In early 2015 Oases Online will be introducing the ability for Oases customers to print out tax statements for their customers. Making this tedious annual task a total snap at no additional cost for the functionality.
Many providers have lots of questions surrounding tax statements and whether they need to provide them and what they should include. If you have ever been asked for one it can be a stressful time of year if you are scheduling your sessions without a software solution that spits them out for you.
Legally, the general consensus is that you don’t need to provide a tax statement to a customer or client, but if a customer presents you with a W10 form, then you are legally obliged to fill it out and return it to them. At this point, it is usually easier to provide a tax statement. As we are all in the business of customer service it is always better to preempt our customers’ needs and give them the items they need or believe they need. It will make you look good and make the customer happy.
Here is what the Tom Copeland Blog had to say on the matter:
Most parents who pay a child care provider are entitled to claim a federal child care tax credit using Form 2441. That form requires the parent to list the name, address, identification number of the child care provider, and the amount paid to the provider. The Instructions to Form 2441 tell parents they can use IRS Form W-10 Dependent Care Provider’s Identification and Certification to collect the identification number of the caregiver. It’s the parent’s responsibility to give this form to the child care provider. It’s not your responsibility to give this form to the parent.
According to the law, family child care providers are not required to give parents their identification number and are not required to give parents an end-of-year receipt. If the parent left your program in 2010 you are not required to track them down to give them this information.
If you are on good terms with the parents in your program I do recommend that you give parents an end-of-year receipt, along with your identification number. Ask the parent to sign one copy and keep it in your records. This can help protect you if you are audited and are asked to provide evidence of what the parent paid you for the year. Many providers give receipts to parents this time of year, but most don’t keep a copy signed by the parent.
Remember, it is not your job to advise them on whether they can or cannot claim your services as a deduction. If they ask that then refer them to an accountant but even if they cannot claim your services as a deduction, if they ask for a tax statement – just give it to them. It is essentially just a list of payments with your EIN at the top.
As a rule, child care can be claimed and tutoring cannot. But there are exceptions to the tutoring rule as discussed by Forbes:
Are tutoring services deductible? Not on the surface. For federal income tax purposes, regular tutoring is considered a personal service and is not deductible (but, psst, keep reading).
However, if your child has special needs, you may be able to deduct tutoring services as a medical expense. You would include the cost of the tutor together with your other medical expenses, assuming you itemize your deductions on a Schedule A and assuming you meet the threshold for deductibility. Remember that, for 2013, the threshold is 10% of your adjusted gross income for most taxpayers (those 65 and older can use the 7.5% threshold through 2016).
So what’s deductible, exactly? Generally, to be deductible as a medical expense, you must have retained the tutor at the recommendation of a doctor, and the teacher must be trained and qualified to work with your child who has been diagnosed with a learning disability caused by mental or physical impairments, including nervous system disorders.
This includes some obvious deductible expenses such as teaching Braille to a visually impaired person, teaching lip reading to a hearing disabled person, or giving remedial language training to correct a condition caused by a birth defect.
Beyond that, you must be careful ensure that the diagnosis is associated with a specific mental or physical impairment – “having trouble in school” isn’t going to cut it.
There is at least one Private Letter Ruling (PLR-140373-04) which ruled that special schooling for children with dyslexia was deductible – I’ll caution you, however, that these determinations are facts and circumstances sensitive and you may not rely on a PLR as precedent. A more specific Revenue Ruling (Rev. Rul. 69-607), which can be relied upon, allowed a deduction for services for a child with dyslexia whose condition was caused by congenital damage to the brain.
The key factor here is a medical diagnosis for a mental or physical impairment. Assuming your child meets that criteria, you can deduct the cost of tutoring services as well as the cost – including tuition, meals, and lodging – of attending a school that furnishes special education to help a child to overcome learning disabilities. The principal reason for the services must be overcoming learning disabilities; any “ordinary” education must be incidental.
Our advice is if a customer asks for one then provide it. You could ask them if they need one and then provide it. Be careful of producing and providing the statement if you are providing tutoring services as this could be construed by the parent that they can claim your services which may lead to disappointment when they file.
Oases Online will have tax statements in place for existing customers to print in January 2015.
If you would like a demonstration of the Oases Online scheduling and data management system please click for a demonstration.