Lesson 7 Credit for Child and Dependent Care Expenses

Objectives Determine who is eligible for the Credit for Child and Dependent Care Expenses Calculate the credit and the exclusion and report the expenses on the correct Form

Intake and Interview Process Form – Intake and Interview Sheet - Credits Section

Form 2441 and Schedule 2

Five Qualifying Tests 1.Qualifying Person 2.Earned Income 3.Work-Related Expense 4.Joint Return 5.Provider Identification

Five Qualifying Tests (Continued) Qualifying Person Test –Qualifying Child –Disabled Dependent –Disabled Spouse

Five Qualifying Tests (Continued) Earned Income Test − Must have had income during the year − If married, both needed to work unless spouse was:  A full-time student (for at least 5 months) or  Incapable of self-care

Five Qualifying Tests (Continued) Earned Income Test (Continued) –If a spouse was a full-time student or was incapable of caring for himself/herself, income is considered to be at least: $250 for one qualifying person $500 for two or more qualifying persons

Five Qualifying Tests (Continued) Work-Related Expense Test Allows the taxpayer to work or look for work Kindergarten expenses no longer qualify Joint Return Test Provider Identification Test Due Diligence Provider Refusal

Limit on Expenses Amount of eligible expenses limited to the lowest of: Lower paid spouse’s earned income (if married) Single taxpayer’s earned income Actual expenses paid Overall limits of $3,000 for one qualifying person $6,000 for two or more persons

Figuring the Credit Use Schedule 2 for Form 1040A Use Form 2441 for Form 1040 Complete Part III of the form if the taxpayers received benefits under a dependent care benefits program

Quality Review (QR) Form 8158 – Quality Review Checklist Adjustments, Deductions and Credits Section

Lesson Summary The Five Tests Volunteer Resource Guide