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Www. Www.taxact.com taxact. Www.taxact.com com 3. Www.taxact.com   Reporting Rental Income, Expenses, and Losses Table of Contents Which Forms To UseSchedule E (Form 1040) Schedule C (Form 1040), Profit or Loss From Business Qualified Joint Venture Limits on Rental LossesAt-Risk Rules Passive Activity Limits Casualties and Thefts Example Figuring the net income or loss for a residential rental activity may involve more than just listing the income and deductions on Schedule E (Form 1040). Www.taxact.com There are activities which do not qualify to use Schedule E, such as when the activity is not engaged in to make a profit or when you provide substantial services in conjunction with the property. Www.taxact.com There are also the limitations which may need to be applied if you have a net loss on Schedule E. Www.taxact.com There are two: (1) the limitation based on the amount of investment you have at risk in your rental activity, and (2) the special limits imposed on passive activities. Www.taxact.com You may also have a gain or loss related to your rental property from a casualty or theft. Www.taxact.com This is considered separately from the income and expense information you report on Schedule E. Www.taxact.com Which Forms To Use The basic form for reporting residential rental income and expenses is Schedule E (Form 1040). Www.taxact.com However, do not use that schedule to report a not-for-profit activity. Www.taxact.com See Not Rented for Profit , in chapter 4. Www.taxact.com There are also other rental situations in which forms other than Schedule E would be used. Www.taxact.com Schedule E (Form 1040) If you rent buildings, rooms, or apartments, and provide basic services such as heat and light, trash collection, etc. Www.taxact.com , you normally report your rental income and expenses on Schedule E, Part I. Www.taxact.com List your total income, expenses, and depreciation for each rental property. Www.taxact.com Be sure to enter the number of fair rental and personal use days on line 2. Www.taxact.com If you have more than three rental or royalty properties, complete and attach as many Schedules E as are needed to list the properties. Www.taxact.com Complete lines 1 and 2 for each property. Www.taxact.com However, fill in lines 23a through 26 on only one Schedule E. Www.taxact.com On Schedule E, page 1, line 18, enter the depreciation you are claiming for each property. Www.taxact.com To find out if you need to attach Form 4562, see Form 4562 , later. Www.taxact.com If you have a loss from your rental real estate activity, you also may need to complete one or both of the following forms. Www.taxact.com Form 6198, At-Risk Limitations. Www.taxact.com See At-Risk Rules , later. Www.taxact.com Also see Publication 925. Www.taxact.com Form 8582, Passive Activity Loss Limitations. Www.taxact.com See Passive Activity Limits , later. Www.taxact.com Page 2 of Schedule E is used to report income or loss from partnerships, S corporations, estates, trusts, and real estate mortgage investment conduits. Www.taxact.com If you need to use page 2 of Schedule E, be sure to use page 2 of the same Schedule E you used to enter your rental activity on page 1. Www.taxact.com Also, include the amount from line 26 (Part I) in the “Total income or (loss)” on line 41 (Part V). Www.taxact.com Form 4562. Www.taxact.com   You must complete and attach Form 4562 for rental activities only if you are claiming: Depreciation, including the special depreciation allowance, on property placed in service during 2013; Depreciation on listed property (such as a car), regardless of when it was placed in service; or Any other car expenses, including the standard mileage rate or lease expenses. Www.taxact.com Otherwise, figure your depreciation on your own worksheet. Www.taxact.com You do not have to attach these computations to your return, but you should keep them in your records for future reference. Www.taxact.com   See Publication 946 for information on preparing Form 4562. Www.taxact.com Schedule C (Form 1040), Profit or Loss From Business Generally, Schedule C is used when you provide substantial services in conjunction with the property or the rental is part of a trade or business as a real estate dealer. Www.taxact.com Providing substantial services. Www.taxact.com   If you provide substantial services that are primarily for your tenant's convenience, such as regular cleaning, changing linen, or maid service, you report your rental income and expenses on Schedule C (Form 1040), Profit or Loss From Business, or Schedule C-EZ (Form 1040), Net Profit From Business. Www.taxact.com Use Form 1065, U. Www.taxact.com S. Www.taxact.com Return of Partnership Income, if your rental activity is a partnership (including a partnership with your spouse unless it is a qualified joint venture). Www.taxact.com Substantial services do not include the furnishing of heat and light, cleaning of public areas, trash collection, etc. Www.taxact.com For information, see Publication 334, Tax Guide for Small Business. Www.taxact.com Also, you may have to pay self-employment tax on your rental income using Schedule SE (Form 1040), Self-Employment Tax. Www.taxact.com For a discussion of “substantial services,” see Real Estate Rents in Publication 334, chapter 5. Www.taxact.com Qualified Joint Venture If you and your spouse each materially participate (see Material participation under Passive Activity Limits, later) as the only members of a jointly owned and operated real estate business, and you file a joint return for the tax year, you can make a joint election to be treated as a qualified joint venture instead of a partnership. Www.taxact.com This election, in most cases, will not increase the total tax owed on the joint return, but it does give each of you credit for social security earnings on which retirement benefits are based and for Medicare coverage if your rental income is subject to self-employment tax. Www.taxact.com If you make this election, you must report rental real estate income on Schedule E (or Schedule C if you provide substantial services). Www.taxact.com You will not be required to file Form 1065 for any year the election is in effect. Www.taxact.com Rental real estate income generally is not included in net earnings from self-employment subject to self-employment tax and generally is subject to the passive activity limits. Www.taxact.com If you and your spouse filed a Form 1065 for the year prior to the election, the partnership terminates at the end of the tax year immediately preceding the year the election takes effect. Www.taxact.com For more information on qualified joint ventures, go to IRS. Www.taxact.com gov and enter “qualified joint venture” in the search box. Www.taxact.com Limits on Rental Losses If you have a loss from your rental real estate activity, two sets of rules may limit the amount of loss you can deduct. Www.taxact.com You must consider these rules in the order shown below. Www.taxact.com Both are discussed in this section. Www.taxact.com At-risk rules. Www.taxact.com These rules are applied first if there is investment in your rental real estate activity for which you are not at risk. Www.taxact.com This applies only if the real property was placed in service after 1986. Www.taxact.com Passive activity limits. Www.taxact.com Generally, rental real estate activities are considered passive activities and losses are not deductible unless you have income from other passive activities to offset them. Www.taxact.com However, there are exceptions. Www.taxact.com At-Risk Rules You may be subject to the at-risk rules if you have: A loss from an activity carried on as a trade or business or for the production of income, and Amounts invested in the activity for which you are not fully at risk. Www.taxact.com Losses from holding real property (other than mineral property) placed in service before 1987 are not subject to the at-risk rules. Www.taxact.com In most cases, any loss from an activity subject to the at-risk rules is allowed only to the extent of the total amount you have at risk in the activity at the end of the tax year. Www.taxact.com You are considered at risk in an activity to the extent of cash and the adjusted basis of other property you contributed to the activity and certain amounts borrowed for use in the activity. Www.taxact.com Any loss that is disallowed because of the at-risk limits is treated as a deduction from the same activity in the next tax year. Www.taxact.com See Publication 925 for a discussion of the at-risk rules. Www.taxact.com Form 6198. Www.taxact.com   If you are subject to the at-risk rules, file Form 6198, At-Risk Limitations, with your tax return. Www.taxact.com Passive Activity Limits In most cases, all rental real estate activities (except those of certain real estate professionals, discussed later) are passive activities. Www.taxact.com For this purpose, a rental activity is an activity from which you receive income mainly for the use of tangible property, rather than for services. Www.taxact.com For a discussion of activities that are not considered rental activities, see Rental Activities in Publication 925. Www.taxact.com Deductions or losses from passive activities are