 Income tax 2022-2023 child and dependent care expenses credit flow chart. Can you claim the credit? Let's do some wealth preservation with some tax preparation. Support accounting instruction by clicking the link below giving you a free month membership to all of the content on our website broken out by category further broken out by course. Each course then organized in a logical reasonable fashion, making it much more easy to find what you need than can be done on a YouTube page. We also include added resources such as Excel practice problems, PDF files and more like QuickBooks backup files when applicable. So once again click the link below for a free month membership to our website and all the content on it. Most of this information comes from publication 503 child and dependent care expenses tax year 2022. You can find on the IRS website irs.gov irs.gov. Looking at the income tax formula, we're down on the credit side of things at the bottom side of the formula. Remembering the first half of the income tax formula is in essence an income statement, although a strange one. The bottom line being taxable income similar to net income for a normal income statement where they're going to calculate the tax based on that taxable income. Not with one rate, but with multiple rates typically because it's going to have a progressive tax structure to get to the tax before credits and other taxes. When we're dealing with the credits and other taxes like self employment taxes and we'll deal with the payments which could be in the form of estimated tax payments or withholdings to get to the bottom line refund or tax due. Also note credits are similar to deductions in that we like them both but the credit if we could get $1 of it versus $1 of a deduction. We typically want the $1 credit because we would get the full dollar of credit whereas a deduction would simply reduce the taxable income and the benefit we would be getting would be dependent then on the tax rate. Also remember that the credits can be broken out into two main categories those that are non refundable and those that are refundable. The non refundable credits don't take the tax liability below zero because then it would no longer be a tax. The credits do which means in that case the tax code is being used kind of like as a benefit type of program situation. Alright so we're looking at the flow chart. We're going to be zooming into each line item of the flow chart. It might be easier to kind of systematically think in a flow chart format when you're trying to visualize whether or not someone could qualify for the credit. Alright so we've got the first point here. Was the care for one or more qualifying persons? So if the answer is yes we can continue on. If no the no's are all going down to the bottom line here. You can't claim the child and dependent care credit in that case. So if the answer is yes we go to step number two. Did you have earned income during the year? You'll recall we have to have earned income for this credit because the general idea is that you have the expenses in order to take care of the child so that you can get earned income. So if the answer is yes we continue on. If no we go down to you can't claim the credit. Then next one. Did you pay expenses to allow you to work or look for work? So that's the general idea. You paid for expenses. Why for the care of the child? Why so that you could work? So the general answer would be yes and you have this little item down here. This also applies to your spouse unless your spouse was disabled or a full-time student. In other words if you're single clearly if you hired someone to help you to take care of the child then you would do that to work. If you're married it gets a little bit more complicated because the assumption would be that your spouse could take care of the child if they're not working. So you would think that both spouses would be working or looking for work or something like that in order to qualify for the credit. So if we say yes we continue on. Next one were your payments made to someone you or your spouse could claim as a dependent. So typically if you could claim them as a dependent they can't really take the credit. You can imagine why the IRS would have a problem with that because if you were able to take the credit for people in your family people would probably structure some strange payments and whatnot to try to maximize tax benefits so you would think. But next one. So this time would say no that's not the case if it was yes then no credit. Okay so were your payments made to your spouse or to the parent of your qualifying person who is your qualifying child and under age 13. So generally you can't make the payment to a spouse or to the parent of your qualifying person who is your qualifying child under age 13. So the answer would have to be no there to be continuing on. Next were your payments made to your child who was under the age of 19 at the end of the year. So again that's kind of like you're paying it to a family member. So if your family member is now dependent their child I mean independent their child they're doing their own thing now. Then maybe that would you know that could be a different situation. But obviously if they're still you know a dependent child then you would think that would be a funny situation. You'd be paying them which you might do anyways and then trying to get a credit for the payment that you would made to the child which seems to not quite be right. So once again were your payments made to your child who was under the age of 19 at the end of the year would say no we're going to continue on are you single. So here's where it gets a little bit messy down here. So are are you single. If yes we can continue down below. If no we're going to continue to the to the right hand side. Let's continue. Let's go with yes being single first. So we're going to say are you single. We'll say yes. And then next one. Do you know the care providers name address and identification number. Now hopefully the answer there is yes. You know who you know who's doing the care. You know their name address and identification number. If it's somebody that if it's a care taking facility they should give you that in the form of an EIN. If not it should be a social security number generally. So normally you would be going down to here. Did you have more than one qualifying person. If the answer is yes you may be able to claim the child and dependent care credit fill out form 2441. But if the answer is no then the question is are you excluding or deducting at least 3000 of dependent care benefits. Because if you're excluding them if they're not being included in income then if you also took the credit for it you'd kind of be double dipping in that situation. So if the answer is no once again you may be able to claim the child and dependent care credit. If the answer is yes you can't claim the credit. Let's move back up here and then imagine now we're going from single to saying no we're not single. And then the next question is are you filing a joint return. So if the answer is yes we continue on as we generally would. If the answer is no you've got that married filing separate situation because if you're married you can only file joint or separate usually. So do you meet the requirements to be considered unmarried. So in other words a situation where you're kind of like separated because if you're filing married filing separate normally you wouldn't be able to claim the credit. So if the answer is no to that then you're filing married filing separate in most circumstances you can't claim the child tax credit. If you say yes to that then we go down. Do you have the care provider's name address and so on. If you're filing married filing joint then we're going to go down to this question again. Do you know the care provider's name address and so on and then move down the structure we saw before. If yes we're going to go down here. Did you have more than one qualified person and so on and so forth. It's the same from that point on down.