Friday, January 13, 2006
Time to hand out W-10's...
The holidays are over and its time to start getting back to business as usual. One of the first items of the year to take care of is giving W-10's out to your "customers". I'm sure that you already know all about this, but I am going to give a quick refresher...
The W-10 shows your taxpayer identification number so that your parents can claim dependant care expenses on their taxes. Are you required to give the parents a W-10 form each year? Are you required to fill one out? Here are some quick FAQ'a about W-10s:
Q. As a Child Care Provider, am I required to give parents my social security number?
A. No, but parents are entitled to give their provider a W-10 form, and request that they complete the form for tax purposes. (see next two questions)
Q. Is there a penalty from the IRS if I refuse to give my social security number to parents?
A. Possibly, if the parent gives the provider a W-10 form, the provider must fill it out or they could face a penalty of at least $50.00, or of being audited by the IRS. The law reads as follows:
Q. Can I use a Tax Identification Number instead of my social security number?
A. Yes, not only is this possible. I would highly recommend it! In today's age of identity theft issues, a person must be careful about presenting your personal social securty number. You can obatin an Employer Identification Number from the IRS by filing an SS-4 form that you can obatin here. When asked the reason for requesting a EIN on question #9, respond "Privacy".
Q. Am I required to give parents a summary of the amount that they paid for the year?
A. No, parents can still claim the tax credit without a summary from you, however I recommend that you do provide an annual summary. Though I promote this as a service to the parents, it is actually for my own protection. The receipt doesn't have to be fancy; it can be written on any piece of paper. Here is an example: "For child care services for John Doe in 2005, Patty Provider received $4,000. Signed by Patty Provider." Make 2 copies of this receipt and make sure the parent signs a copy of the receipt for your records. Give the parent the other copy of the receipt. I suggest that you prepare this annual receipt even if you have been giving parents receipts throughout the year.
Q. Am I responsible for finding a copy of form W-10?
A. No, it is up to the parent to provide you with a W-10 form. However it is a simple enough service to provide for your parents. See below to obtain a copy of the W-10 form.
Q. Is it my responsibility to search for a parent who has left, to give them the tax information?
A. No, Keeping good payment records can cover the provider if they are audited.
Best Practices:
This is a good time to get this done, as most of your parents will be getting their tax information from their employers by the end of the month and may be wanting to start working on their taxes.
The holidays are over and its time to start getting back to business as usual. One of the first items of the year to take care of is giving W-10's out to your "customers". I'm sure that you already know all about this, but I am going to give a quick refresher...
The W-10 shows your taxpayer identification number so that your parents can claim dependant care expenses on their taxes. Are you required to give the parents a W-10 form each year? Are you required to fill one out? Here are some quick FAQ'a about W-10s:
Q. As a Child Care Provider, am I required to give parents my social security number?
A. No, but parents are entitled to give their provider a W-10 form, and request that they complete the form for tax purposes. (see next two questions)
Q. Is there a penalty from the IRS if I refuse to give my social security number to parents?
A. Possibly, if the parent gives the provider a W-10 form, the provider must fill it out or they could face a penalty of at least $50.00, or of being audited by the IRS. The law reads as follows:
Penalty for failure to furnish TIN.—TINs are needed to carryout the Internal Revenue laws of the United States. Section 6109(a) requires a provider of dependent care services to give to you a valid TIN, even if the provider is not required to file a return. The IRS uses the TIN to identify the provider and verify the accuracy of the provider’s return as well as yours.
A care provider who does not give you his or her correct TIN is subject to a penalty of $50 for each failure unless the failure is due to reasonable cause and not willful neglect.
Q. Can I use a Tax Identification Number instead of my social security number?
A. Yes, not only is this possible. I would highly recommend it! In today's age of identity theft issues, a person must be careful about presenting your personal social securty number. You can obatin an Employer Identification Number from the IRS by filing an SS-4 form that you can obatin here. When asked the reason for requesting a EIN on question #9, respond "Privacy".
Q. Am I required to give parents a summary of the amount that they paid for the year?
A. No, parents can still claim the tax credit without a summary from you, however I recommend that you do provide an annual summary. Though I promote this as a service to the parents, it is actually for my own protection. The receipt doesn't have to be fancy; it can be written on any piece of paper. Here is an example: "For child care services for John Doe in 2005, Patty Provider received $4,000. Signed by Patty Provider." Make 2 copies of this receipt and make sure the parent signs a copy of the receipt for your records. Give the parent the other copy of the receipt. I suggest that you prepare this annual receipt even if you have been giving parents receipts throughout the year.
Q. Am I responsible for finding a copy of form W-10?
A. No, it is up to the parent to provide you with a W-10 form. However it is a simple enough service to provide for your parents. See below to obtain a copy of the W-10 form.
Q. Is it my responsibility to search for a parent who has left, to give them the tax information?
A. No, Keeping good payment records can cover the provider if they are audited.
Best Practices:
- Get a copy of the W-10 form, fill it out and give a copy to each parent
- Give parents an end of the year receipt even if you give receipts during the year.
- Add end of the year payment information to W-10 and have parents sign a copy.
- Keep the copy with parent’s signature for your tax files.
This is a good time to get this done, as most of your parents will be getting their tax information from their employers by the end of the month and may be wanting to start working on their taxes.
// posted by Tammy Wachter @ 8:42 PM 
