How do I deduct babysitting costs?

Q: If my son's babysitter isn't claiming the income I'm paying her, can I claim it as a childcare deduction? She won't give me her SS#. --Sheryl, Andover

The following answer was provided by Barry Beck, CPA, Barry D Beck, CPA, PFS, DABFA, Bedford.

A: Based upon the rules, which many feel are impractical, you are obligated to issue her IRS form W-2 for the services rendered inside the home that you have paid for. There are other rules that employers must follow to insure that you have not hired illegal aliens. This paper work is required before you hire any employee.

My guess is that you are trying to do things correctly, but cannot in this current situation and therefore will not be able to take advantage of any tax benefits.

The following answer was provided by Mark Misselbeck, CPA, Levine Katz Nannis & Solomon PC, Needham.

A: I agree with the previous post, except that when you employ someone and they do not supply you with their Social Security Number, not only must you withhold the contributions for the Federal Insurance Compensation Act taxes (Social Security [at 6.2%] and Medicare [at 1.45%]) from their wages, you must also withhold federal income taxes at a flat rate (currently 25%) and remit them to the government. Once subject to this flat withholding rate, the employee would need to provide you with a Form W-4, which you would need to have the IRS certify as correct, before you would be able to withhold income taxes using the federal withholding tables and the exemptions claimed by the employee on the Form W-4.