The Oregon Department of Revenue requires the invoice from the facility or individual and the canceled checks, front and back or money orders as proof of payment. They disallowed the working family credit for anyone who could not prove it. The great the credit, the more likely it will be scrutinized.
Returns containing the Working Family Credit take longer to process by ODR resulting in generally slower refunds. In some cases refunds were held back until the taxpayer sent proof of deductions. Taxpayers should never pay cash for childcare. The working family credit is substantial and is refundable. This is why Oregon is going after proof prior to issuing the refund. It would be too hard to get back.
Proof according to Pub 171/2 includes but is not limited to:
- Cancelled checks
- Money order stubs
- Duplicate checks along with bank statements,
- And specific receipts from the child care provider given to the client at the end of the year. It was determined that clients who went back several months later to secure a statement from the provider had the deduction disallowed. A contemporaneous receipt is required.
Please note that we will not be keeping copies of this documentation for clients. Taxpayers are required to keep it in their own records. If a taxpayer needs assistance in responding to ODR requests for substantiation of deductions it will result in additional charges. If the taxpayer has kept records in the manner suggested above, all they will need to do is make copies of everything and send it with a cover letter to the ODR.