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Lesson 7

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.

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Lesson 7

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  1. Lesson 7 Credit for Child and Dependent Care Expenses

  2. 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

  3. Intake and Interview Process Form 13614 – Intake and Interview Sheet - Credits Section

  4. Form 2441 and Schedule 2

  5. Five Qualifying Tests • Qualifying Person • Earned Income • Work-Related Expense • Joint Return • Provider Identification

  6. Five Qualifying Tests (Continued) • Qualifying Person Test • Qualifying Child • Disabled Dependent • Disabled Spouse

  7. 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

  8. 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

  9. 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

  10. 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

  11. 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

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

  13. Lesson Summary • The Five Tests • Volunteer Resource Guide

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