 Income tax 2021-2022, child and dependent care expenses part one, not married. Get ready to get refunds to the max diving into income tax 2021-2022. Lesser tax software, you don't need tax software to follow along, but you might want to have access to the forms and schedules, which you can find on the IRS website at irs.gov, irs.gov, starting point this time, head of household filing status, note that we're not focused so much on the distinctions between the head of household and single filing statuses here because they don't have a real impact on our focal point, that being the credit that we're looking at. There is a distinction from non-married to married filing status on our focal point, that being the credit. So whether we're talking basically single or head of household, that's going to be kind of non-married for us. And then we're going to be going into the married filing status and we'll focus on the married filing status in the following presentation. Obviously the single and head of household does have an impact on other areas such as the standard deduction, which again is our main focal point here. So we have the Adam Smith, Levin and Beverly Hills, 90210. We have the dependent here, Sam Smith, son, the child tax credit checked off, the income at the 50,000 W2 income, we have the 18,800 standard deduction for head of household filing status, which again not really our focus here, that difference between single and head of household, but note the difference. We've got the 31,200 going to then our formula, the 50,000, 18,800 standard deduction for head of household. We've got the 31,200 for the taxable income back then to the software page two calculating the tax at the 3463 and pulling that over, there's the 3463. Okay, so now what we want to do is say that we had expenses for the child. Now note this credit we're looking at here is going to be different than the child tax credit, which is being calculated on down below here. We're going to jump on over to the 2441, which is the child independent care expenses. That's different than the child tax credits. They're both based on basically a child, but the child tax credit, it's kind of like a default just for basically having the child of a certain age, that is a dependent meets the requirements and so on and so forth. Whereas this one, you're actually making expenditures for the support. And remember the general kind of idea for the credit because to understand the credit, if you have the general philosophy of the credit makes it a little bit easier. The idea being that you have the care that is provided persons or organizations who provided the care that you're paying them. And the idea from the tax code is that you were paying them to free you up to be looking for work or to be working. So that would mean that you would generally need some kind of earned income you would think to qualify for the credit because that would be the reason that you're paying the dependent care expenses here. And then of course, you have to pick up or calculate or get the expenditure. So whoever you are paying for the provider, the care provider, you got to track the payments that are being made to them so that you can sum those up and put them in place in your calculation on form 2441. So here's going to be the basic information. We've got the Adam Smith. We're typically going to be checking off box number two, which says for 2021, your credit for child and dependent care expenses is refundable. That means that it can take your liability below zero. And so we saw that on the bottom part of page two, that's where we saw the credit. That's where the refundable credits are at. That's usually a benefit as opposed to non refundable or your spouse if married filing jointly had a principal place of abode in the United States. So that's going to be, you know, that's going to be the requirement to check this box off. And then on the top part, this is going to be the organization that we're paying in general. And then on the bottom part here, this is the child that we're paying for, which is oftentimes going to be a child and going to be a dependent, which is pulling over from the first page. So if I fill this information out into the data input, it usually looks something like this. We got kind of two halves of it. This is how it shows in LISERT be similar in other software. We're going to pull in our dependent here. And then we're going to say we're going to all the data pulls in. And then I'm going to have my qualified expenditures. So let's I'm going to put a high number on the expenditures of 20,000 so that that will clear the cap because that's more than I'm going to be able to use. And that'll show us kind of where the cap is. If I then go to the second half here, we're going to say now this is the institution that I am paying. So I'm going to put an institution I like a care facility like a company or not not for profit or something like that. So I've picked one up here. And then you're going to need the identification number. So if this was an individual and not an institution, you might have a social security number here. Or for me, I'm going to have an EIN number that I just made up. So now I'm going to pull that over to the forums. Let's pull that over to the forum