You do not qualify for the head of household filing status because you and your spouse have not lived apart for the last 6 months of the taxable year and are not considered unmarried. Your filing status for the year will either be married filing separately, or married filing jointly. If it is married filing separately, you will not qualify for the Earned Income Credit and cannot claim a credit based on child care expenses. If you file a joint return with your spouse, you may be eligible to claim these credits. See Publication 503, Child and Dependent Care Expenses and Publication 596, Earned Income Credit.

References:

• Publication 501, Exemptions, Standard Deduction, and Filing Information
• Publication 503, Child and Dependent Care Expenses
• Publication 596, Earned Income Credit

If you paid someone to care for your dependent under age 13 or your disabled dependent or spouse so that you could work or look for work, you may be able to claim the credit for child and dependent care expenses. For specific information on how to qualify for this credit refer to Tax Topic 602, Child and Dependent Care Credit, or Publication 503, Child and Dependent Care Expenses.

References:

• Publication 503, Child and Dependent Care Expenses
• Tax Topic 602, Child and dependent care credits

The expenses for kindergarten do not qualify for the dependent care credit if the kindergarten is primarily educational in nature. Expenses for school in the first grade or higher do not qualify for the credit. However, you can count the part of the expenses of sending your child to school that is for your child's care if it can be separated from the expenses of education. For example, you may count the cost of an after school care program even though the school tuition does not qualify.

References:

• Publication 503, Child and Dependent Care Expenses
• Tax Topic 602, Child and dependent care credit

That depends on the amount you elected to have contributed to the flexible spending arrangement. The exclusion from income for employer-provided benefits can be as high as $5,000, while the credit for dependent care expenses is based on annual dollar limits of $3,000 for one person and $6,000 for two or more persons. You must reduce those dollar limits by the amount of excludible dependent care benefits. If you had expenses that you paid yourself and the employer provided benefits were less than the applicable dollar limit, you can also claim the credit. Complete Part III of either Form 2441 (PDF), Child and Dependent Care Expenses, or Form 1040A, Schedule 2 (PDF), Child and Dependent Care Expenses for Form 1040A Filers, to determine the excluded benefits and whether you can claim the credit.

Change. The applicable percentage and allowable employment-related expenses increase beginning in 2003. The maximum applicable percentage is 35 percent and the allowable employment-related expenses are $3,000 for one qualifying child and $6,000 for two or more qualifying children (Code Sec. 21, as amended by the Economic Growth and Tax Relief Reconciliation Act of 2001). Thus, the maximum credit is $1,050 for one qualifying child and $2,100 for two or more qualifying children.

References:

• Form 2441 (PDF), Child and Dependent Care Expenses
• Instructions for Form 2441, Child and Dependent Care Expenses
• Publication 503, Child and Dependent Care Expenses
• Tax Topic 602, Child and dependent care credits

If the omission was simply a clerical oversight, you may not claim the child care credit. If the flexible spending account was an eligible plan under Internal Revenue Code Section 125, the amount of the salary reduction that was contributed to your account should appear in box 10 of your Form W-2. Request a corrected Form W-2 from your employer.

You may claim the child care credit if the contribution to your flexible spending account was less than your annual dollar limitation for eligible expenses ($3,000 for one person, or $6,000 for two or more persons). Even if you cannot claim the credit, you must complete Part III of either Form 2441 (PDF), Child and Dependent Care Expenses, or Form 1040A, Schedule 2 (PDF), Child and Dependent Care Expenses for Form 1040A Filers, to exclude your employer provided benefits from your income. If the amount you paid into a flexible spending account reduced your wages in box 1 of Form W-2, it is considered an employer provided benefit.

References:

• Publication 503, Child and Dependent Care Expenses
• Tax Topic 602, Child and dependent care credit

The actual mechanism for this type of plan is an agreement to voluntarily reduce your salary in return for an employer-provided fringe benefit. These plans must be set up this way because you have a choice of whether to receive the cash wages or the benefits, which would make the benefit taxable to you. Therefore, the benefits are actually employer provided or funded. You are receiving a tax benefit because you are not paying taxes on the money that is set aside.

References:

• Publication 503, Child and Dependent Care Expenses
• Tax Topic 602, Child and dependent care credit

You must complete Part III of Form 2441 (PDF), Child and Dependent Care Expenses , (or Form 1040A, Schedule 2 (PDF), Child and Dependent Care Expenses for Form 1040A Filers) to claim the exclusion of the benefits from income even if you cannot claim the credit. Enter your total employer-provided dependent care benefits on line 12 (this amount should appear in box 10 of your Form W-2) and your qualified expenses on line 15. The last six lines of Part III will determine whether you can also take the credit and what your dollar limit is on qualified expenses. Also Complete Part I, Persons or Organizations Who Provided the Care.

