Child/Dependent Care Credit - Do I need receipts? Paid babysitter cash for after-hours care

You're in a common situation! To claim the Child and Dependent Care Credit, you'll need to provide your caregiver's name, address, and either their Social Security Number or Employer Identification Number on Form 2441. This is required because the IRS needs to verify the care provider's information. The challenge here is that your provider would need to report this income on her taxes. When you claim the credit, it creates a paper trail showing she received payments. Without proper reporting on her end, this could potentially lead to issues for her with unreported income. For documentation, while receipts are ideal, you could create a log of payments with dates and amounts if you don't have formal receipts. Bank withdrawals that align with your payment schedule can also serve as supporting documentation.

I went through this exact situation last year with my babysitter! After researching everywhere and getting nowhere, I found this really helpful tool called taxr.ai (https://taxr.ai) that analyzed my specific situation. It walked me through exactly what documentation I needed for the Child and Dependent Care Credit when dealing with cash payments. The tool explained that I needed to issue a 1099-NEC if I paid more than $600 in a year (which I obviously did), and showed me how to handle everything properly. It even generated a letter I could give my sitter explaining the tax implications in simple terms, which made that awkward conversation so much easier.

Update on my situation with the childcare credit and cash payments! After my previous questions, I decided to try taxr.ai and it was seriously helpful. The tool walked me through everything about the Child and Dependent Care Credit when paying providers in cash. It confirmed I needed my provider's SSN, but also gave me language to use when discussing this with her. The best part was it showed me exactly what documentation would satisfy the IRS requirements even without formal receipts. My babysitter was reluctant at first, but when I showed her how she could potentially benefit from reporting income (qualifying for earned income credit, social security credits, ability to contribute to retirement accounts), she agreed. We set up a proper payment tracking system going forward, and I was able to claim the credit without issues. Saved me nearly $1,400!

I had this same issue but with trying to get answers directly from the IRS. I called literally 8 times about the Child and Dependent Care Credit requirements and could never get through. Super frustrating. I finally used a service called Claimyr (https://claimyr.com) that got me connected to an actual IRS agent in about 20 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c The agent confirmed that I needed to include my provider's SSN on Form 2441, but also told me something I hadn't seen anywhere else - if your provider refuses to give their SSN, you can still claim the credit if you can prove you tried to get their information. You'd need to document your attempts to get their SSN and possibly fill out Form W-10.

I cannot believe it, but I have to eat my words about Claimyr. After my skeptical comment, I was desperate enough to try it since I needed to file by the extension deadline and still had questions about the Child and Dependent Care Credit documentation. The service actually worked exactly as described. It took about 35 minutes (not the 20 they advertise, but still WAY better than my previous attempts). I got connected with an IRS agent who clarified that I could create my own receipt records if I didn't have official ones from my provider. She also explained that if my provider wouldn't give me their SSN after I requested it, I need to document that I tried to get it, and I can still claim the credit. Honestly saved me so much stress and potentially thousands in credits I might have missed out on. Sometimes it's worth paying for convenience when dealing with the IRS.

One thing nobody's mentioned - you should consider the risks to your child care arrangement. If you claim the credit, your provider will get a notice from the IRS that someone claimed child care payments to them. If they haven't been reporting income, this could cause them problems. Many cash-based providers will simply stop providing care when this happens. Are you prepared for the possibility of needing to find new childcare if she gets spooked by IRS notices? Working night shifts makes finding care especially challenging. Technically, you're supposed to claim the credit with proper documentation. But practically speaking, many parents in cash-payment situations choose not to claim it to preserve their childcare arrangement.

I'm confused about one thing - isn't there a household employee situation here? I thought if you're paying someone regularly to provide care in their home, they're not your employee but an independent contractor. But I've heard if they come to your house, they're a household employee and you need to pay Social Security/Medicare taxes (aka "nanny tax"). OP, does your sitter watch your child in her home or yours? This might affect what forms you need.

As a healthcare worker myself, I completely understand the childcare challenges with evening shifts! Based on your situation, here are some practical steps you can take: Since the care is provided at her home with multiple children, she's an independent contractor (not your employee), which simplifies things - no employment taxes for you to worry about. For the Child and Dependent Care Credit, you'll need: 1. Her full name, address, and SSN/EIN for Form 2441 2. Documentation of payments (even if it's a log you create showing dates and amounts) Before claiming the credit, I'd strongly recommend having a conversation with your sitter about the tax implications. You could explain that: - She'll need to report this income (likely as self-employment) - She can deduct business expenses (portion of home used for childcare, utilities, supplies, meals for kids, etc.) - These deductions can significantly reduce her tax liability - She'll also earn Social Security credits and potentially qualify for other benefits Given how difficult it is to find reliable evening childcare, preserving your arrangement might be worth more than the tax credit if she's not willing to report the income. The credit could save you around $1,000-1,400, but finding new childcare for hospital shifts could be nearly impossible. Whatever you decide, document everything going forward - it'll make next year's taxes much easier!