 Income Tax 2021-2022 Child and Dependent Care Expenses Credit Line Instructions Part Number 1. Get ready to get refunds to the max diving into Income Tax 2021-2022. Most of this information can be found in the Form 1040 Instructions Tax Year 2021 IRS Website IRS.gov IRS.gov we're in the second half of our income tax formula looking at the credits down below noting that both credits and deductions are good, but if you had a dollar credit and a dollar deduction, the credit would typically be better because you'd get the full amount of the dollar of credit as opposed to the dollar deduction which would be decreasing the taxable income, the tax being calculated on it. Credits can be put into two main categories, either non-refundable credits or refundable credits. The non-refundable credits not taking the liability below zero, refundable credits can and therefore if that was the case, you would get a refund, but it's not really a refund at that case because it's kind of like a benefit program if that was the case. Also note that some credits might have a non-refundable portion and refundable portion to them. We're on the second page of the Form 1040 looking at Line 31. The credit would roll into Schedule 3 and then roll into the second page of the Form 1040. This is the Form 2441, the Child Independent Care Expenses. So we're looking at Line 8. If your filing status is married filing separately and you meet the requirements to claim the credit for child and dependent care expenses, you must check the box on Line 8. So jumping over to the form here, we're on the 2441, Line 8, you can't claim a credit for the child and dependent care expenses. If your filing status is married filing separately, unless you meet the requirements listed in the instructions under married persons filing separately, if you meet these requirements, check the box here. We noted that's kind of a more of an unusual case. Most people here have the B. For 2021, your credit for child and dependent care expenses is refundable if you or your spouse, if married filing jointly, have a principal place of abode in the United States for more than half of 2021. So back on over, we're going to say then that we have, by checking the box, you are confirming that you meet the requirements listed earlier under married persons filing separately. So that's that kind of unusual exception. Line B, for 2021, your credit for child and dependent care expenses is refundable if you, that refundable meaning you get that benefit of it possibly being able to take the liability below zero and get a benefit even though, even in that case. So or your spouse, if married filing jointly had a principal place of abode and the United States for more than half of 2021, this means you or your spouse, if married filing jointly must have your main home in one of the 50 states or the District of Columbia for more than half of the tax year. So then your main home can be any location where you regularly live. Your main home may be your house, apartment, mobile home, shelter, temporary lodging or other location and doesn't need to be the same physical location throughout the tax year. If you're temporarily away from your, your main home because of illness, education, business or vocation, you're generally treated as living in your main home during that time for purposes of this calculation. If you meet these requirements, you must check the box online be, if you don't check the box online be your credit for 2021 is non-refundable and limited to the amount of your tax. So in other words, if I check the box be here when it finally rolls in to the 1040, it's down here. The credit is down here in the refundable kind of area, whereas if I was to uncheck that box, so now I've unchecked the box, then just box here, then if I roll into the 1040 and go on over, now the refundable credit is rolling in up top in, in the non-refundable area. So, and that means that it could be limited, it won't take the tax liability in essence below zero. So for most people, or it would be beneficial to be able to be able to check that box if you meet that requirement. And that would be the case generally for most people. Can be continued, military personnel stationed outside the United States, US military personnel who are stationed outside the United States on extended active duty are considered to have their main home in one of the 50 states or the district of Columbia for purposes of qualifying for the refundable portion of the credit. So if you're outside because of the military, then of course you want to be inside for the purposes of the credit because that would be more beneficial and that's the general case. For this purpose, quote, extended active duty in quote means any period active duty pursuant to a call or order to active duty for a period in excess of 90 days or for an indefinite period. So additional information for more information included rules for people living in American Samoa, the Commonwealth of Northern Mariana Islands, Guam, Puerto Rico or the US Virgin Islands, see frequently asked questions at irs.gov slash CDC see frequently asked questions and form 1040 N.R. filers should also see the instructions for form 1040 N.R. for additional information about claiming the refundable credit tip form 2441 and these instructions use the terms refundable and nonrefundable when discussing the credit for child and dependent care expenses. The term refundable means the credit isn't limited to the amount of your taxes. So even if your credit exceeds the amount of the federal income tax that you owe, you can still claim a full amount of your credit and the amount of the credit in excess of your tax liability can be refunded to you. In other words, it wouldn't really be a refund in that case. It might be more like a benefit program because you're not really paying in taxes possibly at that point in time, but you're getting money. The tax system is giving you money rather than refunding an overpayment of your tax liability. So the term nonrefundable means the credit is limited by law to the amount of your taxes. So if you check the box on line B, your credit is refundable and it is reported on form 2441 line 10 and on schedule 3 form 1040 line 13G and you don't enter any amount on form 2441 line 11. If you don't check the box on line B, your credit is nonrefundable and you may not enter on schedule 3 form 1040 line 13G, the amount from line 10. Instead, you enter the portion of the line 10 that you claim as a nonrefundable credit on line 11. So that's what we basically just looked at when we checked off that box and didn't check it off on the tax return. In line 1, complete columns A through E for each person or organization that provided the care. You can use form W10, dependent care provider identification and certification or any other source listed in its instructions to get the information from the care provider. So this is what a W10 looks like. It's a dependent care provider's identification and certification. So we've got the information up top, the name, the address, the provider's taxpayer identification number and so you can find this on irs.gov, irs.gov. So if you don't give correct or complete information, your credit and exclusion, if applicable, may be disallowed unless you can show you use the due