Child and Dependent Care Credit Explained

One of the most expensive parts of caring for a child is paying for childcare. Luckily, the IRS has an option that one may qualify for to get some of that expense back. This is called the Child and Dependent Care Credit. There are several things that you need to know before you file your taxes if you are hoping to claim credit for any expenses.

1. The child you paid childcare for must be twelve years of age or younger. The only exception to this is if you have an older child, or adult that is incapable of caring for themselves due to a mental or physical handicap.

2. Daycare must have been used only so you, or your spouse, could go to work. If you are unemployed, you can claim daycare expenses for times that you are searching for employment. The IRS will expect to see earned income from wages or self-employment if you file a claim of dependent care expenses.

3. Daycare cannot be done by a family member, or a person under the age of 19. If you use a family member or a teenager, then you cannot claim the expenses on your taxes.

4. The child being claimed must have lived with you for more than half the year. If you are sharing custody with the other parent, then you will be able to claim the child on your years of eligibility.

5. You can only claim 35 percent of the expenses for the year. These expenses must not include any amount that your employer covers.

It is possible to see some of the money that you put out for your children come back. When you work, caring for your child needs to be done by someone else and the amount adds up quickly. Talk to a tax preparer to ensure that you are claiming the proper amounts for the Child and Dependent Care Credit.

What to do if Someone Else Claimed My Dependent ?

What happens when you are told that the dependent you had legitimately claimed, by filling all the pre-requisites – submitting their social security number & satisfying the rules establishing your relationship with them – while filing your returns with the IRS, has also been claimed by someone else, before you?

In that case, the onus of proving themselves right, would rest on the claimants. The tax return  filed online, claiming the already claimed dependent gets rejected. The process can be taken further by re-filing the returns on paper.  Next the claimants would be requested by the IRS to put forth their contentions on meeting the criteria to be fulfilled, for claiming the dependent involved.

The criteria as mentioned above are about relationship, support, residence and age.

The dependent must be a:-

  • Child, stepchild (related by blood or adopted) ,  foster child, step sibling or sibling of the claimant or a dependent of  any of the relations mentioned above
  •  Has not received more than one half of his support from the claimant in the tax year.
  •  Has resided in the same residence as the taxpayer for more than six-months in the tax year, exceptions are given to children whose parents are divorced or are separated or children who were kidnapped. Was born or died in the tax year and the once absent temporarily.
  •  Is  below 19-years of age or if a student for at least 5 months in a year, is under 24-years of age
  •  Is permanently disabled in the tax year.

Write up the contentions supporting the above mentioned criteria along with a cover letter and mail the printed copies of the same to the IRS.  Considering the fact that the privacy of the right claimer be protected by all means, along with giving both, the leverage on a possible unintentional written error during the filing, the IRS would not disclose the identities of any to each other.

The disappearance of seven million dependents in 1987, when these numbers were first allocated to them, exposed the infirmities rampant in the process: all of the kids being claimed by each of the divorced parents; dependents being fabricated; deliberately claiming dependents before others could.

In case,  the filing doesn’t happen as directed, both the claimants would be audited by the IRS.  Collaborating with a tax professional would be helpful in the process further.