Daycare Tax Tips

Is the care provider's tax id needed for dependent care benefit plan participation?

This parent's employer is asking for it

>My husband and I each participated in our employers' DDCFSA plans last year for a total amount of $5000 and this year we are solely into his plan for $5000. With last year's plans, both forms stated that we did not need the babysitters SSN or Tax ID. We switched to an in-home provider midway through the year and never submitted any of this info. She just signed the forms and we were reimbursed. With this years plan, the form says that we need to include the SSN or Tax ID. What is the rule for this? Is our provider required to submit this information and are we required to do anything else? The care is provided in her home while I am at work. I don't want to have to pay any additional money that we weren't counting on, and I don't know if she was plannning on claming the income on her taxes and if now we will be "in trouble" after the fact. Thank you in advance for any help.

Thank you for writing to me. Unfortunately, this is an area of employer benefit that I have no knowledge of. It is up to you to comply with whatever eligibility documentation your employer needs, so that they don't disqualify you from the plan. (Which could result in the $5,000 being taxable, rather than tax free.) That is, unless you are able to determine from some other source that they are asking for unnecessary information and make your case to the employer. Sounds like a long shot to me.

When participating in a dependent care reimbursement plan, you, yourselves, don't normally need the care provider's tax id number, because it won't appear on your tax return anywhere. Be aware, however, that if you have more than one child and paid more than $5,000 for child care during the year, it is possible that you could be eligible for some amount of Dependent Care Credit. This is in addition to any nontaxable dependent care benefits you receive. In that case, you would need the child care provider's tax id number for your tax return in order to attach Form 2441, Child and Dependent Care Expenses.

The official way to request your child care provider's tax id number is to present her with a Form W-10.

Posted on 2011-01-21 03:43:24