If I pay my home daycare provider cash does that person have to claim it on there taxes?
Technically, she should report it as self employment income and pay the appropriate taxes. however, since you have no proof that you paid her, it becomes a he-said she-said issue and without a receipt you’ll probably loose. Always insist on a receipt. Usually if someone is willing to give a substantial discount for paying with cash, its because they intend to do the transaction under the table and not pay their taxes. You do have a few options, but they will all be an up-hill battle. If you have proof that she provided the care and was charging other parents, you might be able to make a case to prove that you paid her and it was not just a favor from a friend. Also, if there are other parents who paid cash and testify in a court hearing, it would make your case stronger. If you do lean on her for her tax fraud, you can expect to be searching for a new daycare, because even if her business doesn’t close, she isn’t going to accept your child anymore.
