Contract with Illegal Business

[Need Help]

Hello,

I recently found out that the daycare we were using was not registered in the state that we live, therefore it is illegal.

Does anyone know if our contract is still valid?

Thanks for the help!

"Need Help"

[wdmmom]

Most states still allow people to provide childcare services regardless of being registered with the state. The state just limits the number of children they can watch if they aren't registered.

Why do you think it would be illegal?

This contract is an agreement between two people...you and your provider. You entered into it without cohersion, therefore, I think it is still valid.

[mrs b]

First I would think you need to find out if it is illegal in your state.

[MyAngels]

IMO one thing that might make your contract invalid would be if the provider claimed to be licensed by the state in the contract and he/she was not in fact licensed.

The best way to find our for sure is to ask an attorney.

[Unregistered]

I was told by the board that regulates daycare that if they are not registered, then they are illegal.

I am setting up an appointment with an attorney to determine what I should do. I don't want to pay and then try to write it off on my taxes at the end of the year and find out that I cannot because they were not a valid business.

[jen]

I was told by the board that regulates daycare that if they are not registered, then they are illegal.

I am setting up an appointment with an attorney to determine what I should do. I don't want to pay and then try to write it off on my taxes at the end of the year and find out that I cannot because they were not a valid business.

Are you in the US?

[grandmom]

eg

Simple. Ask for a receipt with a soceal security or EIN number. If they won't do that, they aren't legal and know it.

[MyAngels]

This is from the IRS Publication 503:

"Due diligence. If the care provider information you give is incorrect or incomplete, your credit may not be allowed. However, if you can show that you used due diligence in trying to supply the information, you can still claim the credit.

You can show due diligence by getting and keeping the provider's completed Form W-10 or one of the other sources of information listed earlier. Care providers can be penalized if they do not provide this information to you or if they provide incorrect information.

Provider refusal. If the provider refuses to give you the identifying information, you should report whatever information you have (such as the name and address) on the form you use to claim the credit. Enter “See Attached Statement” in the columns calling for the information you do not have. Then attach a statement explaining that you requested the information from the care provider, but the provider did not give you the information. Be sure to enter your name and social security number on this statement. The statement will show that you used due diligence in trying to furnish the necessary information."

So you can still claim the deduction whether the provider gives you their SSN or EIN or not.

[JenNJ]

If you tell us what state you are in, we could help out a bit more.

For example -- I am in NJ. I am not registered nor am I required to be. But I am a legal home daycare. I have an EIN and my clients can write off their daycare expenses on their taxes. I report all my income. I operate within the regulations for unlicensed home daycares which is legal in my state.

[Michael]

Are you in the US?

The original IP shows Texas.

[jen]

Thanks Michael.

For the OP...rather than spend money on an attorney, I suggest you post on the daycare and tax section of this forum. Our resident tax expert may be able to tell you what to do if your provider refuses to issue you a receipt or turn over her tax id or social security.

As for the legal status of your daycare, it will not affect your ability to claim the expense on your taxes.

Do you like your provider? Has she provided good care? If so, I would simply talk to her. She may be willing to get her license or become registered. The fact that she isn't registered doesn't by any means make her a bad provider.

If you are CERTAIN she is operating an ILLEGAL daycare, then you can probably get out of your contract pretty easily, but you will need to pay for services already rendered.

[cheerfuldom]

It sounds like the OP is looking for loop hole to get out the contract, period. OP, care to enlighten us?

[tbutler]

It sounds like the OP is looking for loop hole to get out the contract, period. OP, care to enlighten us?

I agree, this is what it sounds like to me.

In Texas, you can be a Listed Family Home:
People who must list with the division are those who are compensated to provide regular child care (at least four hours per day, three or more days a week, for more than nine consecutive weeks) in their own homes for 1-3 unrelated children. After receipt of an application and licensing background check clearances, a certificate is issued. The listed family home caregiver must be at least 18 years old. However, there are no minimum standards, orientation or training requirements for listed homes. They are not inspected unless a report is received alleging child care is offered subject to registration and reports of abuse or neglect are investigated.

[youretooloud]

I think the contract is still binding, but you can give a two week's notice.

The provider should be claiming and paying taxes. If she's not willing to give you a receipt with a tax ID number, then I'd hightail it out of there.