that with cash customers she doesn't report the income. She asked if we wouldn't claim it. We really like her, as does our 1 year old. She has taught her sign language and is overall really good and comes highly recommended among local parents.
Moral stance aside and speaking strictly financially, what would you do?
1) Demand she allow us to claim the costs for a refund on our taxes
2) Give her a break and don't push it since she is convenient, close, does a great job, and other places are more expensive.
3) Other - Work out a compromise, switch providers all together.
Curious to hear everyone's thoughts!
When I used a private in-home person to take care of my son, it was a cash deal. No taxes. Once I used a daycare center, then that changed. I would absolutely let it go. One of the reasons that she is cheaper, is because she does not have to pay taxes. Can't believe you would even think of insisting on that.
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