Turbotax: Dependent Profile & Childcare receipt

 

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Relevant Material: Child care receipts are essential supporting documents for claiming the child care expenses deduction on your Canadian tax return, which can significantly reduce your taxable income. The Canada Revenue Agency (CRA) uses these receipts for verification purposes and will deny your claim or apply penalties if you cannot provide valid documentation upon request. 
Significance of Child Care Receipts for the CRA
  • Substantiation of Claim: Receipts provide proof that the expenses were actually incurred and paid to an eligible provider for a qualifying reason (e.g., so you could work, attend school, or perform research).
  • Audit Protection: While you do not need to submit receipts when you file your tax return (especially if filing electronically), the CRA has the authority to request them later as part of a review or audit. Proper record-keeping prevents problems in such a scenario.
  • Provider Accountability: The receipts, particularly those from individual caregivers that include their Social Insurance Number (SIN), help the CRA ensure that the caregiver reports the income received.
  • Eligibility Verification: The details on the receipt confirm that the services were for an "eligible child" and an "eligible provider" (e.g., not a dependent under 18 or a close relative like the child's other parent). 
Required Information on the Receipt
According to the CRA, every child care receipt should be made out to the individual who paid the expenses and must include all of the following information: 
  • The name of the person for whom the receipt is being prepared (the parent/claimant).
  • The name of the child receiving care.
  • The total amount received for services.
  • The period the services were provided (from and to dates).
  • The provider's name and address.
  • The provider's signature and the date the receipt was signed.
  • The provider's Social Insurance Number (SIN), if an individual provided the services. 
If you cannot obtain a valid receipt with all the necessary information, especially the provider's SIN, the CRA may disallow your deduction. 
Actionable Steps for Claiming the Deduction
  1. Obtain Correct Receipts: Ensure your child care provider issues a complete and accurate receipt by the end of February for the previous tax year.
  2. Complete Form T778: Use Form T778, Child Care Expenses Deduction to calculate your eligible expenses and the maximum amount you can claim.
  3. File Your Return: Enter the allowable amount on Line 21400 of your T1 tax return.
  4. Retain Records: Keep all original receipts and supporting documents (like bank statements showing payment) for a minimum of seven years in case the CRA requests them later. 
Generally, the parent or supporting person with the lower net income must claim the child care expenses deduction, with some exceptions for specific circumstances like schooling or hospitalization. (Google) 
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