The IRS does not routinely pre-verify childcare expenses at the time a return is filed. However, claims for the Child and Dependent Care Credit are subject to IRS review through automated compliance checks, information matching programs, and, where selected, examination (audit). Taxpayers must be able to substantiate all amounts claimed if requested.
Documentation and Verification Requirements
To claim the Child and Dependent Care Credit, you must complete Form 2441 (Child and Dependent Care Expenses) and report required information about the care provider, including:
- Care provider’s name
- Address
- Taxpayer Identification Number (SSN, EIN, or ITIN)
The IRS uses this information to validate the credit and may disallow or delay processing if required provider details are missing or inconsistent.
Due Diligence Rule (Provider TIN Not Provided)
If the care provider refuses or is unable to provide a TIN, the credit may still be allowed if you:
- Request the TIN using reasonable effort (including written request), and
- Retain records of your request, and
- Complete Form 2441 with the required due diligence information as instructed
Failure to meet due diligence requirements may result in disallowance of the credit.
IRS Review and Substantiation
While the IRS does not verify every claim at filing, it may later require substantiation, including:
- Payment records (receipts, canceled checks, bank statements)
- Provider identification records
- Proof of qualifying care expenses
- Evidence that expenses were work-related
Returns may be selected for review through IRS automated filters or examined during audit procedures.
Reporting of the Credit
The Child and Dependent Care Credit is calculated on Form 2441 and flows to:
- Schedule 3 (Form 1040), line 2 (nonrefundable credits section)
- Then to Form 1040 total tax computation
(Exact line placement may vary slightly depending on the tax year revision of Form 1040.)
Source:
Publication 17
Form 2441
Disclaimer: Always verify details with the current year’s Federal or State Department of Revenue Forms and Instructions. Tax laws and requirements may change annually.