Year-end tuition statements for parents (home daycare)

Why parents ask for a statement

Parents who pay for child care so they can work may claim the child and dependent care credit on Form 2441, or use money from an employer dependent care plan. Either way, Form 2441 asks them to list each care provider and the amount paid. The rules are explained in IRS Publication 503.

The credit amount, income limits and plan limits are the parent's issue, not yours, and they change with tax law. Don't promise parents a specific credit. Just give them accurate records.

Your name, address and TIN (Form W-10)

For each provider, Form 2441 asks for the provider's name, address and taxpayer identification number (TIN). According to the Form 2441 instructions and Pub. 503:

• For an individual provider, the TIN is a Social Security number or ITIN. For an organization, it is an EIN.
• Parents can request your information on Form W-10, Dependent Care Provider's Identification and Certification. Parents keep the W-10 with their records. It is not sent to the IRS.
• The W-10 instructions also accept a recently printed letterhead or invoice showing your name, address and TIN as proof of "due diligence."
• Section 6109 requires dependent care providers to give a valid TIN, and a provider who fails to may face a penalty unless there is reasonable cause (Form W-10 instructions).
• If a provider refuses, the parent writes "See Attached Statement" on Form 2441 and explains the refusal. You don't want families doing that over your daycare.

What to include on the statement

There is no official IRS form for a provider's year-end statement. A clear one usually shows:

1. Your business name, address and TIN (matching what you give on Form W-10).
2. The parent or guardian name(s) and the child or children in care.
3. The tax year and the dates of care.
4. The total amount actually paid during the calendar year. Report what was received in that year, not what was billed.
5. A note on any amount paid by a subsidy program or a third party rather than the parent, so the family reports only its own payments. Check how to word this with your preparer.
6. Your signature and the date issued.

Keep statements factual. Leave out tax advice like "you qualify for the credit," and leave out food or registration fees unless you know how your preparer wants them shown.

Match statements to your income records

The total you report as income on Schedule C should agree with the sum of your statements plus any other income (subsidy payments, CACFP reimbursements, and so on). Parents report your TIN on their returns, so mismatches can come up. Before you send statements:

• Reconcile each family's payments with your bank deposits and receipts.
• Watch December payments made for January care, and late payments received in January for December care. Report by date received.
• Keep a copy of every statement with your records. See audit records to keep.

Practical tips

• Hand families a completed W-10 at enrollment, so January requests are faster.
• Issue statements by late January, since families start filing early.
• Use the same template every year. A tax workbook that tracks payments by family can produce the totals automatically.
• If a family asks for a mid-year statement (for a dependent care FSA claim, for example), use the same format with the partial-year dates.

Your state may have its own record rules for enrollment and payments. See our Georgia, Florida and Texas paperwork checklists.