References:

• Form 2441 (PDF), Child and Dependent Care Expenses
• Instructions for Form 2441, Child and Dependent Care Expenses
• Publication 503, Child and Dependent Care Expenses
• Tax Topic 602, Child and Dependent Care Credits

Generally, yes. When you complete Part III of Form 2441 (PDF), Child and Dependent Care Expenses, which you must do to claim excluded benefits, line 17 asks you to enter the smallest of:

If you had a loss from self-employment and no other earned income, your earned income would be $0, unless you can use one of the optional methods on Form 1040, Schedule SE (PDF), Self-Employment Tax. That would mean that the amount in box 10 of your wife's Form W-2 would have to be included in income. (For more information on the optional methods of computing self-employment tax, refer to Publication 533, Self-Employment Tax, or Instructions for Form 1040, Schedule SE, Self-Employment Tax.

The income considered to be earned by a spouse who is a full-time student or who is incapable of self-care is $250 per month if there's one qualifying individual in the household, and $500 a month if there are two or more qualifying individuals. However, this income is deemed to be earned only by one spouse for any given month. (Code Sec. 21 (d) (2)).

References:

• Form 2441 (PDF), Child and Dependent Care Expenses
• Instructions for Form 2441, Child and Dependent Care Expenses
• Publication 503, Child and Dependent Care Expenses
• Tax Topic 602, Child and Dependent Care Credits
• Code Section 21 (d) (2)

Yes. If the flexible spending account is providing you with a dependent care benefit, then it should be reported in box 10 of your Form W-2. These accounts are funded through a salary reduction, so the contribution to the account is considered an employer contribution. When you receive a dependent care benefit from your employer, you must complete Part III of Form 2441 (PDF), Child and Dependent Care Expenses, (or Form 1040A, Schedule 2 (PDF), Child and Dependent Care Expenses for Form 1040A Filers) to see if the benefits are fully excluded from income. You may be able to also claim a credit for child and dependent care expenses if the excluded benefits are less than the dollar limit on qualified expenses for the credit.

References:

• Publication 503, Child and Dependent Care Expenses
• Form 2441 (PDF), Child and Dependent Care Expenses
• Instructions for Form 2441, Child and Dependent Care Expenses
• Tax Topic 602, Child and dependent care credits

The Child and Dependent Care Credit can only be claimed by the custodial parent. This is true even if you cannot claim the child's exemption because the divorce decree allows the other parent to claim the exemption, or you have released the exemption on Form 8332. Refer to Publication 503, Child and Dependent Care Expenses, for a complete discussion.

References:

• Publication 503, Child and Dependent Care Expenses
• Tax Topic 602, Child and dependent care credit

Yes, assuming that you already meet the other requirements to claim the child care credit, but are missing the required ID number of the provider, you can still claim the credit by demonstrating "due diligence" in attempting to secure the needed information.

When the care provider refuses to give the identifying information, the taxpayer can still claim the credit and is instructed to provide whatever information is available about the provider (such as name and address) on the form used to claim the credit Form 2441 (PDF), Child and Dependent Care Expenses, or Form 1040A, Schedule 2 (PDF), Child and Dependent Care Expenses for Form 1040A Filers). The taxpayer should write "see page 2" in the columns calling for the missing information. He/she would write at the bottom of page 2 that the provider refused to give the requested information. This statement will show that the taxpayer used due diligence in trying to secure and furnish the necessary information.

References:

• Form W-10 (PDF), Dependent Care Provider's Identification and Certification
• Form 2441 (PDF), Child and Dependent Care Expenses
• Instructions for Form 2441, Child and Dependent Care Expenses
• Publication 503, Child and Dependent Care Expenses
• Tax Topic 602, Child and dependent care credit

As a care provider, you are required to give your correct name, address, and Taxpayer Identification Number (TIN) to customers who paid for child care services during the year. A valid TIN can be the Employer Identification Number (EIN) of the business or the social security number of a sole proprietor. Form W-10 (PDF), Dependent Care Provider's Identification and Certification, or a similar statement may be used for such purposes.

A care provider who does not give the customer a correct TIN is subject to a penalty of $50 for each failure unless the failure is due to reasonable cause and not willful neglect. The failure of a customer to pay a bill in full would not normally constitute reasonable cause. The penalty does not apply to qualified tax exempt care providers.

When the care provider refuses to give the identifying information, the taxpayer can still claim the credit and is instructed to provide whatever information is available about the provider (such as name and address) on the form used to claim the credit Form 2441 (PDF), Child and Dependent Care Expenses, or Form 1040A, Schedule 2 (PDF), Child and Dependent Care Expenses for Form 1040A Filers). The taxpayer should write "see page 2" in the columns calling for the missing information. He/she would write at the bottom of page 2 that the provider refused to give the requested information. This statement will show that the taxpayer used due diligence in trying to secure and furnish the necessary information.

