Discussion Archives:Dependent care question

From TaxAlmanac, A Free Online Resource for Tax Professionals
Note: You are using this website at your own risk, subject to our Disclaimer and Website Use and Contribution Terms.

From TaxAlmanac

Jump to: navigation, search

Discussion Forum Index --> Advanced Tax Questions --> Dependent care question

Discussion Forum Index --> Tax Questions --> Dependent care question

Pmcaction (talk|edits) said:

24 February 2011
I have a client who is a husband/wife partnership. The wife works full time in the partnership. The husband works part-time in the partnership and also has a full-time job (W-2 employee).

Because the partnership showed a loss in 2010, the wife has no earned income and therefore they were denied the Dependent Care Credit.

Question: If I reclassify her drawing payments as Guaranteed Payments to Partner would that be considered earned income for purposes of qualifying for the Dependent Care Credit? She would pick up the payments as income but that would be offset by a larger partnership loss, so there would be no income tax effect.

I would like to be able to see them claim the credit because they are paying for child care so they both can work. Unfortunately, because the business did not have such a good year, they are not able to claim the credit. Doesn't seem right.

Thanks for your help.

Personal tools