Wednesday, December 30, 2009

CHILD AND DEPENDENT CARE TAX CREDITS (IRC SECTION 21)

A tax credit is available to help offset the expenses incurred for the care of a child, spouse, or other dependent while the taxpayer is gainfully employed, looking for work, or attending school full-time

A taxpayer’s qualifying relative may not qualify him for earned income credit, household filing status, or the child tax credit

To claim the credit, a taxpayer must:
1. Have a qualifying individual, which includes:
a. A “qualifying child” (under the Uniform Definition of a Child rules) who is under age 13 at the end of the year;
b. A dependent of the taxpayer who is incapable of self-care;
c. The spouse of the taxpayer, if the spouse is physically or mentally incapable of self-care.
d. A taxpayer who may claim an individual as his/her qualifying relative may not claim the dependent care credit, unless that qualifying relative is physically or mentally disabled
2. Incur household and dependent care expenses to allow the taxpayer (and
spouse) to work, attend school full-time, or look for work;
3. Have earned income or be a full-time student during the year;
4. Make payments for household and dependent care expenses to a dependent care center or to an individual:
a. Whom the taxpayer (or spouse) cannot claim as a dependent; and
b. Who is not the taxpayer’s child under age 19 at the end of the year.
5. Identify the care provider on his/her income tax return, including social
security number or employer identification number;
6. File a joint return if married, or head of household if qualified; and
7. File Form 1040 or 1040A, but not Form 1040EZ.