To join in on this discussion, you must first log in.

Discussion:Dependent Day Care allowed for child not in day care?

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 --> Basic Tax Questions --> Dependent Day Care allowed for child not in day care?


Discussion Forum Index --> Tax Questions --> Dependent Day Care allowed for child not in day care?

Mikeburg (talk|edits) said:

14 March 2014
Am I seeing this right?

I have taxpayers who have two "Qualifying Children" (one 4 & one 9 years old).

They pay over $6,000 day care for the 4 year old.

The 9 year old does not go to day care but is otherwise a "Qualifying Child".

Do the taxpayer's get to use $6,000 or $3,000 for their day care credit?

I appreciate any information on this so much. mikeburg

Captcook (talk|edits) said:

14 March 2014
Quoted from form instructions, Line 2(c): "If you paid qualified expenses for the care of two or more qualifying persons, the applicable dollar limit is $6,000. This limit does not need to be divided equally. For example, if you paid and incurred $2,500 of qualified expenses for the care of one qualifying person and $3,500 for the care of another qualifying person, you can use the total, $6,000, to figure the credit."

Nightsnorkeler (talk|edits) said:

14 March 2014
Guess they should've paid at least $1 for the care of child #2

Ckenefick (talk|edits) said:

14 March 2014
I don't know if I like that Forms Instructions language. Not so sure it's right. OP should get a credit based on $6,000. If OP puts both kids on the 2441 and then inputs, say, $10,000 under one of the kids, and $0 under the other, how does the computer compute the credit? Try it, let us know.

Captcook (talk|edits) said:

14 March 2014
I read the phrase, "This limit does not need to be divided equally." to say he gets the $6,000 base on which to claim the credit.

Ckenefick (talk|edits) said:

14 March 2014
Gotcha. I was focused on this part:

If you paid qualified expenses for the care of two or more qualifying persons

Ckenefick (talk|edits) said:

14 March 2014
Not sure where the IRS got that information from. Don't think you'll find it in the Code or the Regs.

Taxmonkey (talk|edits) said:

14 March 2014
IRC 21 is pretty strait forward language. The max expenses are $6000 if 2 or more qualified individuals. Regardless of how the expenses are split, even if $6000 and $0.

"(c) Dollar limit on amount creditable The amount of the employment-related expenses incurred during any taxable year which may be taken into account under subsection (a) shall not exceed— (1) $3,000 if there is 1 qualifying individual with respect to the taxpayer for such taxable year, or (2) $6,000 if there are 2 or more qualifying individuals with respect to the taxpayer for such taxable year. "

"(1) Qualifying individual The term “qualifying individual” means— (A) a dependent of the taxpayer (as defined in section 152 (a)(1)) who has not attained age 13, "

Ckenefick (talk|edits) said:

14 March 2014
For example, if you paid and incurred $2,500 of qualified expenses for the care of one qualifying person and $3,500 for the care of another qualifying person, you can use the total, $6,000, to figure the credit.

Actually, I don't think this is right either.

What if I pay $6,000 for one and $0 for another? Why doesn't the IRS put that example in the Pub?

Ckenefick (talk|edits) said:

14 March 2014
IRC 21 is pretty strait forward language. The max expenses are $6000 if 2 or more qualified individuals. Regardless of how the expenses are split, even if $6000 and $0.

Totally agree. Yet, IRS Pub implies you have to pay something for each kid or on behalf of each kid. What Capt cited uses the phrase "for the care" three different times. And that's not how the credit operates.

Captcook (talk|edits) said:

14 March 2014
It would sure be more clear if they said: For example, if you paid and incurred more than $3,000 in qualified expenses and had more than one qualifying individual, you can use the total expenses to figure the credit, up to $6,000.

Nilodop (talk|edits) said:

14 March 2014
What if I pay $6,000 for one and $0 for another? Why doesn't the IRS put that example in the Pub?

You mean like this? "To qualify for the credit, you must have one or more qualifying persons. You should show the expenses for each person on Form 2441, line 2, column (c). However, it is possible a qualifying person could have no expenses and a second qualifying person could have expenses ex- ceeding $3,000. You should list -0- for the one person and the actual amount for the second person. The $6,000 limit that applies to two or more qualifying persons would still be used to compute your credit unless you already exclu- ded or deducted, in Part III of Form 2441, certain depend- ent care benefits paid to you (or on your behalf) by your employer."

Ckenefick (talk|edits) said:

14 March 2014
Yes, like that. Meant to say form instructions, which is where Capt was quoting from.

Check there, Lenny. Let us know if there's a $0 expenditure example.

Rupert (talk|edits) said:

14 March 2014
Do the taxpayer's get to use $6,000 or $3,000 for their day care credit?

$6,000

Mikeburg (talk|edits) said:

14 March 2014
Thanks for your help. My tax software uses $6,000 when $6090 entered for one child & -0- for the other.

Thanks so much. mikeburg

Ckenefick (talk|edits) said:

14 March 2014
Exactly, it caps it out...BUT...it should base the credit on the $6,000.

Taxaway (talk|edits) said:

15 March 2014
See, I was doubting myself in the other post, reading the discrepancy between IRC 121 which defines 'qualifying individual' without regard to actually having to had paid expenses, to the info and flowchart in the nonofficial Pub 503, which includes the phrase 'when the care was provided' and the flowchart which asks 'did you pay expenses for more than one qualifying persons'.

So my final answer is.....I'll go with IRC over some flowchart. One child in daycare, one not. Two qualifying individuals, 6K

Mikeburg (talk|edits) said:

15 March 2014
Thanks so much. mikeburg

EZTAX (talk|edits) said:

15 March 2014
Thanks a lot guys. Just when I was thinking I understood the basics....

I knew the "trick" that if you have two dependents, and one has over 3k in child care, telling the client to try and get child care for at least a day for the second child would create a nice tax savings. I never did go read the code directly. Serves me right I suppose.

My tax program, Ultra Tax, will not allow a 0 entry.

Ckenefick (talk|edits) said:

16 March 2014
What if you put in $1.00?

Smokeytax (talk|edits) said:

21 March 2014
Not that we use our tax software for research, but Drake allows the higher limit when you enter $0 for the second child.

To join in on this discussion, you must first log in.
Personal tools