An individual that pays someone to care for their dependents (qualifying child under age 13, or their spouse or any dependent who is physically and mentally incapable of their own care) while they work or look for work, may be able to claim a credit for their expenses. Child and dependent care expenses must be claimed on Form 2441 to figure and receive the credit. Certain qualifying tests must be met in order to claim the Child And Dependent Care Expense Credit.
The following are the qualifying tests:
- There must be at least one qualifying person identified on the form used to claim the credit.
- Both the taxpayer and spouse (if applicable) must have earned income during the year, unless one is a student or disabled.
- Expenses must be paid for child care so that the taxpayer and spouse can work or look for work.
- Payments must be made to someone the taxpayer or spouse cannot claim as a dependent. They can hire their child if they are at least 19 years old and cannot be claimed as a dependent. Payments cannot be made to a spouse, or the dependent's parent.
- The taxpayer cannot file as Married Filing Separately, unless certain exceptions apply.
- The taxpayer must be able to identify the care provider. If they are unable to get information, they must be able to show their due diligence in trying to get the information
- If the taxpayer excludes or deducts dependent care benefits from their income, the total amount of the exclusion or deduction cannot exceed the maximum limits ($3000 for one qualifying person, $6000 for two or more qualifying persons)
The maximum amount of qualified child and dependent care expenses that can be claimed on Form 2441 is $3,000 for one qualifying person, $6,000 for two or more qualifying persons.
You can use Form W-10, or any other source listed in its instructions to get the information from the care provider. If you do not give correct or complete information, your credit (and exclusion, if applicable) may be disallowed unless you can show you used due diligence in trying to get the required information.
Instructions for entering Child And Dependent Care Expense Credit in the tax program
From the Main Menu of the Tax Return (Form 1040) select:
- Credits Menu
- Child And Dependent Care Expenses Credit (2441)
- Amount Paid to Child Care Providers
- Select New or double-click the entry you wish to Edit.
- Enter the care provider's ID number and name. Indicate if the ID number is an EIN or SSN.
- Next enter the care provider's address of the Providers' business.
- Input the amount paid to the Provider.
- The number of qualifying dependents will be listed. If you need to add additional dependents select Number of Qualifying Dependents and enter in the dependents SSN, name, and qualifying expenses.
- If you were covered by your employer’s dependent care plan, and if any employer paid dependent care benefits have been indicated on Form W-2, the amount will appear in Part III. If this amount needs to be adjusted select Employer-paid Dependent Care Benefits and then adjust the amount accordingly.
NOTE: This is a guide to entering Child And Dependent Care Expenses into the TaxSlayer Pro program. This is not intended as tax advice.