limited. Www.taxact.com You generally cannot offset income, other than passive income, with losses from passive activities. Www.taxact.com Nor can you offset taxes on income, other than passive income, with credits resulting from passive activities. Www.taxact.com Any excess loss or credit is carried forward to the next tax year. Www.taxact.com Exceptions to the rules for figuring passive activity limits for personal use of a dwelling unit and for rental real estate with active participation are discussed later. Www.taxact.com For a detailed discussion of these rules, see Publication 925. Www.taxact.com Real estate professionals. Www.taxact.com   If you are a real estate professional, complete line 43 of Schedule E. Www.taxact.com      You qualify as a real estate professional for the tax year if you meet both of the following requirements. Www.taxact.com More than half of the personal services you perform in all trades or businesses during the tax year are performed in real property trades or businesses in which you materially participate. Www.taxact.com You perform more than 750 hours of services during the tax year in real property trades or businesses in which you materially participate. Www.taxact.com If you qualify as a real estate professional, rental real estate activities in which you materially participated are not passive activities. Www.taxact.com For purposes of determining whether you materially participated in your rental real estate activities, each interest in rental real estate is a separate activity unless you elect to treat all your interests in rental real estate as one activity. Www.taxact.com   Do not count personal services you perform as an employee in real property trades or businesses unless you are a 5% owner of your employer. Www.taxact.com You are a 5% owner if you own (or are considered to own) more than 5% of your employer's outstanding stock, or capital or profits interest. Www.taxact.com   Do not count your spouse's personal services to determine whether you met the requirements listed earlier to qualify as a real estate professional. Www.taxact.com However, you can count your spouse's participation in an activity in determining if you materially participated. Www.taxact.com Real property trades or businesses. Www.taxact.com   A real property trade or business is a trade or business that does any of the following with real property. Www.taxact.com Develops or redevelops it. Www.taxact.com Constructs or reconstructs it. Www.taxact.com Acquires it. Www.taxact.com Converts it. Www.taxact.com Rents or leases it. Www.taxact.com Operates or manages it. Www.taxact.com Brokers it. Www.taxact.com Choice to treat all interests as one activity. Www.taxact.com   If you were a real estate professional and had more than one rental real estate interest during the year, you can choose to treat all the interests as one activity. Www.taxact.com You can make this choice for any year that you qualify as a real estate professional. Www.taxact.com If you forgo making the choice for one year, you can still make it for a later year. Www.taxact.com   If you make the choice, it is binding for the tax year you make it and for any later year that you are a real estate professional. Www.taxact.com This is true even if you are not a real estate professional in any intervening year. Www.taxact.com (For that year, the exception for real estate professionals will not apply in determining whether your activity is subject to the passive activity rules. Www.taxact.com )   See the Instructions for Schedule E for information about making this choice. Www.taxact.com Material participation. Www.taxact.com   Generally, you materially participated in an activity for the tax year if you were involved in its operations on a regular, continuous, and substantial basis during the year. Www.taxact.com For details, see Publication 925 or the Instructions for Schedule C. Www.taxact.com Participating spouse. Www.taxact.com   If you are married, determine whether you materially participated in an activity by also counting any participation in the activity by your spouse during the year. Www.taxact.com Do this even if your spouse owns no interest in the activity or files a separate return for the year. Www.taxact.com Form 8582. Www.taxact.com    You may have to complete Form 8582 to figure the amount of any passive activity loss for the current tax year for all activities and the amount of the passive activity loss allowed on your tax return. Www.taxact.com See Form 8582 not required , later in this chapter, to determine if you must complete Form 8582. Www.taxact.com   If you are required to complete Form 8582 and are also subject to the at-risk rules, include the amount from Form 6198, line 21 (deductible loss) in column (b) of Form 8582, Worksheet 1 or 3, as required. Www.taxact.com Exception for Personal Use of Dwelling Unit If you used the rental property as a home during the year, any income, deductions, gain, or loss allocable to such use shall not be taken into account for purposes of the passive activity loss limitation. Www.taxact.com Instead, follow the rules explained in chapter 5, Personal Use of Dwelling Unit (Including Vacation Home). Www.taxact.com Exception for Rental Real Estate With Active Participation If you or your spouse actively participated in a passive rental real estate activity, you may be able to deduct up to $25,000 of loss from the activity from your nonpassive income. Www.taxact.com This special allowance is an exception to the general rule disallowing losses in excess of income from passive activities. Www.taxact.com Similarly, you may be able to offset credits from the activity against the tax on up to $25,000 of nonpassive income after taking into account any losses allowed under this exception. Www.taxact.com Example. Www.taxact.com Jane is single and has $40,000 in wages, $2,000 of passive income from a limited partnership, and $3,500 of passive loss from a rental real estate activity in which she actively participated. Www.taxact.com $2,000 of Jane's $3,500 loss offsets her passive income. Www.taxact.com The remaining $1,500 loss can be deducted from her $40,000 wages. Www.taxact.com The special allowance is not available if you were married, lived with your spouse at any time during the year, and are filing a separate return. Www.taxact.com Active participation. Www.taxact.com   You actively participated in a rental real estate activity if you (and your spouse) owned at least 10% of the rental property and you made management decisions or arranged for others to provide services (such as repairs) in a significant and bona fide sense. Www.taxact.com Management decisions that may count as active participation include approving new tenants, deciding on rental terms, approving expenditures, and other similar decisions. Www.taxact.com Example. Www.taxact.com Mike is single and had the following income and losses during the tax year:   Salary $42,300     Dividends 300     Interest 1,400     Rental loss (4,000)   The rental loss was from the rental of a house Mike owned. Www.taxact.com Mike had advertised and rented the house to the current tenant himself. Www.taxact.com He also collected the rents, which usually came by mail. Www.taxact.com All repairs were either made or contracted out by Mike. Www.taxact.com Although the rental loss is from a passive activity, because Mike actively participated in the rental property management he can use the entire $4,000 loss to offset his other income. Www.taxact.com Maximum special allowance. Www.taxact.com   The maximum special allowance is: $25,000 for single individuals and married individuals filing a joint return for the tax year, $12,500 for married individuals who file separate returns for the tax year and lived apart from their spouses at all times during the tax year, and $25,000 for a qualifying estate reduced by the special allowance for which the surviving spouse qualified. Www.taxact.com   If your modified adjusted gross income (MAGI) is $100,000 or less ($50,000 or less if married filing separately), you can deduct your loss up to the amount specified above. Www.taxact.com If your MAGI is more than $100,000 (more than $50,000 if married filing separately), your special allowance is limited to 50% of the difference between $150,000 ($75,000 if married filing separately) and your MAGI. Www.taxact.com   Generally, if your MAGI is $150,000 or more ($75,000 or more if you are married filing separately), there is no special allowance. Www.taxact.com Modified adjusted gross income (MAGI). Www.taxact.com   This is your adjusted gross income from Form 1040, U. Www.taxact.com S. Www.taxact.com Individual Income Tax Return, line 38, or Form 1040NR, U. Www.taxact.com S. Www.taxact.com Nonresident Alien Income Tax Return, line 37, figured without taking into account: The taxable amount of social security or equivalent tier 1 railroad retirement benefits, The deductible contributions to traditional individual retirement accounts (IRAs) and section 501(c)(18) pension plans, The exclusion from income of interest from Series EE and I U. Www.taxact.com S. Www.taxact.com savings bonds used to pay higher educational expenses, The exclusion of amounts received under an employer's adoption assistance