I am preparing a new client's 2020 return who has significant payments to Caretakers - round the clock care - $160,595 before LTC reimbursements of $69,175. She began using the Caretakers in 2019 and I'm guessing the prior tax preparer (the client became mine via an acquisition in 2020) did not advise the client to report the payments either via 1099 or W2. She is now on board with reporting for 2021 however the Caretakers may walk (oh well...). I have explained the consequences of not reporting this compensation and taking the deduction. My question is, how should I include on the 2020 return knowing what I know? 1) Do I include all knowing we will do the right thing next year by reporting the comp paid to the Caretakers? or 2) exclude from Sch A the all comp exp & recognize LTC reimbursements income - this results in owing $20k in federal taxes or 3) exclude from Sch A the net $90k that wasn't reimbursed? Or maybe the better question is where is it written that you cannot deduct subcontractor expenses if they were not reported as income to the subcontractors? Should my client be audited, would not claiming these deductions in 2020 mitigate the situation?