Daycare Tax Tips


Child Care Providers and other Sole Proprietors: Get an EIN

Protect the privacy of your social security number

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Self-employed business owners need an Employer Identification Number (EIN) if they have employees. Day care providers, with or without employees, have another reason to obtain this tax id number for their business: IDENTITY THEFT PREVENTION.

At the end of the year, parents will be requesting your tax id number for the purpose to claiming the federal Credit for Child and Dependent Care Expenses. They may even ask you to fill out a Form W-10, Dependent Care Provider's Identification and Certification. (But most parents don't realize this is the official form they should be using.) Many providers give out their social security number, but it is much safer to give parents an EIN.

Not a day care provider? Do you provide other services as a sole proprietor? Anyone ever ask for your social security number or give you a W-9, Request for Taxpayer Identification Number? You, too, should protect your social security number and get an Employer Identification Number. Give your EIN to clients before they prepare their 1099-MISC forms at the end of the year.

You can get an EIN quickly and easily using the IRS website interview-style online EIN application. Click on "APPLY ONLINE NOW" near the bottom of the page.

IMPORTANT pointers regarding the EIN application:

>> Remember that you are a sole proprietor** and a commercial employer (NOT a household employer).

>> When asked the reason for requesting an EIN, select "started a new business." This may seem strange if you have been in business for a while, but the instructions say to choose the answer that is closest to your situation, and this answer is as close as any.

Even if you are in the process of hiring an employee, I suggest you stick with "started a new business," NOT "hired employees," and when asked if you are hiring anyone right now, say NO. This will give you flexibility. If you or your potential employee have second thoughts, you won't have the IRS expecting you to file employment tax returns.

As of May 2014, you can no longer apply for an EIN over the phone. If you have trouble completing the online application, you can get an EIN by faxing or mailing Form SS-4, Application for Employer Identification Number, to the IRS. The fax number and mailing address can be found in the SS-4 Instructions.

Once you have an employer id number, give it out to parents/clients and protect the privacy of your social security number.

**Most family child care providers are sole proprietors, but answer this question based on your own situation.


Last updated 30 May 2014

Posted on 2007-09-09 02:44:03

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