Summer Tax Tips for Child Care

Summer is here! And a long-standing tradition of the season is kids being out of school for summer break. Your children may be home from school for awhile, but you still have to work. So like any responsible parent, you use some option of child care service to watch your little ones.

But did you know those services can affect your taxes? In some cases, service costs can decrease or put money back in your pocket. Here are a few ways in which your taxes can benefit from child care services you use this Summer:

Tax Breaks Hiring a Sitter
If you’re paying a child sitter more than $1,900 this year to watch your kids, then you’re required to pay employment taxes. A dedicated payroll system is needed to deduct household employer taxes, but taking the time and effort can yield some generous tax credits.

So to get a financial increase from paying your sitter as a legal household employee, you’ll need to factor gross wages along with various taxes such as Social Security, Medicare, and Unemployment Insurance if necessary – consulting with a local tax professional can ease the stress of having these amounts in order.

You can also visit our affiliate site, ExpressIRSForms.com, to quickly and easily e-file IRS Form W-2 for your household employee.

Flexible Spending Account
You won’t be able to benefit from this tip immediately, but for future reference, inquire with your employer about a Flexible Spending Account or Dependent Care Account. Typically, you can register for such an account during the Fall or within 30 days of a life-altering event.

With this account, you’re able to use pre-tax dollars to pay up to $5,000 of child care expenses. Because the money is tax-free, you could get a minimum of $2,000 based on marginal tax rates. Check with your employer or a CPA for more details.

Tax Deductions from Summer Camp
Enrollment fees for a summer day camp can go towards the Child Care Tax Credit, or you can use money generated within your Flexible Spending Account. Even if your child attends multiple summer camps, the tax credits can still apply. The only drawback is that overnight camps aren’t eligible.

Important: You may be in a position to benefit from both having a sitter and utilizing summer camps – and that’s fine. But be aware of when your sitter is on and off the clock. You may have your sitter take your children to the camps or even be home watching your kids while you’re there. Labor laws apply to a legal employer/employee relationship and making a clear distinction between work hours and responsibilities is the most professional way to start.

Consult with a local tax professional to have your child care expenses in order by next tax season – if you need more time, you can e-file IRS Form 4868 with ExpressExtension.com and quickly get an additional six months to file your personal tax return. You can even e-file your extension while out with kids through our FREE downloadable Express 4868 App for iOS and Android devices.

Contact our friendly, live customer support team for any questions about e-filing tax extensions. We’re available Monday through Friday from 9 a.m. to 6 p.m. EST at (803) 514-5155. We also offer 24/7 email assistance with [email protected].