Child care providers are not required by law to give parents a receipt for their payment. However, most parents will request at least an annual receipt, showing payments they have made throughout the year. That’s because parents can claim a tax credit worth up to $2,000 per qualifying child in the tax years 2020 and 2021. They need a receipt to support their claim for the tax credit.
Why Give a Receipt?
Besides giving a year-end receipt, from your perspective as a child care provider, it’s good practice to write a receipt to parents each time they pay – daily, weekly or monthly – whether the parent requests it or not. This is helpful for several reasons:
- It creates a physical record that you can use to calculate the amount of income you report on your tax return
- It creates a paper trail for the Internal Revenue Service if you are ever audited
- Receipts can be used to resolve disputes with parents about how much they have paid or to protect you if a parent claims an amount that is more than what you received.
Finding a Template
If you’re writing receipts regularly, then you can cut down your administration time considerably by preparing a template receipt that's ready to go when you need it. Free templates are widely available for download on the internet (search "child care receipt"), or you can create your own using one of the ready-made templates in Word or Google Docs. Writing your name, business name and contact details at the top of the receipt as a letterhead will make your receipt look more professional.
Your local office supply store should also carry books of general commercial receipts. Choose the ones that come with a carbon copy so you have two copies of the receipt: one for you and one for the parent.
What Information Should the Receipt Contain?
The receipt can be written in any format and any design, as long as it contains the following information:
- A description of what the payment is for – for example, "child care services" or "late fees"
- The period the payment is for – for example, "December 2020," "1 - 15 February 2021" or "the week April 10 through 15, 2021." For annual receipts, write "For tax year" and insert the year
- The dollar amount you received in words and numbers so there’s no doubt about the transaction – "two hundred and fifty dollars ($250)"
- Whether you were paid by cash or check – if check, include the check number
- The name of the person who made the payment – "Mrs. Laura Smith"
- The date the payment was made – "April 20, 2021"
- Your signature and date
- Space for the parent’s signature
Have the parent sign the receipt in duplicate so you can both keep a signed copy for your records.
IRS Form W-10 as a Receipt
For an annual receipt only, you can also use IRS Form W-10. Parents should provide you with this form at the end of the tax year to get your correct name, address and taxpayer identification number to support a claim for child tax credit or benefits under their employer’s dependent care plan. Simply write the total amount you received during the tax year and return a copy to the parent.
Jayne Thompson earned an LLB in Law and Business Administration from the University of Birmingham and an LLM in International Law from the University of East London. She practiced in various “big law” firms before launching a career as a commercial writer. Her work has appeared on numerous financial blogs including Wealth Soup and Synchrony. Find her at www.whiterosecopywriting.com.