Did You Know? Legislation on Child & Dependent Care Expenses Credit

• A notarized letter from the provider stating dates, times and where the care was provided
• A copy of the provider’s drivers license and social security number
• A copy of each child being cared for, birth certificate and social security number

If the documents are not received within 30 days, the tax filer (you) must pay back all credits refunded to them plus interest or they’ll have their wages garnished.

To quote the State Franchise Tax Board:

“Effective tax year 2000, legislation was passed creating a refundable Child and Dependent Care Expenses credit based on a percentage of the Child and Dependent Care Credit allowed by federal law. To qualify for the California credit, a taxpayer must have earned income, as well as qualifying individual(s).  Taxpayers who meet the requirements may be able to claim a credit of up to $1,050.  In tax year 2007, over 535,000 returns claimed the credit.

The Franchise Tax Board has a program to verify the claims to ensure that money is not being paid out to those who are not entitled to the credit. For tax years 2006 and 2007, the Franchise Tax Board reviewed over 125,000 returns and identified over $50 million in claims that were not substantiated.”

These audit letters are not your tax preparer’s fault, they did nothing wrong.  The problem is that if Franchise Tax Board cannot get in touch with, locate or get a response from the day care provider listed on your return, they go after you the parent.  This is unfair but they go after you if they cannot get them, because they can find you.

The only way around this is to turn in everything.  If you can’t turn in everything, if you’re missing just 1 document, your package is rejected and you are on the hook for the refund.

A suggestion, if you cannot provide all this information, do not take the $1,050 tax credit  because it will be very costly for you.  If this is happening to you contact, “Will The Tax Man”, William Green, 916-457-3300 for assistance.