Child Care Credit

Today TaxMama hears from Julia from Avon, CO who tells us “I am a contract laborer as a mental health consultant in preschools. I have two children in childcare in order to work. But, as I am preparing my taxes it doesn’t show that I receive a child -care credit because I did not receive a W-2 but a 1099-MISC. How can I get this credit? “

Dear Julia,

Even if you had gotten a W-2, your program wouldn’t compute the child care credit all by itself. You have to enter the relevant data on the form. Here are the steps:

First, report your 1099-MISC income on Schedule C.
http://www.irs.gov/pub/irs-pdf/f1040sc.pdf – link to Form
http://www.irs.gov/pub/irs-pdf/i1040sc.pdf – link to Instructions

2) Deduct all your business costs and auto expenses or mileage.

For information on what expenses to deduct, you’ll find some resources on TaxMama’s Small Business Resources page http://www.taxmama.com/resources/smallbiz.html

3) You may also qualify for the office in home deduction. Read the instructions.
http://www.irs.gov/pub/irs-pdf/f8829.pdf – link to Form
http://www.irs.gov/pub/irs-pdf/i8829.pdf – link to Instructions

What’s left is your profit.

4) Take that profit amount and carry it to line 4 of the Form 2441, the child and dependent care credit form.
http://www.irs.gov/pub/irs-pdf/f2441.pdf

Remember to fill in all the input about your children, their date of birth, and how much you paid for each of their care.

Some programs have the input on ‘dependents’ page and carry it over to the Form 2441. Others pick up the dependent, but make you enter the expenses on their Form 2441 input page. You’ll have to read the instructions in your software package or call their customers service line if you can’t figure it out.

OR enter the income and run the program’s diagnostic tool. It will take you straight to those fields that are missing information.

And remember, you’ll find answers to questions about credits and all kinds of tax issues, free. Where? Where else? At TaxMama.com

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