Business Notes

Honesty is the best policy -- especially when you have no alternative. That would seem to be the conclusion of millions of U.S. taxpayers. In 1988, 8.7 million of them claimed a tax credit for child-care expenses, but in 1989 only 6 million did so. Could it be that in just a year 2.7 million taxpayers stopped paying for child care? Not likely. A better explanation: in the interim a law took effect requiring parents who claimed such tax breaks to identify their day-care providers. Suddenly, if the IRS wanted to check out your claim, it could.

"We are fairly certain that there was a major impact because of this new provision of the law," says an IRS spokesman, politely sidestepping the more pointed conclusion that some children previously cited as dependents existed only in the imagination of resourceful 1040 filers. Estimated windfall to the U.S. Treasury from the stricter rule: more than $1.2 billion.