References:

• Form W-10 (PDF), Dependent Care Provider's Identification and Certification
• Form 2441 (PDF), Child and Dependent Care Expenses
• Instructions for Form 2441, Child and Dependent Care Expenses.
• Publication 503, Child and Dependent Care Expenses
• Tax Topic 602, Child and dependent care credit

The up front fee may qualify as a child care expense if it is an expense you must pay in order to obtain care. However, you can only count it toward the credit proportionately over the duration of the agreement to employ the au pair. The $150 per week as well as other work related expenses may qualify as a child and dependent care expense. Please refer to Publication 503, Child and Dependent Care Expenses for a full discussion.

If your au pair works in your home, you may also be responsible for employment taxes. Refer to Publication 926, Household Employers Tax Guide, for more information.

References:

• Form 2441 (PDF), Child and Dependent Care Expenses
• Instructions for Form 2441, Child and Dependent Care Expenses
• Publication 503, Child and Dependent Care Expenses
• Publication 926, Household Employers Tax Guide
• Tax Topic 602, Child and dependent care credit

The cost of day camp, including a camp that specializes in a particular activity such as soccer or computers, may qualify as child care expense, if your main purpose in sending your child is to assure the child's well-being and protection.

References:

• Form 2441 (PDF), Child and Dependent Care Expenses
• Instructions for Form 2441 Child and Dependent Care Expenses
• Publication 503, Child and Dependent Care Expenses
• Tax Topic 602, Child and dependent care credit

You may have qualified child care expenses if the family member baby-sitting is not your dependent or your child under age 19 and you meet all the tests to claim the Child and Dependent Care Credit. Your family member will be responsible for paying taxes on the money earned and will be considered to be self-employed.

References:

• Publication 503, Child and Dependent Care Expenses
• Publication 533, Self-Employment Tax
• Tax Topic 602, Child and dependent care credit

Elderly day care payments may qualify as Child and Dependent Care Expenses. In order to be a qualifying person, the person receiving the elderly day care must be either your spouse who was physically or mentally not able to care for himself or your dependent who was physically not able to care for himself and for whom you can claim an exemption (or could claim an exemption except the person had $3,050 or more of gross income in the year 2003) (for 2004, gross income of $3,050 or more). All of the other criteria for claiming the Child and Dependent Care Credit must also be met.

References:

• Publication 503, Child and Dependent Care Expenses
• Tax Topic 602, Child and dependent care credit

The Child Tax Credit and the Child and Dependent Care Credit can both be claimed on the same return. They can be claimed on either Form 1040 (PDF), U.S. Individual Income Tax Return, or Form 1040A (PDF), U.S. Individual Income Tax Return. Please refer to the Instructions for Form 1040 or the Instructions for Form 1040A index for the Child Tax Credit. The referenced pages will explain who qualifies for the Child Tax Credit, and how to calculate it. Publication 503, Child and Dependent Care Expenses, has more information for the child care credit.

References:

• Instructions for Form 1040
• Instructions for Form 1040A
• Tax Topic 606, Child tax credits

Generally, if you were age 65 or older or disabled and your income and nontaxable social security and other nontaxable pension are below specified amounts, you may be able to take this credit. For more details, refer to Tax Topic 603, Credit for the Elderly or the Disabled, or Publication 524, Credit for the Elderly or the Disabled.

References:

• Publication 524, Credit for the Elderly or the Disabled
• Tax Topic 603, Creditor for the elderly or the disabled

On July 25, 2003, the IRS began issuing advance payment checks to about 25 million taxpayers who claimed the Child Tax Credit on their 2002 tax return. The payment is an advance refund of the expanded Child Tax Credit for the 2003 tax year. This credit increased to $1,000 per eligible child from $600 per child for the 2002 tax year. Taxpayers were able to get an advance payment of up to $400 per eligible child they claimed on their 2002 return.

The IRS notified all eligible taxpayers before the checks were sent. Taxpayers did not have to do anything. We were using your 2002 data to automatically figure whether you were due an advance payment check and if so, how much.

Generally, you were eligible to get the check if you claimed the Child Tax Credit on your 2002 tax return and your qualifying child was born after 1986. If you did not get a check and think that you are eligible for the credit, take the entire amount when you file your 2003 return.

If you did not get a check, you can claim up to $1,000 for each eligible child on your 2003 federal income tax return. Notify the U.S. Post Office of your address change.

Assuming that your income and number of qualifying children remain the same, your 2003 refund should not be smaller than your 2002 refund because of your advance payment. The law simply gave you this increase rather than have you wait until you filed your 2003 return in 2004. You just subtract the amount of your advance payment check from the $1,000 per-child total on your 2003 return.

No. It's part of the tax cut the new law gives you for 2003.