program, Any passive activity income or loss included on Form 8582, Any rental real estate loss allowed to real estate professionals, Any overall loss from a publicly traded partnership (see Publicly Traded Partnerships (PTPs) in the Instructions for Form 8582), The deduction allowed for one-half of self-employment tax, The deduction allowed for interest paid on student loans, The deduction for qualified tuition and related fees, and The domestic production activities deduction (see the Instructions for Form 8903). Www.taxact.com Form 8582 not required. Www.taxact.com   Do not complete Form 8582 if you meet all of the following conditions. Www.taxact.com Your only passive activities were rental real estate activities in which you actively participated. Www.taxact.com Your overall net loss from these activities is $25,000 or less ($12,500 or less if married filing separately and you lived apart from your spouse all year). Www.taxact.com If married filing separately, you lived apart from your spouse all year. Www.taxact.com You have no prior year unallowed losses from these (or any other passive) activities. Www.taxact.com You have no current or prior year unallowed credits from passive activities. Www.taxact.com Your MAGI is $100,000 or less ($50,000 or less if married filing separately and you lived apart from your spouse all year). Www.taxact.com You do not hold any interest in a rental real estate activity as a limited partner or as a beneficiary of an estate or a trust. Www.taxact.com   If you meet all of the conditions listed above, your rental real estate activities are not limited by the passive activity rules and you do not have to complete Form 8582. Www.taxact.com On lines 23a through 23e of your Schedule E, enter the applicable amounts. Www.taxact.com Casualties and Thefts As a result of a casualty or theft, you may have a loss related to your rental property. Www.taxact.com You may be able to deduct the loss on your income tax return. Www.taxact.com Casualty. Www.taxact.com   This is the damage, destruction, or loss of property resulting from an identifiable event that is sudden, unexpected, or unusual. Www.taxact.com Such events include a storm, fire, or earthquake. Www.taxact.com Theft. Www.taxact.com   This is defined as the unlawful taking and removing of your money or property with the intent to deprive you of it. Www.taxact.com Gain from casualty or theft. Www.taxact.com   It is also possible to have a gain from a casualty or theft if you receive money, including insurance, that is more than your adjusted basis in the property. Www.taxact.com Generally, you must report this gain. Www.taxact.com However, under certain circumstances, you may defer paying tax by choosing to postpone reporting the gain. Www.taxact.com To do this, you generally must buy replacement property within 2 years after the close of the first tax year in which any part of your gain is realized. Www.taxact.com In certain circumstances, the replacement period can be greater than 2 years; see Replacement Period in Publication 547 for more information. Www.taxact.com The cost of the replacement property must be equal to or more than the net insurance or other payment you received. Www.taxact.com More information. Www.taxact.com   For information on business and nonbusiness casualty and theft losses, see Publication 547. Www.taxact.com How to report. Www.taxact.com    If you had a casualty or theft that involved property used in your rental activity, figure the net gain or loss in Section B of Form 4684, Casualties and Thefts. Www.taxact.com Follow the Instructions for Form 4684 for where to carry your net gain or loss. Www.taxact.com Example In February 2008, Marie Pfister bought a rental house for $135,000 (house $120,000 and land $15,000) and immediately began renting it out. Www.taxact.com In 2013, she rented it all 12 months for a monthly rental fee of $1,125. Www.taxact.com In addition to her rental income of $13,500 (12 x $1,125), Marie had the following expenses. Www.taxact.com Mortgage interest $8,000 Fire insurance (1-year policy) 250 Miscellaneous repairs 400 Real estate taxes imposed and paid 500 Maintenance 200 Marie depreciates the residential rental property under MACRS GDS. Www.taxact.com This means using the straight line method over a recovery period of 27. Www.taxact.com 5 years. Www.taxact.com She uses Table 2-2d to find her depreciation percentage. Www.taxact.com Because she placed the property in service in February 2008, she continues to use that row of Table 2-2d. Www.taxact.com For year 6, the rate is 3. Www.taxact.com 636%. Www.taxact.com Marie figures her net rental income or loss for the house as follows: Total rental income received  ($1,125 × 12) $13,500 Minus: Expenses     Mortgage interest $8,000   Fire insurance 250   Miscellaneous repairs 400   Real estate taxes 500   Maintenance 200   Total expenses 9,350 Balance $4,150 Minus: Depreciation ($120,000 x 3. Www.taxact.com 636%) 4,363 Net rental (loss) for house ($213)       Marie had a net loss for the year. Www.taxact.com Because she actively participated in her passive rental real estate activity and her loss was less than $25,000, she can deduct the loss on her return. Www.taxact.com Marie also meets all of the requirements for not having to file Form 8582. Www.taxact.com She uses Schedule E, Part I, to report her rental income and expenses. Www.taxact.com She enters her income, expenses, and depreciation for the house in the column for Property A and enters her loss on line 22. Www.taxact.com Form 4562 is not required. Www.taxact.com Prev  Up  Next   Home   More Online Publications
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Free File: Frequently Asked Questions

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What is Free File? 
Free File provides free federal tax prep and e-file for taxpayers, either through brand-name software or online fillable forms. This year, you have until April 15, 2014, to file and pay your taxes or request an extension.  

Who can use Free File?
You can, if your  Adjusted Gross Income (AGI) was $58,000 or less in 2013. You can use free brand-name software. You can find the company that’s best for you using the “Help Me Find Free File Software" tool. If your income was higher than $58,000, Free File Fillable Forms is available.

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Some participating Free File companies offer free state tax prep and e-file. Check the company's Free File home page to learn if free state income tax prep and e-file are available.

Note: AK, FL, NV, NH, SD, TN, TX, WA and WY do not have a state income tax return filing requirement for reporting W2 wage income. Two of these, NH and TN, require taxpayers to file returns for individual interest and dividend income.  

What forms and schedules can I  use to Free File?
Free File offers the most commonly filed forms/schedules. Review the list of most commonly filed forms. If a form/schedule is not listed, check the company's website for more information.

May I use Free File to e-file my prior year return? 
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How do I get a copy of my return? 
Always remember to print your return after you successfully e-file. If you forget to print your return, order a free
transcript from IRS. Depending on the type of transcript your request, you'll get more or less of the information from your return. 

Is customer support service available for Free File?
Yes. Access the Free File company's website to find customer support contact information. Browse the company’s website to find free customer service options such as online assistance, or an e-mail address for technical and/or tax law assistance. Direct specific questions about your individual tax return to the tax software company you are using. Contact the Free File company to resolve issues related to the company’s software. If you are not able to resolve your issue, try another Free File company’s software. 

Where do I enter the six-digit Identity Protection PIN?
If the IRS sent you a letter with an Identity Protection PIN, enter the six-digit PIN in the appropriate place in the Free File software you have selected. 

Where can I find answers to tax law questions? You can get answers to many questions on IRS.gov. Try the Interactive Tax Assistant, use Search in the upper right corner of IRS.gov, and check Tax Topics, Help and Resources and Individuals. If you still don’t find the answer to your question, call our toll-free tax assistance line at 1-800-829-1040 for individual tax questions or 1-800-829-4933 for business tax questions.

What can I do if I am not able to get into a Free File company from the IRS.gov website?
This problem may be due to your Internet service provider, your Internet security software and/or your IT department blocking expected information in the web request from your browser. This information is necessary to protect both you and IRS.gov systems from improper use such as phishing and other security threats. Unfortunately, due to the many differences between Internet browsers and individual computer configurations, we are unable to suggest Internet settings or configurations for you. Try selecting another company, use another computer or another browser. 

