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IRS Information & Child & Dependent Care Credit
IRS Instructions and Manuals

Topic 602 - Child and Dependent Care Credit

If you paid someone to care for a qualifying individual so you (and your spouse if you are married) could work or look for work, you may be able to claim the credit for child and dependent care expenses. If you are married, both you and your spouse must have earned income, unless one spouse was either a full–time student or was physically or mentally incapable of self–care. The expenses you paid must have been for the care of one or more of the following qualifying individuals:

  1. Your dependent (under the rules for qualifying child) who was under age 13 when care was provided. For certain custodial parents, refer to Child of Divorced or Separated Parents in Publication 503, Child and Dependent Care Expenses. A noncustodial parent, however, cannot treat a child as a qualifying person even if the parent may claim the child as an exemption.
  2. Your spouse who was mentally or physically not able to care for himself or herself and who has the same principal place of abode as you for more than one-half of the year.
  3. Your dependent who was physically or mentally not able to care for himself or herself, for whom you can claim an exemption, and who has the same principal place of abode as you for more than one-half of the year.
In addition to the conditions just described, to take the credit, you must meet all the following conditions:
  1. You must provide the taxpayer identification number (usually the social security number) of the qualifying person.
  2. Your filing status must be a status other than married filing separate (You must file a joint return if you are married.)
  3. The payments for care cannot be paid to someone you can claim as your dependent, or to your child who is under age 19 even if he or she is not your dependent.
  4. You must report the name, address, and taxpayer identification number, (either the social security number, or the employer identification number) of the care provider on your return. If the care provider is tax exempt, you need only report the name and address on your return. You can use Form W-10 (PDF), Dependent Care Provider's Identification and Certification, to request this information from the care provider.
If you qualify for the credit, complete Form 1040A, Schedule 2 (PDF), or Form 2441 (PDF) with Form 1040 (PDF). If you received dependent care benefits from your employer (this amount should be shown on your Form W-2 (PDF)), you must complete Part III of Schedule 2 (Form 1040A) or Form 2441. You cannot use 1040EZ if you claim the child and dependent care credit.

The credit is a percentage, based on your adjusted gross income, of the amount of work–related child and dependent care expenses you paid to a care provider. There is a maximum dollar limit of dependent care expenses you can use for this credit. The amount of the maximum dollar limit depends on the taxable year and the number of qualifying children. These dollar limits must be reduced by the amount of any dependent care benefits provided by your employer that you exclude from your income. Refer to Publication 503, Child and Dependent Care Expenses, for additional information.

If you pay someone to look after your dependent or spouse in your home, you may be a household employer. If you are a household employer, you may have to withhold and pay social security and Medicare tax and pay federal unemployment tax. For information, refer to Publication 926, Household Employer's Tax Guide, or to Topic 756.

Link: http://www.irs.gov/taxtopics/tc602.html


Frequently Asked Tax Questions And Answers

Keyword: Flexible Spending Account

7.1 Child Care Credit/Other Credits : Child and Dependent Care Credit & Flexible Benefit Plans

I was under the impression that a Dependent Care Benefit Plan would benefit me, not penalize me with an increase in taxes. How can my employer say they provided a benefit in the total amount of $3,000 in W-2, Block 10 when I had $3,000 in wages set aside for dependent care benefits?

The actual mechanism for this type of plan is an agreement to voluntarily reduce your salary in return for an employer-provided fringe benefit. These plans must be set up this way because you have a choice of whether to receive the cash wages or the benefits, which would make the benefit taxable to you. Therefore, the benefits are actually employer provided or funded. You are receiving a tax benefit because you are not paying taxes on the money that is set aside.


How do I complete Form 2441 if I have flexible Spending Account?

You must complete Part III of Form 2441 (PDF), Child and Dependent Care Expenses, (or Form 1040A, Schedule 2 (PDF), Child and Dependent Care Expenses for Form 1040A Filers) to claim the exclusion of the benefits from income even if you cannot claim the credit. Enter your total employer-provided dependent care benefits on the correct line (this amount should appear in box 10 of your Form W-2) and your qualified expenses on the correct line. The last lines of Part III will determine whether you can also take the credit and what your dollar limit is on qualified expenses. Also complete Part I, Persons or Organizations Who Provided the Care.

References: Link: http://www.irs.gov/faqs/faq-kw72.html


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