Filing Tax Form 2441: Child and Dependent Care Expenses

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Filing Tax Form 2441: Child and Dependent Care Expenses

I’ve talked to Turbotax customer support a couple of times and they don’t acknowledge the problem and won’t take ownership for researching the problem. TurboTax will determine your eligibility and calculate the maximum credit allowed. The final step, of course, is to include turbotax dependent care provider Form 2441 with your 1040 when filing your taxes for the year. Household employers, on the other hand, can qualify for the Child and Dependent Care Credit. Since every family is different, the IRS has a series of exceptions to the rules in the qualification process.

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  1. (If you don’t enter your own correct info, you might not be covered by the accuracy guarantee.)   I haven’t gotten any response from TT either.
  2. The 2021 Child and Dependent Care Credit amount begins to phase out when the taxpayer’s adjusted gross income (AGI) reaches over $125,000.
  3. For this purpose, your income is your “adjusted gross income” shown on your Form 1040, 1040-SR, or 1040-NR.
  4. For tax year 2023 and 2024, the maximum amount that can be contributed to a dependent care flexible spending account and the amount of tax-free employer-provided dependent care benefits is $5,000 ($2,500 if married filing separately).
  5. You (and your spouse in the case of a joint return) must have earned income to claim the credit.
  6. If your filing status is married filing separately and all of the following apply, you are considered unmarried for purposes of claiming the credit on Form 2441.

If you are temporarily away from your main home because of illness, education, business, vacation, or military service, you are generally treated as living in your main home during that time. The maximum amount of work-related expenses you can take into account for purposes of the credit is $8,000 if you have one qualifying person, and $16,000 if you have two or more qualifying persons. This means that the maximum total amount of the credit is $4,000 (50 percent of $8,000) if you have one qualifying person, and $8,000 (50 percent of $16,000) if you have two or more qualifying persons. The percentage of your work-related expenses allowed as a credit depends on your income (and your spouse’s income in the case of a joint return). The maximum percentage of your work-related expenses allowed as a credit for 2021 is 50 percent.

Like a nanny, the IRS considers babysitters household employees if you exceed the annual income threshold for the year. Your employer will need to withhold taxes on your behalf unless you’re under the age of 18 or meet other exceptions to this rule, such as working for an agency. If you earn beneath this income level, you qualify as a self-employed person. For example, a taxpayer with one qualifying person, $3,000 in qualifying expenses and an AGI of $60,000 would qualify for a nonrefundable credit of approximately $600 (20% x $3,000).

Common questions for Form 2441 Child and Dependent Care Expenses in Lacerte

I had no DC FSA contribution reported on my W2 in 2021, but had a carryover from 2020 because of COVID. If there is no amount in Box 10 of a W2, Turbotax does not walk you through the pages to enter information about your dependent care situation (e.g., employer onsite care, did you have a FSA, any balance in FSA at year end). I had to put $1 in Box 10 to get these pages and also to get Part III of Form 2441 generated.

The good news is that most good tax preparation software can automatically calculate and file the credit on your behalf. There are a number of eligibility requirements to satisfy before potentially receiving a child or dependent care credit, so it’s a good idea to familiarize yourself with the rules before preparing Form 2441. Let a local tax expert matched to your unique situation get your taxes done 100% right with TurboTax Live Full Service.

See Q12 for more information about the residency requirements. You should keep records of your work-related expenses. Also, if your dependent or spouse is not able to take care of himself or herself, your records should show both the nature and length of the disability.

Is This Tax Deductible? Care-taking for a Parent

One last comment in case TurboTax is listening. I believe they need to re-engineer this process. Entering/verifying information related to your DC FSA benefits in two different places is confusing (i.e., in the W2 section and the Child and Dependent Care Credit section). In the Child and Dependent Care Credit section they should ask if you have a DC FSA before/after you enter your dependent care expense information. If you do, they should walk you through an additional set of pages to validate your W2 Box 10 information, capture the additional DC FSA benefit information, and then complete form 2441 (Part I, II, and III, if required) at this point. The above article is intended to provide generalized financial information designed to educate a broad segment of the public; it does not give personalized tax, investment, legal, or other business and professional advice.

Care you can claim

Because you have two or more qualifying persons, you are subject to the higher $16,000 work-related expense limitation, regardless of how the expenses are allocated among the qualifying persons. The IRS is very particular about how it defines “care provider” to claim the CDCC. For example, paying certain family members, such as your spouse, to take care of your dependent is not permissible. There are also additional rules for people who are considered household employees.

Child and Dependent Care Credit for 2023 and 2024

Common types of unearned income include pensions, Social Security retirement benefits, unemployment compensation, and interest, dividends and capital gains. If your sole source of income for the year is unemployment compensation, for example, you aren’t eligible for the child and dependent care credit because you did not have any earned income. While the child and dependent care credit is attractive, you may save even more money with other options. If you are paying someone to take care of your children or another person in your household while you work, you might be eligible for the child and dependent care credit.

You (and your spouse in the case of a joint return) must have earned income to claim the credit. Earned income includes wages, salaries, tips, other taxable employee compensation, and net earnings from self-employment. A net loss from self-employment reduces earned income. Earned income also includes any strike benefits and disability pay you report as wages. Unemployment compensation is not included in earned income. The child and dependent care credit (CDCC) is a tax credit for parents or caregivers to help cover the cost of qualified care expenses for a child under 13, a spouse or parent unable to care for themselves, or another dependent.

In Part I of Form 2441, report the names of the individuals and organizations you make payments to during the year for care provider services. The IRS also requires their addresses, Social Security or employer identification numbers, and the amount that you paid them. In limited circumstances, however, earned income will include other amounts received that aren’t earned at work or in your business. This income can include the taxable disability benefits you receive while you’re unable to work, and tax-free combat pay you receive as a result of military service. Unfortunately, household employers aren’t required to do this, so you could end up with a big tax bill at the end of the year if you don’t set aside money.

This credit “gives back” a portion of the money you spend on care, and can reduce your tax bill by hundreds or even thousands of dollars. When a taxpayer is filing MFS and has dependent care expenses, there are certain requirements that must be met to be able to take the credit. The  taxpayer would be “treated as unmarried.” The amount of work-related expenses that can be taken into account in calculating the credit cannot exceed your earned income.

Of course it’s blank because the interview NEVER ASKS FOR CARRY OVER AMOUNT. Being the online product, it is IMPOSSIBLE to directly edit Form 2441. To validate that there isn’t anything messed up with my specific return that may be causing this problem, I created a completely new return in Turbotax.

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