This tax season, how parents pay a nanny may make the difference between receiving a child care tax credit and owing thousands in penalties.
Filers who shelled out for day care, summer camp or a babysitter may be able to scoop up a tax credit of up to $1,050 if they paid for one child under age 13. That credit rises to $2,100 for two or more kids.
Here's the catch: To qualify for this tax break, you need to identify all of the entities that look after your child and make note of their taxpayer identification number.
That means that if you're paying your care provider under the table, you won't be able to claim the credit unless you come clean to the IRS first.
"In general, if you file your return and you should've been paying your nanny legally and remitting taxes last year, all isn't lost," said Kerri Swope, vice president of Care.com's HomePay , a household employee payroll program.
"It's fixable, but it's a little painful to make it right for the 2017 tax year," she said.
Here's how to get right with the IRS and nab that child care tax credit.