What’s legally required?

A family child care provider writes:

Can you please tell me two things? Are we required by law to submit a statement to parents with a TOTAL for their taxes? If so where do I find the law? I heard the only regulation was to provide your ID number.

Also, if the parent owes me money and did not follow the rules of the signed contract, can I withhold the statement until their account is paid in full? Is this legal?

For answers to questions like this, I encourage you to get a copy of Tom Copeland’s indispensable Family Child Care Record-Keeping Guide.

Briefly, you are not required to give parents a total of their payments to you for their taxes. I generally recommend it, though, because it’s good to have the parents report the correct amount on Form 2441 for the Child and Dependent Care Credit.

Here is the only thing you are required by law to do

If a parent gives you an IRS Form W-10, Dependent Care Provider’s Identification, and Certification, then you must complete the form and return it to them. You can face a $50 penalty for not giving your correct tax id number or for refusing to fill out the form.

You don’t have to give your tax id number or other information over the phone or any other way except when presented with Form W-10. For your current parents, it’s a good idea to tell them that you prefer to fill out Form W-10 yourself and to proactively provide the form to them. In his FCC Record-Keeping Guide, Seventh Edition, Tom Copeland writes, “If a former parent who owes you money asks for your number, you can stall by saying that you’ll provide it only after all your fees are paid in full.” But if they learn about Form W-10 and present it to you, you must fill it out.

One final note

Do NOT use your social security number as your tax id number on Form W-10. Protect your privacy by using an Employer Identification Number. Apply for an EIN now, if you don’t already have one. It only takes a few minutes.

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