Does Free File use secure technologies?
Yes. We approve the Free File companies’ proprietary software. All Free File companies must get third-party privacy and security certificates. Taxpayers enter tax information in a secure session and the Free File companies transmit tax returns using secure technologies. In addition, the Free File tax software companies must comply with all federal rules governing e-filing and regulations covering taxpayer privacy. The companies may not disclose or use tax return information for purposes other than tax return preparation without the knowing, informed and voluntary consent of the taxpayer. These companies are also subject to the Federal Trade Commission Privacy and Safeguards Rules.

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Can a Free File company share my information with anybody besides the IRS?
No. As part of the agreement, the Free File Alliance companies must comply with our strict privacy standards. In accordance with Treasury regulations, the companies may not disclose your tax return information without your permission.

Page Last Reviewed or Updated: 16-Jan-2014

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Www. Www.taxact.com taxact. Www.taxact.com com Publication 503 - Main Content Table of Contents Tests To Claim the CreditQualifying Person Test Earned Income Test Work-Related Expense Test Joint Return Test Provider Identification Test How To Figure the CreditFiguring Total Work-Related Expenses Earned Income Limit Dollar Limit Amount of Credit How To Claim the CreditTax credit not refundable. Www.taxact.com Employment Taxes for Household Employers How To Get Tax HelpLow Income Taxpayer Clinics Tests To Claim the Credit To be able to claim the credit for child and dependent care expenses, you must file Form 1040, Form 1040A, or Form 1040NR, not Form 1040EZ or Form 1040NR-EZ, and meet all the following tests. Www.taxact.com The care must be for one or more qualifying persons who are identified on Form 2441. Www.taxact.com (See Qualifying Person Test. Www.taxact.com ) You (and your spouse if filing jointly) must have earned income during the year. Www.taxact.com (However, see Rule for student-spouse or spouse not able to care for self under Earned Income Test, later. Www.taxact.com ) You must pay child and dependent care expenses so you (and your spouse if filing jointly) can work or look for work. Www.taxact.com (See Work-Related Expense Test, later. Www.taxact.com ) You must make payments for child and dependent care to someone you (and your spouse) cannot claim as a dependent. Www.taxact.com If you make payments to your child, he or she cannot be your dependent and must be age 19 or older by the end of the year. Www.taxact.com You cannot make payments to: Your spouse, or The parent of your qualifying person if your qualifying person is your child and under age 13. Www.taxact.com See Payments to Relatives or Dependents under Work-Related Expense Test, later. Www.taxact.com Your filing status may be single, head of household, or qualifying widow(er) with dependent child. Www.taxact.com If you are married, you must file a joint return, unless an exception applies to you. Www.taxact.com See Joint Return Test, later. Www.taxact.com You must identify the care provider on your tax return. Www.taxact.com (See Provider Identification Test, later. Www.taxact.com ) If you exclude or deduct dependent care benefits provided by a dependent care benefit plan, the total amount you exclude or deduct must be less than the dollar limit for qualifying expenses (generally, $3,000 if one qualifying person was cared for or $6,000 if two or more qualifying persons were cared for). Www.taxact.com (If two or more qualifying persons were cared for, the amount you exclude or deduct will always be less than the dollar limit, since the total amount you can exclude or deduct is limited to $5,000. Www.taxact.com See Reduced Dollar Limit under How To Figure the Credit, later. Www.taxact.com ) These tests are presented in Figure A and are also explained in detail in this publication. Www.taxact.com Qualifying Person Test Your child and dependent care expenses must be for the care of one or more qualifying persons. Www.taxact.com A qualifying person is: Your qualifying child who is your dependent and who was under age 13 when the care was provided (but see Child of divorced or separated parents or parents living apart , later), Your spouse who was not physically or mentally able to care for himself or herself and lived with you for more than half the year, or A person who was not physically or mentally able to care for himself or herself, lived with you for more than half the year, and either: Was your dependent, or Would have been your dependent except that: He or she received gross income of $3,900 or more, He or she filed a joint return, or You, or your spouse if filing jointly, could be claimed as a dependent on someone else's 2013 return. Www.taxact.com Dependent defined. Www.taxact.com   A dependent is a person, other than you or your spouse, for whom you can claim an exemption. Www.taxact.com To be your dependent, a person must be your qualifying child (or your qualifying relative). Www.taxact.com Qualifying child. Www.taxact.com   To be your qualifying child, a child must live with you for more than half the year and meet other requirements. Www.taxact.com More information. Www.taxact.com   For more information about who is a dependent or a qualifying child, see Publication 501. Www.taxact.com Physically or mentally not able to care for oneself. Www.taxact.com   Persons who cannot dress, clean, or feed themselves because of physical or mental problems are considered not able to care for themselves. Www.taxact.com Also, persons who must have constant attention to prevent them from injuring themselves or others are considered not able to care for themselves. Www.taxact.com Person qualifying for part of year. Www.taxact.com   You determine a person's qualifying status each day. Www.taxact.com For example, if the person for whom you pay child and dependent care expenses no longer qualifies on September 16, count only those expenses through September 15. Www.taxact.com Also see Yearly limit under Dollar Limit, later. Www.taxact.com Birth or death of otherwise qualifying person. Www.taxact.com   In determining whether a person is a qualifying person, a person who was born or died in 2013 is treated as having lived with you for more than half of 2013 if your home was the person's home more than half the time he or she was alive in 2013. Www.taxact.com Taxpayer identification number. Www.taxact.com   You must include on your return the name and taxpayer identification number (generally the social security number) of the qualifying person(s). Www.taxact.com If the correct information is not shown, the credit may be reduced or disallowed. Www.taxact.com Individual taxpayer identification number (ITIN) for aliens. Www.taxact.com   If your qualifying person is a nonresident or resident alien who does not have and cannot get a social security number (SSN), use that person's ITIN. Www.taxact.com The ITIN is entered wherever an SSN is requested on a tax return. Www.taxact.com If the alien does not have an ITIN, he or she must apply for one. Www.taxact.com See Form W-7, Application for IRS Individual Taxpayer Identification Number, for details. Www.taxact.com   An ITIN is for tax use only. Www.taxact.com It does not entitle the holder to social security benefits or change the holder's employment or immigration status under U. Www.taxact.com S. Www.taxact.com law. Www.taxact.com Adoption taxpayer identification number (ATIN). Www.taxact.com   If your qualifying person is a child who was placed in your home for adoption and for whom you do not have an SSN, you must get an ATIN for the child. Www.taxact.com File Form W-7A, Application for Taxpayer Identification Number for Pending U. Www.taxact.com S. Www.taxact.com Adoptions. Www.taxact.com Child of divorced or separated parents or parents living apart. Www.taxact.com   Even if you cannot claim your child as a dependent, he or she is treated as your qualifying person if: The child was under age 13 or was not physically or mentally able to care for himself or herself, The child received over half of his or her support during the calendar year from one or both parents who are divorced or legally separated under a decree of divorce or separate maintenance, are separated under a written separation agreement, or lived apart at all times during the last 6 months of the calendar year, The child was in the custody of one or both parents for more than half the year, and You were the child's custodial parent. Www.taxact.com   The custodial parent is the parent with whom the child lived for the greater number of nights in 2013. Www.taxact.com If the child was with each parent for an equal number of nights, the custodial parent is the parent with the higher adjusted gross income. Www.taxact.com For details and an exception for a parent who works at night, see Publication 501. Www.taxact.com   The noncustodial parent cannot treat the child as a qualifying person even if that parent is entitled to claim the child