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

"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 the year?"

"I received a check on January 1st for care I provided the previous December. Is it January income or December income?"

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. 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.

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 income for January. 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 December because that was the year you received it.

Tom Copeland - www.tomcopelandblog.com

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