Child & Dependent Care Tax Credit Reminder

GTM Payroll Services would like to remind you of 2 important tax credits available from the IRS, as you prepare and file your tax returns… Check it out!

Tax Credits

If you’re a parent, you could be eligible for additional tax credits!! It could even mean you might receive a refund rather than owe any taxes.

1. The Child & Dependent Care Tax Credit is for expenses paid for the care of your qualifying children under age 13, or for a disabled spouse or dependent, to enable you to work or look for work. For more information, see IRS Publication 503, Child and Dependent Care Expenses.
2. The Child Tax Credit is for people who have a qualifying child. The maximum amount of the credit is $1,000 for each qualifying child. This credit can be claimed in addition to the credit for child and dependent care expenses. For more information on the Child Tax Credit, see IRS Publication 972, Child Tax Credit.

See below for more information...

Top Ten Facts About the Child & Dependent Care Credit

If you paid someone to care for a child, spouse, or dependent, you may be able to reduce your tax by claiming the Child and Dependent Care Credit on your federal income tax return. Below are the top ten things you need to know about claiming a credit for child and dependent care expenses.

1. The care must have been provided for one or more qualifying persons. A qualifying person is your dependent child under age 13. Additionally, your spouse and certain other individuals who are physically or mentally incapable of self-care may also be qualifying persons. You must identify each qualifying person on your tax return.
2. The care must have been provided so you – and your spouse if you are married – could work or look for work.
3. You – and your spouse if you are married – must have earned income from wages, salaries, tips, other taxable employee compensation or net earnings from self-employment. One spouse may be considered as having earned income if they were a full-time student or they were physically or mentally unable to care for themselves.
4. The payments for care cannot be paid to your spouse, to someone you can claim as your dependent on your return, or to your child who is under age 19, even if he or she is not your dependent. You must identify the care provider on your tax return.
5. Your filing status must be single, married filing jointly, head of household or qualifying widow(er) with a dependent child.
6. The qualifying person must have lived with you for more than half of 2008.
7. The credit can be up to 35 percent of your qualifying expenses, depending upon your income.
8. For 2008, you may use up to $3,000 of the expenses paid in a year for one qualifying individual or $6,000 for two or more qualifying individuals.
9. The qualifying expenses must be reduced by the amount of any dependent care benefits provided by your employer that you exclude from your income.
10. If you pay someone to come to your home and care for your dependent or spouse, you may be a household employer. If you are a household employer, you may have to withhold and pay social security and Medicare tax and pay federal unemployment tax. For information, see Publication 926, Household Employer's Tax Guide.

The following forms and information can be found online at GTM’s Household Tax Resource Center, under Tax Forms.

    * Publication 926 - Household Employment Tax Guide for Wages Paid in 2008
    * Form 2441 - Child & Dependent Care Expenses (2007) - File with Personal Federal 1040 Return
    * Form 2441 - Child & Dependent Care Expenses Instructions (2007)
    * Form W-10 - Dependent Care Provider's Identification and Certification (DO NOT FILE THIS FORM WITH TAX RETURN )

For more information on the Child and Dependent Care Credit, see Publication 503, Child and Dependent Care Expenses.  Since many qualifications and limitations apply to the various credits, additional information is available at www.IRS.gov.

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The items included in this blog are informational only and are not meant to exclude the tax advice from an accredited representative.  Please consult a professional tax advisor for more information and to determine how any item applies to your personal tax scenario.