as a dependent under the special rules for a child of divorced or separated parents. Www.taxact.com Please click here for the text description of the image. Www.taxact.com Figure a. Www.taxact.com Can you claim the credit Earned Income Test To claim the credit, you (and your spouse if filing jointly) must have earned income during the year. Www.taxact.com Earned income. Www.taxact.com   Earned income includes wages, salaries, tips, other taxable employee compensation, and net earnings from self-employment. Www.taxact.com A net loss from self-employment reduces earned income. Www.taxact.com Earned income also includes strike benefits and any disability pay you report as wages. Www.taxact.com   Generally, only taxable compensation is included. Www.taxact.com However, you can elect to include nontaxable combat pay in earned income. Www.taxact.com If you are filing a joint return and both you and your spouse received nontaxable combat pay, you can each make your own election. Www.taxact.com (In other words, if one of you makes the election, the other one can also make it but does not have to. Www.taxact.com ) Including this income will give you a larger credit only if your (or your spouse's) other earned income is less than the amount entered on line 3 of Form 2441. Www.taxact.com You should figure your credit both ways and make the election if it gives you a greater tax benefit. Www.taxact.com    You can choose to include your nontaxable combat pay in earned income when figuring your credit for child and dependent care expenses, even if you choose not to include it in earned income for the earned income credit or the exclusion or deduction for dependent care benefits. Www.taxact.com Members of certain religious faiths opposed to social security. Www.taxact.com   This section is for persons who are members of certain religious faiths that are opposed to participation in Social Security Act programs and have an IRS-approved form that exempts certain income from social security and Medicare taxes. Www.taxact.com These forms are: Form 4361, Application for Exemption From Self-Employment Tax for Use by Ministers, Members of Religious Orders and Christian Science Practitioners, and Form 4029, Application for Exemption From Social Security and Medicare Taxes and Waiver of Benefits, for use by members of recognized religious groups. Www.taxact.com   Each form is discussed here in terms of what is or is not earned income for purposes of the child and dependent care credit. Www.taxact.com For information on the use of these forms, see Publication 517, Social Security and Other Information for Members of the Clergy and Religious Workers. Www.taxact.com Form 4361. Www.taxact.com   Whether or not you have an approved Form 4361, amounts you received for performing ministerial duties as an employee are earned income. Www.taxact.com This includes wages, salaries, tips, and other taxable employee compensation. Www.taxact.com   However, amounts you received for ministerial duties, but not as an employee, do not count as earned income. Www.taxact.com Examples include fees for performing marriages and honoraria for delivering speeches. Www.taxact.com   Any amount you received for work that is not related to your ministerial duties is earned income. Www.taxact.com Form 4029. Www.taxact.com   Whether or not you have an approved Form 4029, all wages, salaries, tips, and other taxable employee compensation are earned income. Www.taxact.com   However, amounts you received as a self-employed individual do not count as earned income. Www.taxact.com What is not earned income?   Earned income does not include: Pensions and annuities, Social security and railroad retirement benefits, Workers' compensation, Interest and dividends, Unemployment compensation, Scholarships or fellowship grants, except for those reported on Form W-2 and paid to you for teaching or other services, Nontaxable workfare payments, Child support payments received, Income of a nonresident alien that is not effectively connected with a U. Www.taxact.com S. Www.taxact.com trade or business, or Any amount received for work while an inmate in a penal institution. Www.taxact.com Rule for student-spouse or spouse not able to care for self. Www.taxact.com   Your spouse is treated as having earned income for any month that he or she is: A full-time student, or Physically or mentally not able to care for himself or herself. Www.taxact.com (Your spouse also must live with you for more than half the year. Www.taxact.com )   If you are filing a joint return, this rule also applies to you. Www.taxact.com You can be treated as having earned income for any month you are a full-time student or not able to care for yourself. Www.taxact.com   Figure the earned income of the nonworking spouse, described under (1) or (2) above, as shown under Earned Income Limit under How To Figure the Credit, later. Www.taxact.com   This rule applies to only one spouse for any one month. Www.taxact.com If, in the same month, both you and your spouse do not work and are either full-time students or not physically or mentally able to care for yourselves, only one of you can be treated as having earned income in that month. Www.taxact.com Full-time student. Www.taxact.com    You are a full-time student if you are enrolled at a school for the number of hours or classes that the school considers full time. Www.taxact.com You must have been a full-time student for some part of each of 5 calendar months during the year. Www.taxact.com (The months need not be consecutive. Www.taxact.com ) School. Www.taxact.com   The term “school” includes high schools, colleges, universities, and technical, trade, and mechanical schools. Www.taxact.com A school does not include an on-the-job training course, correspondence school, or school offering courses only through the Internet. Www.taxact.com Work-Related Expense Test Child and dependent care expenses must be work-related to qualify for the credit. Www.taxact.com Expenses are considered work-related only if both of the following are true. Www.taxact.com They allow you (and your spouse if filing jointly) to work or look for work. Www.taxact.com They are for a qualifying person's care. Www.taxact.com Working or Looking for Work To be work-related, your expenses must allow you to work or look for work. Www.taxact.com If you are married, generally both you and your spouse must work or look for work. Www.taxact.com One spouse is treated as working during any month he or she is a full-time student or is not physically or mentally able to care for himself or herself. Www.taxact.com Your work can be for others or in your own business or partnership. Www.taxact.com It can be either full time or part time. Www.taxact.com Work also includes actively looking for work. Www.taxact.com However, if you do not find a job and have no earned income for the year, you cannot take this credit. Www.taxact.com See Earned Income Test, earlier. Www.taxact.com An expense is not considered work-related merely because you had it while you were working. Www.taxact.com The purpose of the expense must be to allow you to work. Www.taxact.com Whether your expenses allow you to work or look for work depends on the facts. Www.taxact.com Example 1. Www.taxact.com The cost of a babysitter while you and your spouse go out to eat is not normally a work-related expense. Www.taxact.com Example 2. Www.taxact.com You work during the day. Www.taxact.com Your spouse works at night and sleeps during the day. Www.taxact.com You pay for care of your 5-year-old child during the hours when you are working and your spouse is sleeping. Www.taxact.com Your expenses are considered work-related. Www.taxact.com Volunteer work. Www.taxact.com   For this purpose, you are not considered to be working if you do unpaid volunteer work or volunteer work for a nominal salary. Www.taxact.com Work for part of year. Www.taxact.com   If you work or actively look for work during only part of the period covered by the expenses, then you must figure your expenses for each day. Www.taxact.com For example, if you work all year and pay care expenses of $250 a month ($3,000 for the year), all the expenses are work related. Www.taxact.com However, if you work or look for work for only 2 months and 15 days during the year and pay expenses of $250 a month, your work-related expenses are limited to $625 (2½ months × $250). Www.taxact.com Temporary absence from work. Www.taxact.com   You do not have to figure your expenses for each day during a short, temporary absence from work, such as for vacation or a minor illness, if you have to pay for care anyway. Www.taxact.com Instead, you can figure your credit including the expenses you paid for the period of absence. Www.taxact.com   An absence of 2 weeks or less is a short, temporary absence. Www.taxact.com An absence of more than 2 weeks may be considered a short, temporary absence, depending on the circumstances. Www.taxact.com Example. Www.taxact.com You pay a nanny to care for your 2-year-old son and 4-year-old daughter so you can work. Www.taxact.com You become ill and miss 4 months of work but receive sick pay. Www.taxact.com You continue to pay the nanny to care for