here. So now it's populated here. We've got our care provider information up top. We're not checking this off because you're going to check here if the care provider is your household employee, which they are not scrolling down. We've got Sam Smith. That's going to be our dependent. There's the social security number. We paid a large amount here. And so that's going to show us kind of where the cap is, which we see on line three, where it says add the amounts in column C of line two, don't enter more than 8,000 if you had one qualifying person or 16,000 if you had two or more persons. So that's why we have the 8,000 there. Then we have your earned income. So that earned income is the 50,000 that pulled in from page one of the forum 1040. So there's our 50,000 back on over. And then we don't have any 50,000 from a spouse, of course. So it's just going to be the same 50,000 because we're non-married. So in this example, so the enter the smaller, so we enter the smaller of the 8,000. So then enter your your amount from 1040 line 11. That's the AGI. And then we're multiplying that times the rate 50% unless it phases out. Here's your caps. And that's going to give us our 4,000. So there is our 4,000, which is basically the maximum amount, which would then pull in to go into the schedule three, schedule three page two because it's refundable. And there's the 4,000 here, that then pulls into the forum 1040 page number two. And you can see it down here in the refundable area, meaning it could take the liability kind of below zero. So we're down here at the 4,000 that's pulling in from schedule C schedule three. So you could kind of recalculate this on our Excel worksheet over here. So you might say that you want another credit down here. It'd be around the CTC credits. I'm not going to recalculate the whole thing, but I'm going to say this is a 24421442144 dependent dependent care expenses for example. And so we're going to say this is 2441 child and dependent care expenses 24412441. Sorry about that. I get my numbers mixed up sometimes. That's not good for a tax preparatory. I know right click, I'm going to say format this thing. We're going to say this is going to be currency brackets. Let's make some no dollar sign get rid of the decimals okay, and increase the size of this thing. And then we'll make it boldened. And then this is going to be form 2441 child child and dependent care expenses. And most of this is going to be most of the time this will be a refundable credit. So I'm just going to put the balance in right now. I'm going to kind of rely on the software to do that to do the calculation. You might I could recreate it so maybe we'll recreate it later, but I'll all say the expenses let's say expenses or 20,000. And then the amount of the credit credit I'm just going to put on the outside and rely on the software which calculated it at this case to be the 4000. And so I'll say 4000 data input and make this will make this blue and brackets and blue and brackets. So again, we might go back in there and I could recreate that thing I could do that. But I'm going to put that on the first page here and say it's going to be part of this calculation in the refundable credits. So I've got the child tax credit, the payments. So now I'm going to add to that then the dependent care stuff at the 4000. And then we also have the child tax credit, which was calculating over here where we had the child tax credit at that was at the 3600. So if I go back on over to page one, we've got these refundable amounts down below getting us to the taxable amount of the all right, I adjusted it the 7600 payments dependent care child tax credit to get us to the 4137 would be the general idea. So I just kind of put that together fairly quickly. But our focus here, of course, is going to be on this credit down here, not so much the child tax credit. We look at that in a prior presentation. But you note that this credit child tax credit and like the earned income credit are all in down here normally oftentimes for the refundable portions of the credit. So they kind of commingled together down at the bottom of the tax return. Let's go back on over to the form 2441 then. Now let's say the income was lower than like 8000. So we had a low amount of income. For example, if I was to say the income was at 5000, for example, and I brought this on over note that then it's basically capping. Instead of taking the 8000 here, we've got the 5000 that the credit is being calculated on to get us to the 2500. So we've got that in place. If I put this back on over back up to the 50,000, we're back up to the 50,000. So now we're back in our normal place. You also have the caps basically on the high end of things. So you'll see here if line seven is 125,000 or less enter 50%. So if you go over 125,000, then you're going to start to have a change as well. So if I put this up to 160,000, then we're going to have something other than the 50%. So that's where the phase out starts to take place that starts to reduce the credit. You could also have other kinds of income other than the W2 income. You could see if I didn't have any income, then I wouldn't have the credit at all. It would be gone because the point is, in general, you need some income in order to qualify