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 13614 – Intake and Interview Sheet - Credits Section

Form 2441 and Schedule 2

Five Qualifying Tests

1. Qualifying Person2. Earned Income3. Work-Related Expense4. Joint Return5. 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