The Internal Revenue Service (IRS) allows a generous credit for child care expenses. Parents can claim up to $3,000 for one qualifying person or $6,000 for two or more persons. The credit is claimed on Form 1040, 1040A or 1040NR using Form 2441; it cannot be claimed on Form 1040EZ or 1040NR-EZ. To claim the credit, the taxpayer should have documentation of child care expenses in the form of a year-end receipt. This receipt protects the child care provider and the taxpayer in the event of an audit. As a child care provider, you can easily create a year-end receipt by hand, on a word processor or with a template.
Gather receipts and records from throughout the year. The day care provider should collect her records of what the parents have paid for child care from January to December of the year in question and compare the tallied total with the parents’ records. If a discrepancy exists, resolve the issue before creating the year-end receipt.
Provide appropriate identifying information. The receipt should include the parents’ names, the names of the children who were cared for and the provider’s Social Security or employer identification number (EIN).
Provide a total of all child care expenses paid to the provider by the parents from January through December of the tax year in question. This total can include fees for meals and field trips that were a part of the daycare program.
Provide Form W-10 to the parents for reference. Form W-10 provides the child care provider's information, including name, address and taxpayer identification number. The child care provider signs the form to attest that his/her name, address and taxpayer identification number are correct.
Use a template. Many year-end receipt templates are available on the Internet. For example, Childcare Link provides a simple, printable template on its website (see Resources).
Sign and date the receipt. The provider and the parents should both sign the receipt.
Keep a copy of the receipt for your records. Make at least two copies of the receipt and keep one for your records. Give the other copy and the original to the parents.
Never create a fraudulent child care receipt. This constitutes tax fraud and is a serious crime.
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