diligence in trying to get the required information. So you need the information. If you get wrong information, then you could get in trouble and they might remove the credit unless you could show that you did your best, did your due diligence in order to get the proper information. If we take a look at the line 1 here, so this is the form 2441. Here's part number 1 where we have the persons or organizations who provide the care. So we got the information. We just made up a place here and there's the address and there's the identification number that we would need. And then check here if the provider is your household employee and then the amount that was paid. So then we have, if you have more than three care providers, check the box above line 1 and attach a statement to your return with the required information. Be sure to put your name and social security numbers, the SSN, on the statement. In this situation, all the lines on line 1 form 2441 must be completed with information for the three highest paid providers. The attach statements must provide the same information for the additional providers not listed. So we might have multiple people that were paying. There's only three listed on the actual form. So the attach statement may optionally include the full list of providers including the ones already listed on the form, but you should indicate which providers listed on the statement are also listed on the form. So if you had neither a qualifying person nor any care provider for 2021 and you are filing form 2441 only to report taxable income in part three, enter none on line one column A. Due diligence. So what does it mean to get your due diligence in order to get this information to properly report the ID number of the provider and so on? You can show a serious and earnest effort due diligence to get the information by keeping in your records a form W10 completed by the care provider. So if you get that W10, then you did basically what you could do at that point in time. You've tried to get the information. If it's wrong, then you kind of are showing your due diligence or you may keep one of the other sources of information listed in the instructions for form W10. So if the provider doesn't give you the information, complete the entries you can on line one. For example, enter the provider's name and address so you might not have the number in that case. That's usually the thing that will be missing if they won't provide you that number. Then you know that's that's the problem. Enter a C attached statement in the columns for which you don't have the information then attach a statement to your return explaining that the provider didn't give you the information. So if they say, hey, I'm not going to give you my social security number. For example, if it was an individual or my EIN number for whatever reason, if it was a business, then and you still want to take the deduction, you're going to have to tell the IRS. Hey, look, I can't completely identify this person. I tried, but I couldn't. So caution, I don't list the ineligible related individuals as a care provider in line one. No credit is allowed for any amount paid to your spouse, the parent of your qualifying child or a person to whom you can claim as a dependent. So the person that you're paying for the care cannot be your spouse because the IRS is basically saying, well, you can't be paying your spouse for the care of the child, the parent of your qualifying child. So if it's not your spouse, but the parent of the qualifying child, also IRS is saying, no, that doesn't count for or a person whom you can claim as a dependent. So if they're another child or some other dependent on your tax return that you're paying to take care of another dependent on your tax return, can't typically do that. So if your child, including stepchild or foster child provided the care he or she must have been age 19, so you might have your child actually providing the care, but they can't be your dependent. They'd have to be non dependent and so and over the age of 19 or older by the end of the year and he or she can't be your dependent. So columns A and B, so enter the care provider's name and address. If you were covered by your employer's dependent care plan and your employer furnished the care either at your workplace or by hiring a care provider enter your employer's name in column A and enter next enter CW2 in column B because that information might be pulled from the W2 information. Then leave column C, D and E blank, but if your employer paid a third party, not hired by your employer on your behalf to provide the care, you must give information on the third party in columns A through E. So we're looking here, the care provider, the address, identification number and if you hired them and then or check here if the provider is your household employee and then the amount paid is what we're looking for. All right, so then column C if the care provider is an individual enter his social security number so if it's just a person they don't have an EIN number then this SSN social security number or individual taxpayer identification number the I-10 otherwise enter the provider's employer identification number. So if it's a company or a business they would have an EIN and they would probably be very very vocal about the fact that you know they have their EIN, you might be able to write off the care that they are providing if they're in the business of providing this kind of care to parents who would typically benefit from writing it off. So if the provider is a tax exempt organization enter quote tax exempt end quote in column C. U.S. citizen and resident aliens living abroad if you are living abroad your care provider may not have and may not be required to get a U.S. taxpayer identification number for example an SSN social security number or EIN employer identification number if so enter quote L-A-F-C-P end quote living a abroad foreign care provider in the space for the care provider's taxpayer identification number if you lived abroad in 2021 your credit may not be refundable see the instructions for line B earlier. Column D check the box in column D if the care provider is your household employee so now you're employing them as a household employee if you pay someone to come to your home and care for your dependent or spouse and you can control not only what the work is done but how it is done you may be a household employer and you may need to file schedule H form 1040 household employment taxes with your tax return and pay household employment taxes so that's a whole another issue that if they were a household employee the iris might expect to kind of see that here so for more information on household employer's tax responsibilities see schedule at H form 1040 and its instructions and publication 926 household employer's tax guide column E enter the total amount you actually paid in 2021 to the care provider also include amounts your employer paid to a third party on your behalf it doesn't matter when the expenses were incurred don't reduce this amount by any reimbursement you received so we're going to have the full amount that was paid here and we're not reducing it by the reimbursements that might come into play at a later point which we'll see in a future presentation possibly