New Year’s Tips: EIN, Parent Receipts and Reporting Income

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“Should I get an EIN or give parents my Social Security number?”

“Do I have to give parents a receipt for what they paid me in 2012?”

“I received a check on January 1st for care I provided in 2012. Is it income for 2012 or 2013?”

These questions always come up in early January as family child care providers respond to parents who want to claim their Child Care Tax Credit.

Answers

Here are the answers:

I strongly recommend that child care providers get an Employer Identification Number (EIN) instead of your Social Security number to parents. Giving out your Social Security number increases the chances of identity theft. I wrote an article, “What to Give Parents: Social Security Number or EIN?” that describes how you can get your free EIN in 15 minutes online.

You are not required to give parents an end-of-year receipt indicating how much they paid you for the year. I think it’s a good idea to give a receipt to parents so they can properly claim their Child Care Tax Credit. You can use IRS Form W-10 for this purpose, the Redleaf Press receipt book, or any receipt you create. I wrote an article, “The Truth About End-of-Year Parrent Receipts” that discusses this issue in detail.

IRS rules state that you must report income on your tax return in the year you receive it, not the year you earned it. So, if you got a check from parents in January for care you delivered last December, this is 2013 income. If the parent gave you a check in December and you didn’t deposit it into a bank account until January, it’s income for 2012 because that was the year you received it.

As always, I’m happy to answer your questions by email (tomcopeland@live.com) or by phone 651-280-5991. It’s free.

Tom Copeland – www.tomcopelandblog.com

Image credit: http://www.flickr.com



Categories: Parents & Taxes, Record Keeping & Taxes

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4 replies

  1. I just got an EIN number, my husband who is also self employed doesn’t seem to happy that I did? He says I’ll have more paper work? If so, what more would I need to do related to any taxes? I’m confused.

  2. Once you have your EIN, there is no additional paperwork. Give your EIN to parents, not your Social Security number. Put your EIN on your business tax forms. That’s it.

  3. I have a small family daycare. What is the right way/best way to fill out the FORM to get the EIN nbr to avoid future complicated paper work when tax season comes? Other than “started a new business” for sole proprietor who does Not intend to hire employees. Appreciate advise. Thanks
    Miniblessings Family daycare.

  4. You must enter “started a new business” when asked, even though you may have been in business for many years. After entering this, the rest of the questions are straight forward and you’ll get your EIN without difficulty.

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