the children while you are ill. Www.taxact.com Your absence is not a short, temporary absence, and your expenses are not considered work-related. Www.taxact.com Part-time work. Www.taxact.com   If you work part-time, you generally must figure your expenses for each day. Www.taxact.com However, if you have to pay for care weekly, monthly, or in another way that includes both days worked and days not worked, you can figure your credit including the expenses you paid for days you did not work. Www.taxact.com Any day when you work at least 1 hour is a day of work. Www.taxact.com Example 1. Www.taxact.com You work 3 days a week. Www.taxact.com While you work, your 6-year-old child attends a dependent care center, which complies with all state and local regulations. Www.taxact.com You can pay the center $150 for any 3 days a week or $250 for 5 days a week. Www.taxact.com Your child attends the center 5 days a week. Www.taxact.com Your work-related expenses are limited to $150 a week. Www.taxact.com Example 2. Www.taxact.com The facts are the same as in Example 1 except the center does not offer a 3-day option. Www.taxact.com The entire $250 weekly fee may be a work-related expense. Www.taxact.com Care of a Qualifying Person To be work-related, your expenses must be to provide care for a qualifying person. Www.taxact.com You do not have to choose the least expensive way of providing the care. Www.taxact.com The cost of a paid care provider may be an expense for the care of a qualifying person even if another care provider is available at no cost. Www.taxact.com Expenses are for the care of a qualifying person only if their main purpose is the person's well-being and protection. Www.taxact.com Expenses for household services qualify if part of the services is for the care of qualifying persons. Www.taxact.com See Household Services, later. Www.taxact.com Expenses not for care. Www.taxact.com   Expenses for care do not include amounts you pay for food, lodging, clothing, education, and entertainment. Www.taxact.com However, you can include small amounts paid for these items if they are incidental to and cannot be separated from the cost of caring for the qualifying person. Www.taxact.com Otherwise, see the discussion of Expenses partly work-related, later. Www.taxact.com   Child support payments are not for care and do not qualify for the credit. Www.taxact.com Education. Www.taxact.com   Expenses for a child in nursery school, preschool, or similar programs for children below the level of kindergarten are expenses for care. Www.taxact.com   Expenses to attend kindergarten or a higher grade are not expenses for care. Www.taxact.com Do not use these expenses to figure your credit. Www.taxact.com   However, expenses for before- or after-school care of a child in kindergarten or a higher grade may be expenses for care. Www.taxact.com   Summer school and tutoring programs are not for care. Www.taxact.com Example 1. Www.taxact.com You take your 3-year-old child to a nursery school that provides lunch and a few educational activities as part of its preschool childcare service. Www.taxact.com The lunch and educational activities are incidental to the childcare, and their cost cannot be separated from the cost of care. Www.taxact.com You can count the total cost when you figure the credit. Www.taxact.com Example 2. Www.taxact.com You place your 10-year-old child in a boarding school so you can work full time. Www.taxact.com Only the part of the boarding school expense that is for the care of your child is a work-related expense. Www.taxact.com You can count that part of the expense in figuring your credit if it can be separated from the cost of education. Www.taxact.com You cannot count any part of the amount you pay the school for your child's education. Www.taxact.com Care outside your home. Www.taxact.com   You can count the cost of care provided outside your home if the care is for your dependent under age 13 or any other qualifying person who regularly spends at least 8 hours each day in your home. Www.taxact.com Dependent care center. Www.taxact.com   You can count care provided outside your home by a dependent care center only if the center complies with all state and local regulations that apply to these centers. Www.taxact.com   A dependent care center is a place that provides care for more than six persons (other than persons who live there) and receives a fee, payment, or grant for providing services for any of those persons, even if the center is not run for profit. Www.taxact.com Camp. Www.taxact.com   The cost of sending your child to an overnight camp is not considered a work-related expense. Www.taxact.com    The cost of sending your child to a day camp may be a work-related expense, even if the camp specializes in a particular activity, such as computers or soccer. Www.taxact.com Transportation. Www.taxact.com   If a care provider takes a qualifying person to or from a place where care is provided, that transportation is for the care of the qualifying person. Www.taxact.com This includes transportation by bus, subway, taxi, or private car. Www.taxact.com However, transportation not provided by a care provider is not for the care of a qualifying person. Www.taxact.com Also, if you pay the transportation cost for the care provider to come to your home, that expense is not for care of a qualifying person. Www.taxact.com Fees and deposits. Www.taxact.com   Fees you paid to an agency to get the services of a care provider, deposits you paid to an agency or preschool, application fees, and other indirect expenses are work-related expenses if you have to pay them to get care, even though they are not directly for care. Www.taxact.com However, a forfeited deposit is not for the care of a qualifying person if care is not provided. Www.taxact.com Example 1. Www.taxact.com You paid a fee to an agency to get the services of the nanny who cares for your 2-year-old daughter while you work. Www.taxact.com The fee you paid is a work-related expense. Www.taxact.com Example 2. Www.taxact.com You placed a deposit with a preschool to reserve a place for your 3-year-old child. Www.taxact.com You later sent your child to a different preschool and forfeited the deposit. Www.taxact.com The forfeited deposit is not for care and so is not a work-related expense. Www.taxact.com Household Services Expenses you pay for household services meet the work-related expense test if they are at least partly for the well-being and protection of a qualifying person. Www.taxact.com Definition. Www.taxact.com   Household services are ordinary and usual services done in and around your home that are necessary to run your home. Www.taxact.com They include the services of a housekeeper, maid, or cook. Www.taxact.com However, they do not include the services of a chauffeur, bartender, or gardener. Www.taxact.com Housekeeper. Www.taxact.com   In this publication, the term housekeeper refers to any household employee whose services include the care of a qualifying person. Www.taxact.com Expenses partly work-related. Www.taxact.com   If part of an expense is work-related (for either household services or the care of a qualifying person) and part is for other purposes, you have to divide the expense. Www.taxact.com To figure your credit, count only the part that is work-related. Www.taxact.com However, you do not have to divide the expense if only a small part is for other purposes. Www.taxact.com Example. Www.taxact.com You pay a housekeeper to care for your 9-year-old and 15-year-old children so you can work. Www.taxact.com The housekeeper spends most of the time doing normal household work and spends 30 minutes a day driving you to and from work. Www.taxact.com You do not have to divide the expenses. Www.taxact.com You can treat the entire expense of the housekeeper as work-related because the time spent driving is minimal. Www.taxact.com Nor do you have to divide the expenses between the two children, even though the expenses are partly for the 15-year-old child who is not a qualifying person, because the expense is also partly for the care of your 9-year-old child, who is a qualifying person. Www.taxact.com However, the dollar limit (discussed later) is based on one qualifying person, not two. Www.taxact.com Meals and lodging provided for housekeeper. Www.taxact.com   If you have expenses for meals that your housekeeper eats in your home because of his or her employment, count these as work-related expenses. Www.taxact.com If you have extra expenses for providing lodging in your home to the housekeeper, count these as work-related expenses also. Www.taxact.com Example. Www.taxact.com To provide lodging to the housekeeper, you move to an apartment with an extra bedroom. Www.taxact.com You can count the extra rent and utility expenses for the housekeeper's bedroom as work-related. Www.taxact.com However, if your housekeeper moves into an existing bedroom in your home, you can count only the extra utility expenses as work-related. Www.taxact.com Taxes paid on wages. Www.taxact.com   The taxes you pay on wages for qualifying child and dependent care services are work-related expenses. Www.taxact.com For more information on a