Child And Dependent Care Expense Credit

Taxpayers paying for babysitting as they work are able to claim a credit for their expenses. The qualifying age is 13, and includes a spouse or dependent who is incapable of their own care either physically or mentally.  Form 2441 is used to claim Child and dependent care expenses and to determine and receive the credit. There are a number of conditions that must be met for one to claim the Child and Dependent Care Expense Credit. These include the following: 

• At least one person, who is on the form, should be eligible to claim the credit 
• The taxpayer and their spouse (if applicable), must have both earned income within the year, unless either is a student or disabled. 
• There must be expenditure incurred to allow the taxpayer and their spouse to work or look for work. 
• The person paid must not be one who either the taxpayer or their spouse can claim as a dependent. They may be able to hire their child if they are 19 years old and cannot be claimed as a dependent. Payments cannot also be made to a spouse or the parents of the dependent. 
• Except when certain exceptions apply, the taxpayer is not allowed to file as Married Filing Separately. 
• The care provider must be identified by the taxpayer. In the event that they fail to get the information, they must show their due diligence in attempting to get the information. 
• The maximum limits must not be exceeded by the total amount of the exclusion or deduction in the event that the taxpayer excludes or deducts dependent care benefits from their home. The maximum limits are $3000 For one qualifying person the maximum limit stands at $3000, for two or more qualifying persons, $6000 is the limit. 

A maximum of $3000 is what can be claimed using Form 2441, whereas for two or more qualifying persons, upto $6000 can be claimed, as the qualified child and dependent care expenses. 

Form W-10 can be used to gather information from the care provider. Your credit may be disallowed should you give incorrect or incomplete information. However, despite the incorrect and incomplete information, you may be able to still claim the credit if you can show you used due diligence in searching for the required information. 

Entering Child and Dependent Care Expense Credit in the desktop of the tax program: 

• Go to the Main Menu of the tax return (Form 1040) 
• From the menu, select Credits menu 
• Proceed to Child And Dependent Care Expenses Credit (2441) 
• Then to Amount Paid to Child Care Providers 
• Select New or double click on an entry you would wish to Edit 
• Enter the ID Number and name of the care provider. Show whether the ID Number is an EIN or SSN 
• Enter the address of the business of the care provider 
• Enter the amount paid to the provider 
• The number of qualifying dependents will be displayed. In case you need to include additional dependents, select Number of Qualifying Dependents then enter the SSN, name, and qualifying expenses of the dependents. 
• In case you were covered by the dependent care plan of your employer, and in the event that dependent care benefits  are paid by the employer and displayed on Form W-2, it is in Part III that the amount will appear. Should this amount require any adjustment, you can make them after selecting Employer-paid Dependent Care Benefits. 
• U.S Principal Place of Abode for More Than Half the Year? 

For 2021 and for those taxpayers whose place of abode was outside the United States for a period exceeding 6 months, the credit remains non-refundable. 

For purposes of being eligible for the refundable part of the credit, U.S military personnel posted outside the United States on extended active duty are regarded to have their main home in the US or the District of Columbia.