Child Care Credit, Other Credits:
Child and Dependent Care Credit &
Flexible Benefit Plans
This is archived information that pertains only to the 2005 Tax Year. If you
are looking for information for the current tax year, go to the Tax Prep Help Area.
My spouse and I both work and are eligible for the Child and Dependent
Care Credit. May I include my 5 year old son's parochial school kindergarten
tuition cost as a qualified expense in Form 2441, Child Care Expenses?
The expenses for kindergarten do not qualify for the dependent care credit
because kindergarten is primarily educational in nature. 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.
I was under the impression that a Dependent Care Benefit Plan would
benefit me, not penalize me with an increase in taxes. How can my employer
say they provided a benefit in the total amount of $3,000 in W-2, Block 10
when I had $3,000 in wages set aside for dependent care benefits?
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.
How do I complete Form 2441 if I have flexible Spending Account?
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 the correct line (this
amount should appear in box 10 of your Form W-2) and your qualified expenses
on the correct line. The last 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.
My babysitter refused to provide me with her social security number.
Can I still claim what I paid for child care on my taxes while I worked? If
so, how?
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.
I am thinking of having a family member baby-sit for my child full
time in their own home while I work. Are either of us responsible for taxes
on the money I would pay? Can I claim this money as a child care expense even
though my family member is not a registered day care provider?
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. Who is responsible for taxes
depends on whether your family member is your employee or is self-employed.
See Publication 15-A (PDF) , Employer's Supplemental
Tax Guide, for a discussion of how to tell whether someone who is performing
services for you is an employee or an independent contractor. If your family
member is not your employee, then the family member will be responsible for
paying income taxes and self-employment taxes on the money earned. If your
family member is your employee, then you are generally responsible for withholding
and paying the taxes. However, special rules apply to family employees. See Publication 15 , Circular E, Employer's Tax Guide, for these
rules.
Can elderly day care payments qualify for the 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 the qualifying person must have the same principal place of abode as you.
All of the other criteria for claiming the Child and Dependent Care Credit
must also be met.This information can be found in Publication 17,
Chapter 34 .
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