household employer's tax responsibilities, see Employment Taxes for Household Employers, later. Www.taxact.com Payments to Relatives or Dependents You can count work-related payments you make to relatives who are not your dependents, even if they live in your home. Www.taxact.com However, do not count any amounts you pay to: A dependent for whom you (or your spouse if filing jointly) can claim an exemption, Your child who was under age 19 at the end of the year, even if he or she is not your dependent, A person who was your spouse any time during the year, or The parent of your qualifying person if your qualifying person is your child and under age 13. Www.taxact.com Joint Return Test Generally, married couples must file a joint return to take the credit. Www.taxact.com However, if you are legally separated or living apart from your spouse, you may be able to file a separate return and still take the credit. Www.taxact.com Legally separated. Www.taxact.com   You are not considered married if you are legally separated from your spouse under a decree of divorce or separate maintenance. Www.taxact.com You may be eligible to take the credit on your return using head of household filing status. Www.taxact.com Married and living apart. Www.taxact.com   You are not considered married and are eligible to take the credit if all the following apply. Www.taxact.com You file a return apart from your spouse. Www.taxact.com Your home is the home of a qualifying person for more than half the year. Www.taxact.com You pay more than half the cost of keeping up your home for the year. Www.taxact.com Your spouse does not live in your home for the last 6 months of the year. Www.taxact.com Costs of keeping up a home. Www.taxact.com   The costs of keeping up a home normally include property taxes, mortgage interest, rent, utility charges, home repairs, insurance on the home, and food eaten at home. Www.taxact.com   The costs of keeping up a home do not include payments for clothing, education, medical treatment, vacations, life insurance, transportation, or mortgage principal. Www.taxact.com   They also do not include the purchase, permanent improvement, or replacement of property. Www.taxact.com For example, you cannot include the cost of replacing a water heater. Www.taxact.com However, you can include the cost of repairing a water heater. Www.taxact.com Death of spouse. Www.taxact.com   If your spouse died during the year and you do not remarry before the end of the year, you generally must file a joint return to take the credit. Www.taxact.com If you do remarry before the end of the year, the credit can be claimed on your deceased spouse's own return. Www.taxact.com Provider Identification Test You must identify all persons or organizations that provide care for your child or dependent. Www.taxact.com Use Form 2441, Part I, to show the information. Www.taxact.com If you do not have any care providers and you are filing Form 2441 only to report taxable income in Part III, enter “none” in line 1, column (a). Www.taxact.com Information needed. Www.taxact.com   To identify the care provider, you must give the provider's: Name, Address, and Taxpayer identification number. Www.taxact.com    If the care provider is an individual, the taxpayer identification number is his or her social security number or individual taxpayer identification number. Www.taxact.com If the care provider is an organization, then it is the employer identification number (EIN). Www.taxact.com   You do not have to show the taxpayer identification number if the care provider is a tax-exempt organization (such as a church or school). Www.taxact.com In this case, enter “Tax-Exempt” in the space where Form 2441 asks for the number. Www.taxact.com   If you cannot provide all of the information or the information is incorrect, you must be able to show that you used due diligence (discussed later) in trying to furnish the necessary information. Www.taxact.com Getting the information. Www.taxact.com    You can use Form W-10, Dependent Care Provider's Identification and Certification, to request the required information from the care provider. Www.taxact.com If you do not use Form W-10, you can get the information from one of the other sources listed in the instructions for Form W-10, including: A copy of the provider's social security card, A copy of the provider's completed Form W-4, Employee's Withholding Allowance Certificate, if he or she is your household employee, A copy of the statement furnished by your employer if the provider is your employer's dependent care plan, or A letter or invoice from the provider if it shows the necessary information. Www.taxact.com    You should keep this information with your tax records. Www.taxact.com Do not send Form W-10 (or other document containing this information) to the Internal Revenue Service. Www.taxact.com Due diligence. Www.taxact.com   If the care provider information you give is incorrect or incomplete, your credit may not be allowed. Www.taxact.com However, if you can show that you used due diligence in trying to supply the information, you can still claim the credit. Www.taxact.com   You can show due diligence by getting and keeping the provider's completed Form W-10 or one of the other sources of information just listed. Www.taxact.com Care providers can be penalized if they do not provide this information to you or if they provide incorrect information. Www.taxact.com Provider refusal. Www.taxact.com    If the provider refuses to give you the identifying information, you should report on Form 2441 whatever information you have (such as the name and address). Www.taxact.com Enter “See Attached Statement” in the columns calling for the information you do not have. Www.taxact.com Then attach a statement explaining that you requested the information from the care provider, but the provider did not give you the information. Www.taxact.com Be sure to write your name and social security number on this statement. Www.taxact.com The statement will show that you used due diligence in trying to furnish the necessary information. Www.taxact.com U. Www.taxact.com S. Www.taxact.com citizens and resident aliens living abroad. Www.taxact.com   If you are living abroad, your care provider may not have, and may not be required to get, a U. Www.taxact.com S. Www.taxact.com taxpayer identification number (for example, an SSN or an EIN). Www.taxact.com If so, enter “LAFCP” (Living Abroad Foreign Care Provider) in the space for the care provider's taxpayer identification number. Www.taxact.com How To Figure the Credit Your credit is a percentage of your work-related expenses. Www.taxact.com Your expenses are subject to the earned income limit and the dollar limit. Www.taxact.com The percentage is based on your adjusted gross income. Www.taxact.com Figuring Total Work-Related Expenses To figure the credit for 2013 work-related expenses, count only those you paid by December 31, 2013. Www.taxact.com Expenses prepaid in an earlier year. Www.taxact.com   If you pay for services before they are provided, you can count the prepaid expenses only in the year the care is received. Www.taxact.com Claim the expenses for the later year as if they were actually paid in that later year. Www.taxact.com Expenses not paid until the following year. Www.taxact.com   Do not count 2012 expenses that you paid in 2013 as work-related expenses for 2013. Www.taxact.com You may be able to claim an additional credit for them on your 2013 return, but you must figure it separately. Www.taxact.com See Payments for prior year's expenses under Amount of Credit, later. Www.taxact.com If you had expenses in 2013 that you did not pay until 2014, you cannot count them when figuring your 2013 credit. Www.taxact.com You may be able to claim a credit for them on your 2014 return. Www.taxact.com Expenses reimbursed. Www.taxact.com   If a state social services agency pays you a nontaxable amount to reimburse you for some of your child and dependent care expenses, you cannot count the expenses that are reimbursed as work-related expenses. Www.taxact.com Example. Www.taxact.com You paid work-related expenses of $3,000. Www.taxact.com You are reimbursed $2,000 by a state social services agency. Www.taxact.com You can use only $1,000 to figure your credit. Www.taxact.com Medical expenses. Www.taxact.com   Some expenses for the care of qualifying persons who are not able to care for themselves may qualify as work-related expenses and also as medical expenses. Www.taxact.com You can use them either way, but you cannot use the same expenses to claim both a credit and a medical expense deduction. Www.taxact.com   If you use these expenses to figure the credit and they are more than the earned income limit or the dollar limit, discussed later, you can add the excess to your medical expenses. Www.taxact.com However, if you use your total expenses to figure your medical expense deduction, you cannot use any part of them to figure your credit. Www.taxact.com For information on medical expenses, see Publication 502, Medical and Dental Expenses. Www.taxact.com    Amounts excluded from your income under your employer's dependent care benefits plan cannot be