for the credit. You might have Schedule C income, however, which is going to be self-employment income. Putting that 50,000 on the Schedule C, then we should have this calculation back in place once again pulling in the information from the Schedule C income in order to help us out with that calculation. As you can see the Schedule C being populated now. So next we can add another student down below, another dependent, I should say. So let's add another dependent. So we're going to say now we've got Jane here as a dependent. And we're going to say there's that, there's that we're going to bring over Jane on page one. Now you see we've got Sam and Jane, both qualifying. But note, if I don't apply, if it's possible, for example, I paid something just for one of the two, even though they're both qualifying for the expenditures here. So in other words, if I go over to the form 2441, I have the same situation where I paid this amount to this institution just for Sam. And even though the other dependent would qualify, I didn't pay any care for the other dependent at this time. So notice it's capping still at the 8000, we get down to the 4000 here. So you got to be kind of careful there because you could then say I'm going to add Jane, even though I didn't pay anything. So I'm going to add another another student. So we're going to say adding Jane now. And then on the we're going to, but we're going to say we didn't actually pay anything for Jane, because we just took care of things ourselves there. But Jane was there. So we still have the 20,000 here to the provider. So I'm going to go back on over. So now, even though I didn't pay anything for Jane, she's on the list for the credit for child independent care. And notice that it increased now to the 16,000 here. And so now we've got the maximum of the 8,000. So if I then went to the form 1040 page number two, now we've got this 8,000 that's pulling out that it's maxing off at now notice it stops at two. So if I added another dependent, then that that cap will not increase. So if I added say another dependent over here and said, okay, what if I had this is a good trend, let's say I had another dependent, which is T Smith, I'm not even going to name them anymore, because I'm just looking for the credit, man. I'm just looking for the credit. That's not good. So when applicable, we're going to say when applicable. And then let's pull them over to our form. So now we also have we also have T Smith, we just call them T Smith. And then that's going to be the expenses. And then let's pull it over to the form. So now if I look at this form, we've got three listed here, but it's not like they increased this anymore, it has no net impact, even though we paid the 20,000, it kind of capped it out same there. So it's one and then two, and then you don't have that increase to the cap after that point. Now it is, of course, possible for us to have paid out to like for the two institutions. So maybe I have Sam, where I paid the 10,000. And then we had Jane, where we paid out the 10,000. And then we had the institution being paid the 20,000. Right. And then if I was to go on over and say there, there we have our calculation. Now, now we've got the 20,000 still going to the one institution, which has been broken out between 10 and 10, Sam and Jane, we're at the 16,000 down below. And we get that we got the same calculation for the 8,000. Now, if the care provider was a household employee, we'd have to check that off here. So that wouldn't be the case. If it was an institution, that would be like a person, most likely or something like that would be a household employee, you'd have to check that off because they want to know that to make sure you're following all the other rules for basically the household employee. So that's going to be that item. I'm going to uncheck that bringing that back here. Also note that you couldn't have one of your dependents that could also be qualified as someone you paid. So I couldn't have, of course, T here, basically paying him for the care of Sam so I could go to work or something like that because they're both dependents. If T was over, like, I think 19 and not a dependent, and I paid them possibly in that instance, you can check that research out. But if they're on the return as a dependent, then you can't pay one dependent, basically, and then get the deduction for the dependent. And for the fact that you pay the dependent for the child tax cared to take care of the other dependent. Also note, you might get the information for the dependent care provider's identification with the W 10, which you can find in the IRS website, which is please print or type the dependent care providers identification and so on. This will be the general information that you would need, the name, the address, and the ID number to help you to fill out the form. And then you also could have some situation where your employer provides you dependent care benefits and that would be on the W two form. So if you had an employer that provided dependent care benefits, then generally up to a certain point, that then would be taken out of box one up top. So not taxable or for federal income tax person purposes and reported on line 10. So if that were the case, and I went back on