ADVICE needed - daycare

So my kids are at in home daycare...we pay 225 a week for them

we love the provider.

My friend also sends her kids there. We wanted to ask her about claiming the income so we can claim the deduction. This is the email my friend sent her

Steph and I were just talking and we were discussing taxes for this year. We realized that neither of us had discussed with you how you wanted to handle 2009.We just wanted to be sure that we are all on the same page. Our question is - do you prefer that we claim YOU as the provider, or were you going to put the income in Stewie’s name? I know that you prefer that I put his name on the checks, so I figured maybe you want the income in his name?? Obviously, it does not matter for us, but whatever is better for you. I wasn’t sure, because we didn’t do anything for 2008. We started late in the year, and for me, mine were gone in December anyway, after I had Sammy, so it was only really 2-3 mos. of just Gianna. For Steph, it wasn’t TOO much more than that, so we just figured we wouldn’t worry about it. This year, however, we of course paid out way more and obviously need to write off the expense. Just let us know what you prefer. Think it over and let us know.

This was her response

We had discussed the taxes at the later part of last year and I was told that it would not be a problem to not claim. I can not claim taxes with the rates I am charging you guys. When ya'll first came I told you guys I normally charge between 150-175 for child care. I accepted the lower rate and now it is even lower. I understand that I agreed to the lower rate but if I file taxes I have to pay taxes and basically about 1/4 of what was paid to me will have to go to taxes. If you now are wanting to claim I will have to raise my rates. With not filing last year I have not kept reciepts or bills that would be needed to file. (gas, electric, water, ect.) Please let me know how you guys want to proceed for this coming year

a little more info.....we get 15 days a year where we can keep our kids home and not pay and we pay the sitter for about 10 holidays where she does not work....I guess our stance is if you want to run it like a daycare, run it like a daycare (where we can deduct the expense and there is more "structure" for the kids)

any opinions?

TIA

oh and BTW before you say what a great price she is giving us, we live in NC and we called around 5 different in home daycares and got the same rate so she is not giving us any HUGE break

Message edited 12/28/2009 1:33:18 PM.

Re: daycare question

I would probably try to do an estimate of what the difference would be between the reduced rate, and the amount I am paying in taxes if I don't take the write off. If it's the same, I would just leave things as they are. If I would have a significant savings by claiming the daycare expense, I would tell her I want to claim it for 2010 and pay the higher rate.

Are the other rates you got from licensed providers who would also be paying taxes on their fees?

Message edited 3/5/2010 3:11:00 PM.

Re: daycare question

Re: ADVICE needed - daycare

So do you mean for your 2010 taxes or 2009? If it wasnt discussed before 2009 and she hasnt kept proper documentation, then I think you need to let 2009 taxes go since it wasnt brought up earlier, KWIM? But then make it clear that for 2010, you'd like to claim. But I think it's pretty common for in home daycares not to file, right? When you called around to the other 5 places, did you ask if you can file the deduction? Maybe it's worth taking a survey among them and seeing what the norm is?

Re: ADVICE needed - daycare

Are the other home providers at the same rate, on the books or off?

Re: ADVICE needed - daycare

Most that come into your home are off the books (as to my knowledge). In home I would think would be different b/c I am assuming they would be licenced??

Re: ADVICE needed - daycare

Re: ADVICE needed - daycare

Re: ADVICE needed - daycare

Posted by pinkandblue

Posted by nbc188

Posted by SweetCaroline

Are the other home providers at the same rate, on the books or off?

That's what I was wondering too....I know around here a lot of in-home providers are off the books, that's why they're often the affordable option.

could be, I am not sure

this issue is for 2010, not 2009 so we are going to sit down and discuss

we used to use another in home provider who charged the same but she did not claim the income. She also did not get paid for holidays and for days when the kids were sick or whatever

thanks all

Re: ADVICE needed - daycare

since it was not discussed at the start, basically she is going to be losing money she did not expect to lose.

This was a major issue for me. In the middle of the game, we agreed she could have my SSN, but she must pay me what I will owe out.

She forgot we agreed to second part of deal...and that was it for that gig.

I was not told upfront that
I would be offering my services one month for free...that's the amount I would have owed on it.

My accountant said she should have to pay for 1/2 as my employer and nanny tax.

good luck!

Re: ADVICE needed - daycare