Form W10 and uncooperating provider

[FEDUKE404]

A client has valid dependent care expenses. Neighbor also "keeps" other children, and client pays the neighbor a fixed monthly amount to care for child while parent is at work. Client is in the military.

The provider is now refusing to provide a SSN/EIN on the Form W10.

While I have encountered this problem in the past, the newest wrinkle is apparently that a Form 2441 without a valid SSN/EIN cannot be efiled. A paper return, with a "note" at the bottom of page 2 of the Form 2441, is required. While not a dead-end, it does create issues due to paper-shuffling and speed of processing/refund.

But, I guess that is just the way it is.

Question: Does anyone know, from experience, what kind of follow-up (if any) the IRS is likely to do with expenses paid (and name/address of provider) on the Form 2441 but no identifying tax number for the provider? Will someone eventually "get a letter"?? IRS Section 6109(a)(2) is pretty clear about things (to include a $50 fee for failing to disclose).

Thanks for any insight!

FE

[JohnH]

This isnt an answer to your question, but whenever I see someone squabbling with a day care provider over this issue, I wonder if the person is still keeping the kid(s).

[taxea]

Have your client give them a copy of the requirements...that might create a change of mind.

[MAMalody]

If unable to resolve the issue, sometimes what you can do to get part of the refund could be to file without the F2441 and then file an amended return after the original has paid out. In that way your client can get some immediate refund and the rest a couple of months later.

[taxea]

If unable to resolve the issue, sometimes what you can do to get part of the refund could be to file without the F2441 and then file an amended return after the original has paid out. In that way your client can get some immediate refund and the rest a couple of months later.

Isn't this failure as a tax preparer to do due diligence since you know that the return is not complete without this information, how can you, in all good conscience, file the return?

[ChEAr$]

Isn't this failure as a tax preparer to do due diligence since you know that the return is not complete without this information, how can you, in all good conscience, file the return?

Nope, not a problem atall. No one HAS to take deductions or credits, the exception being failure to take proper business deductions to enhance the EITC.

[FEDUKE404]

There is no preparer "failure" here at all

Isn't this failure as a tax preparer to do due diligence since you know that the return is not complete without this information, how can you, in all good conscience, file the return?

Not an issue of "conscience" at all.

As a preparer, for my client I have two available options:

1 - Electronically file the return with SSN/EIN available and shown on the Form 2441

or

2 - Paper file the return with the proper annotation (in accordance with the IRS instructions for such situations where the provider refuses to furnish the appropriate number) at the bottom of page 2 of the Form 2441.

The return is quite "complete" either way......

Due diligence concerns have no part of this discussion in any way, shape, or form. My client and I have to best deal with the available facts!

Additional: I did provide client with copy of IRS code info, and so far as I know client continues to use the same provider. Also, we may decide to efile without Form 2441, and then later amend to include Form 2441 change. That decision will essentially rest with the client and will be decided once the return nears completion.

FE

[taxmandan]

Question: Does anyone know, from experience, what kind of follow-up (if any) the IRS is likely to do with expenses paid (and name/address of provider) on the Form 2441 but no identifying tax number for the provider? Will someone eventually "get a letter"?? IRS Section 6109(a)(2) is pretty clear about things (to include a $50 fee for failing to disclose).

Thanks for any insight!

FE

TheIRS is not likely to pursue it beyond maybe a letter to the provider reminding them of the law. But I doubt even that will occur, theIRS is busy chasing overseas hidden income to bother with helping someone get their child care credit in a timely manner.

[Burke]

I have never known of a case where it was even cross-checked when the Soc Sec number IS on the return. And when child care credit first came out, we took the deduction (where the client agreed) whether the provider gave us an SSN or not. I never got any feedback that it presented a problem to either party.

[taxea]

due diligence

Seems that whenever I use this term someone disagrees...here is the websters dictionary defination

http://www.merriam-webster.com/dictionary/due%20diligence

I take this to me using reason and common sense. This tells me that if I have knowledge of something that should be on the return then if I knowingly omit it I am not doing my due diligence.

[S T]

2441 Instructions

Due Diligence
You can show a serious and earnest effort (due diligence) to get the information by keeping in your records a Form W-10 completed by the care provider. Or
you may keep one of the other sources of information listed in the instructions for Form W-10. If the provider does not give you the information, complete the entries you can on line 1. For example, enter the provider’s name and address. Enter “See Attached Statement” in
the columns for which you do not have the information. Then, attach a statement to your return explaining that the provider did not give you the information you requested.

Sandy

[Gary2]

I take this to me using reason and common sense. This tells me that if I have knowledge of something that should be on the return then if I knowingly omit it I am not doing my due diligence.

There's a difference between required to be on the return and helpful, but optional. In this case, your due diligence ends at advising the client of their legal options. Due diligence does not include demanding that the client take a credit to which they're entitled but for which there is no legal requirement that they take it.

[JohnH]

I agree with Gary. Contrary to the view some tax preparers are inclined toward, due diligence does not involve volunteering to be a proxy auditor - that's the job of the IRS.

[taxea]

There's a difference between required to be on the return and helpful, but optional. In this case, your due diligence ends at advising the client of their legal options. Due diligence does not include demanding that the client take a credit to which they're entitled but for which there is no legal requirement that they take it.

I am not in the habit of demanding anything from the client...but when I prepare returns I use due diligence (with a broader definition) on all aspects of the return not just 2441. Aren't we all here to insure that the client lowers the tax burden with every deduction they can legally take? If my client chooses not to take the credit I don't insist and I don't include it. I simply explain that his tax liability will be higher without it and he/she is entitled to include it.

[FEDUKE404]

Interesting conversation here

The IRS, in its own instructions for Form 2441, tells how a taxpayer/tax professional can handle the scenario where a day care provider fails to provide a SSN/EIN. To summarize: attach an explanatory statement to the bottom of page 2 of Form 2441, and file a paper return in lieu of efiling.

So long as I properly adhere to those specific stated guidelines, I totally fail to see how in any way, shape, or form I have not already performed the necessary "due diligence" for the preparation of said Form 2441.

Thanks to the many folks who have responded. I now get the distinct opinion that the IRS has other points of emphasis at the present time....

FE