over, we should be able to see that we could say, okay, if I had 50,000 up here, and then line number 10, let's say was, let's say 5000, then I can go back on over to my forms and look at that 2441. And you can see there's, there's been a change to the calculation. If I look at page number two, we have the 5000 basically being taken into consideration pulling over online 12. This is part number three of our form into the total amount of dependent care benefits you received the 20,021. So there's the 5000, I won't go through the whole kind of calculation. Basically, if you go over 10,500 in general, you don't get any more benefit on on the benefit program generally. So that's, but we won't go into that in detail. But the basic idea is that we had that 16,000 before, and now it was decreased by the 5000 to basically the 11,000. So if I go back then to page one, you can see the starting point here. Instead of the 16,000 is that 11,000 taking the 50% to get to the to the 5,500. So there's there's that idea, that concept. Let's take that out for now. Let's put that back in and say, remove that. So there is so that we're back to that, then you might have a situation where you're not a resident here. So if you're so if I if I say that I uncheck this one, I'm going to uncheck that and say say I'm going to say uncheck that box. So now that's going to adjust the calculation. So now we've got the 3463. And if I go to the schedule three, then it's not being reported on page two. It's in the non refundables on page one and schedule three of the 3463 that flows in to the 1040 page two up top for the credit up top here. And it's basically wiping out the tax because it's being capped at the amount of the tax. So in other words, if I was to notice it was down here below, so like if my income was higher up top, if I said my income went up to like 70,000, and I go back on over to my form, notice that then the credit amount basically changed as well, because it's it's basically being capped at the amount of the income. So and where it wasn't before, because if I brought it back down to 50,000, if I brought it back down to 50,000, if I go back on over to the forms, I go to the 2441. So there's there's our adjustment if I then put this box back in place. And remember what this box says for 2021 year credit for the child dependent care expenses is refundable. That's what we're talking about the refundableness here, or the spouses married filing jointly had a principal place of a boat in the United States, that's going to be the difference here. So that would be most people would be in the United States if it's a US income tax for the most part. So now the box is back on. And now we've got the 8000. And if I go to the form 1040 page number two, it's no longer up top, but it's in this refundable area down below. It's also on schedule C, not on the first page, but on the second page for the payments and refundable credits. So there we have that. Now the last thing that could come that I'll just point out here is that you could have combat pay come up. And if you had combat pay, let's say that we had, we had like, we had only like 4000. And then we had another w two with combat pay. If they had combat pay, then your member of the military, it would be I believe in box number 12. And it would have like a queue, I think, right? It was a it was a queue in there that would indicate it. So it wouldn't be in box one, because you're getting a benefit because it's not going to be taxable. But you might want to add combat pay for things like possibly the earned income tax credit or the child tax credit, maybe or the or this or this one, which would be the expenses for the child care. So let's say this was like 6000, let's say, let's say 10,000 of combat pay. So if I don't make the election down below, and I go back on over now, I would only have 4000 to calculate because if I go to page one of the form 1040, I only had 4000, my combat pay is not being included here. And then if I go to the 2441, then I'm limited by my income being at the 4000. But if I could include my combat pay just for that, I don't want to include it in income, but I include it for for the for the non taxable combat pay and earn income for 2441 calculation. Now I'm back up to the 16,000 up up top. Now I am because I had it clicked off as the spouse. So now I've now I've got the 16, I'm at the 14, now, as opposed to what it was before, or if I increase the combat pay to like 15,000, for example. So so now that's at 19, and it brings it back up so you can you can that combat pay is like is like a wild card, you know, you can do whatever you want with it, like, so you don't you don't typically want to include it in income and it's not because it's not in box one, but you might want to include it for the earned income tax credit calculation. You might want to include it for the calculation of this credit for the child independent care expenses. And you could typically kind of do some mixing and some mashing. If that is involved, which is kind of a specialized case. But if you see that, or if you're in that, if you're in have if you have combat pay, then let make sure you're talking to somebody that has some ideas of these different kind of things you can do with the combat pay.