How do I use the $3,000 deduction for childcare? Would there be increased risk of an audit?
My mom has been coming to my house to help me babysit while my wife and I work. I've been giving her cash to reimburse her for food and gas. It probably came out to $3600 for the year. I just found out that I could claim $3,000 for childcare expenses. Is this the same situation as a household employee? Was I supposed to keep careful records and deduct social security or unemployment taxes? If I claim the deduction, my mom will need to claim the income. Would that expose us to additional risks of an audit? Is it worth the extra hassle and paperwork?
Public Comments
- You will have to report her name address and SS# to the IRS on form 2441. They will use this to check that she claims the income on her return. She will have to file a Schedule C and the income will be subject to self employment tax and income tax. She will be able to deduct any expenses she has on the Schedule C.
- The childcare credit is maxed out at $600. While you can claim $3,000 in childcare expenses, it is not a direct deduction. It is a maximum tax credit of 20% of your expenses up to $3,000, or $600.
Like the above mentioned, you would report these expenses on Form 2441, and would need to provide your mother's SS#. She would also have to pick up this income on her tax return and would be subject to self-employment tax.
