Report Relative to IRS

[green_goblin12]

My SIL runs a small in-home daycare. She is not licensed in her state, which doesn't bother me much. I'm pretty sure she doesn't have more than the maximum allowable children.

What does bother me is that I know she gets paid cash and doesn't report her income to the IRS. OK, this bothers me a bit but I know it is very common. What bothers me the most is that by not reporting her income, they qualify for some state benefits. Mostly health care benefits, early learning assistance, and her kids get free lunches at school. These I know of. If she reported her income, I'm pretty sure they wouldn't qualify for any of these welfare programs.

Mind my own business or report her to the IRS?

[disneysteve]

Mind my own business or report her to the IRS?

I believe the IRS has an anonymous system for people to report tax cheats. There may even be compensation for the one filing the report as a finder's fee but I'm not sure.

Should you do it? That's up to you. Which will bother you more? Seeing her continue to get away with it or knowing that you're the one who shut it down? This is a family member after all. As long as you'd be fine facing her and not letting on that you were involved, you could look into it. There is probably something on the IRS website.

[Joan.of.the.Arch]

If the assistance is what bothers you most, how about first having a thorough look at the eligibility criteria of the programs you think her family is using? The criteria may be different than you think, and your relative may qualify even if she were reporting the childcare income.

For example, if a child has already had medical bills beyond what a family could pay and is definitely expected to have more (because of a chronic illness, birth defect, accident with long lasting consequences, etc), even an otherwise upper middle class family might qualify for Medicaid for that child.

The family may qualify for school lunch (either free or reduced cost) even if they have 185% of poverty level income.

Some states now have various free early childhood programs:

--some free preschool in the regular schools. Often places are taken by lottery, with no priority given to families of low income.

--some federally funded Headstart (eligibility for that can be met by low income, SSI disability of the parent, or already being identified as a special needs child. But if there are funded spaces going unused, a child who does not meet any of the normal criteria may be admitted.);

--some infant-to-age-three education featuring home visits by an educator and center visits for group activities. In my state the last program is called "Parents as Teachers" and it is free to all no matter the income.

[sandrark]

I wouldn't do it, simply because it affects the kids so drastically. If they don't get decent school lunches and health care, it's likely that your SIL/brother are on the edge - so they'd delay health care, skip checkups, etc.

So nope, not my business. I assume karma will come around eventually.

Sandi

[riverwed070707]

I wouldn't do it, simply because it affects the kids so drastically. If they don't get decent school lunches and health care, it's likely that your SIL/brother are on the edge - so they'd delay health care, skip checkups, etc.

So nope, not my business. I assume karma will come around eventually.

Sandi

This. In situations like this, the kids are the ones who suffer, not the parents. I'd MYOB and take personal responsiblity for helping to teach the children the proper way to treat finances and how to get ahead in life if you have the opportunity.

[rj.phila]

that anyone would even consider reporting a family member to the IRS is utterly astounding to me. let alone because.....her kids are eating free lunches?

[Joan.of.the.Arch]

rj.phila, I'm pretty sure a lot of jaws dropped. I wondered, too, whether someone might be more willing to report a relative than a stranger!

[bjl584]

I'd probably let it go. My old neighbors did something similar, but my quality of life wasn't effected by it.

[DebbieL]

I would mind my own business, even if it weren't a family member. I would definitely mind my own business in this situation.

[DebbieL]

rj.phila, I'm pretty sure a lot of jaws dropped. I wondered, too, whether someone might be more willing to report a relative than a stranger!

I agree. OP sounded kind of bitter/spiteful to me. I can't even imagine something like this even crossing my mind (or bothering me, quite frankly).

[disneysteve]

For those who wouldn't report tax evasion (and I'm not saying I disagree), I'm curious what type of criminal activity you would report. In no way do I want to imply that the following are comparable offenses, but would you call the authorities if there were unsafe conditions in this home daycare? How about if the kids were being mistreated? What if the adults were using drugs? Where do you draw the line for what crime you report and what crime you don't? Do you not report the tax evasion because you consider it "victimless"? Do you think, "It's okay to screw the government as long as nobody gets hurt."

This is more of a philosophical post and a rhetorical question but it does raise some interesting issues. I'm sure we've all been in situations where we turned away when we knew there was wrongdoing occurring because it didn't affect us or we didn't want to get involved.

[rj.phila]

steve, you raise a critical point. in defense of a child's safety is really the only way i could imagine doing such a thing. thus, the idea of reporting someone for FEEDING their children is just completely bat**** crazy to me.

[Joan.of.the.Arch]

If the person really is not claiming her daycare income, she may already have been reported passively. Many parents would want her Social Security Number so that they can claim the childcare expenses on their own taxes. Once the IRS computer gears spin a couple times and there was no matching income reported for that Social Security Number, then perhaps a letter goes out to the daycare person.

Is that how it works?

[disneysteve]

If the person really is not claiming her daycare income, she may already have been reported passively. Many parents would want her Social Security Number so that they can claim the childcare expenses on their own taxes. Once the IRS computer gears spin a couple times and there was no matching income reported for that Social Security Number, then perhaps a letter goes out to the daycare person.

Is that how it works?

I have no idea but I would tend to think that people who are putting their kids in an unlicensed day care probably aren't all that concerned about the tax deduction. They're probably saving a bundle with cheaper rates since the operator can undercut the legal businesses.

[greenskeeper]

I would mind my own business, even if it weren't a family member. I would definitely mind my own business in this situation.

I agree.

The govt takes plenty of our money, and when that isn't enough, they print more out of thin air to devalue the money that we still have in our pockets.