used to claim a medical expense deduction. Www.taxact.com Dependent Care Benefits If you receive dependent care benefits, your dollar limit for purposes of the credit may be reduced. Www.taxact.com See Reduced Dollar Limit, later. Www.taxact.com But, even if you cannot take the credit, you may be able to take an exclusion or deduction for the dependent care benefits. Www.taxact.com Dependent care benefits. Www.taxact.com    Dependent care benefits include: Amounts your employer paid directly to either you or your care provider for the care of your qualifying person while you work, The fair market value of care in a daycare facility provided or sponsored by your employer, and Pre-tax contributions you made under a dependent care flexible spending arrangement. Www.taxact.com Your salary may have been reduced to pay for these benefits. Www.taxact.com If you received benefits as an employee, they should be shown in box 10 of your Form W-2, Wage and Tax Statement. Www.taxact.com See Statement for employee, later. Www.taxact.com Benefits you received as a partner should be shown in box 13 of your Schedule K-1 (Form 1065) with code O. Www.taxact.com   Enter the amount of these benefits on Form 2441, Part III, line 12. Www.taxact.com Exclusion or deduction. Www.taxact.com   If your employer provides dependent care benefits under a qualified plan, you may be able to exclude these benefits from your income. Www.taxact.com Your employer can tell you whether your benefit plan qualifies. Www.taxact.com To claim the exclusion, you must complete Part III of Form 2441. Www.taxact.com You cannot use Form 1040EZ. Www.taxact.com   If you are self-employed and receive benefits from a qualified dependent care benefit plan, you are treated as both employer and employee. Www.taxact.com Therefore, you would not get an exclusion from wages. Www.taxact.com Instead, you would get a deduction on Form 1040, Schedule C, line 14; Schedule E, line 19 or 28; or Schedule F, line 15. Www.taxact.com To claim the deduction, you must use Form 2441. Www.taxact.com   The amount you can exclude or deduct is limited to the smallest of: The total amount of dependent care benefits you received during the year, The total amount of qualified expenses you incurred during the year, Your earned income, Your spouse's earned income, or $5,000 ($2,500 if married filing separately). Www.taxact.com   The definition of earned income for the exclusion or deduction is the same as the definition used when figuring the credit except that earned income for the exclusion or deduction does not include any dependent care benefits you receive. Www.taxact.com    You can choose to include your nontaxable combat pay in earned income when figuring your exclusion or deduction, even if you choose not to include it in earned income for the earned income credit or the credit for child and dependent care expenses. Www.taxact.com Statement for employee. Www.taxact.com   Your employer must give you a Form W-2 (or similar statement), showing in box 10 the total amount of dependent care benefits provided to you during the year under a qualified plan. Www.taxact.com Your employer will also include any dependent care benefits over $5,000 in your wages shown on your Form W-2 in box 1. Www.taxact.com Effect of exclusion on credit. Www.taxact.com   If you exclude dependent care benefits from your income, the amount of the excluded benefits: Is not included in your work-related expenses, and Reduces the dollar limit, discussed later. Www.taxact.com Earned Income Limit The amount of work-related expenses you use to figure your credit cannot be more than: Your earned income for the year, if you are single at the end of the year, or The smaller of your or your spouse's earned income for the year if you are married at the end of the year. Www.taxact.com Earned income for the purpose of figuring the credit is defined under Earned Income Test, earlier. Www.taxact.com For purposes of item (2), use your spouse's earned income for the entire year, even if you were married for only part of the year. Www.taxact.com Example. Www.taxact.com You remarried on December 3. Www.taxact.com Your earned income for the year was $18,000. Www.taxact.com Your new spouse's earned income for the year was $2,000. Www.taxact.com You paid work-related expenses of $3,000 for the care of your 5-year-old child and qualified to claim the credit. Www.taxact.com The amount of expenses you use to figure your credit cannot be more than $2,000 (the smaller of your earned income or that of your spouse). Www.taxact.com Separated spouse. Www.taxact.com   If you are legally separated or married and living apart from your spouse (as described under Joint Return Test, earlier), you are not considered married for purposes of the earned income limit. Www.taxact.com Use only your income in figuring the earned income limit. Www.taxact.com Surviving spouse. Www.taxact.com   If your spouse died during the year and you file a joint return as a surviving spouse, you may, but are not required to, take into account the earned income of your spouse who died during the year. Www.taxact.com Community property laws. Www.taxact.com   Disregard community property laws when you figure earned income for this credit. Www.taxact.com Self-employment earnings. Www.taxact.com   If you are self-employed, include your net earnings in earned income. Www.taxact.com For purposes of the child and dependent care credit, net earnings from self-employment generally means the amount from Schedule SE (either Section A or Section B), line 3, minus any deduction for self-employment tax on Form 1040 or Form 1040NR, line 27. Www.taxact.com Include your self-employment earnings in earned income, even if they are less than $400 and you did not file Schedule SE. Www.taxact.com Clergy or church employee. Www.taxact.com   If you are a member of the clergy or a church employee, see the Instructions for Form 2441 for details. Www.taxact.com Statutory employee. Www.taxact.com   If you filed Schedule C (Form 1040) or C-EZ (Form 1040) to report income as a statutory employee, also include as earned income the amount from line 1 of that Schedule C (Form 1040) or C-EZ (Form 1040). Www.taxact.com Net loss. Www.taxact.com   You must reduce your earned income by any net loss from self-employment. Www.taxact.com Optional method if earnings are low or a net loss. Www.taxact.com   If your net earnings from self-employment are low or you have a net loss, you may be able to figure your net earnings by using an optional method instead of the regular method. Www.taxact.com Get Publication 334, Tax Guide for Small Business, for details. Www.taxact.com If you use an optional method to figure net earnings for self-employment tax purposes, include those net earnings in your earned income for this credit. Www.taxact.com In this case, subtract any deduction you claimed on Form 1040 or Form 1040NR, line 27, from the total of the amounts on Schedule SE, Section B, lines 3 and 4b, to figure your net earnings. Www.taxact.com You or your spouse is a student or not able to care for self. Www.taxact.com   Your spouse who is either a full-time student or not able to care for himself or herself is treated as having earned income. Www.taxact.com His or her earned income for each month is considered to be at least $250 if there is one qualifying person in your home, or at least $500 if there are two or more. Www.taxact.com Spouse works. Www.taxact.com   If your spouse works during that month, use the higher of $250 (or $500) or his or her actual earned income for that month. Www.taxact.com Spouse qualifies for part of month. Www.taxact.com   If your spouse is a full-time student or not able to care for himself or herself for only part of a month, the full $250 (or $500) still applies for that month. Www.taxact.com You are a student or not able to care for self. Www.taxact.com   These rules also apply if you are a student or not able to care for yourself and are filing a joint return. Www.taxact.com For each month or part of a month you are a student or not able to care for yourself, your earned income is considered to be at least $250 (or $500). Www.taxact.com If you also work during that month, use the higher of $250 (or $500) or your actual earned income for that month. Www.taxact.com Both spouses qualify. Www.taxact.com   If, in the same month, both you and your spouse are either full-time students or not able to care for yourselves, only one spouse can be considered to have this earned income of $250 (or $500) for that month. Www.taxact.com Example. Www.taxact.com Jim works and keeps up a home for himself and his wife Sharon. Www.taxact.com Because of an accident, Sharon is not able to care for herself for 11 months during the tax year. Www.taxact.com During the 11 months, Jim pays $3,300 of work-related expenses for Sharon's care. Www.taxact.com These expenses also qualify as medical expenses. Www.taxact.com Their adjusted gross income is $29,000 and the entire amount is Jim's earned income. Www.taxact.com Jim and Sharon's earned income limit is the smallest of the following amounts. Www.taxact.com   Jim and Sharon's Earned Income Limit   1) Work-related expenses Jim paid $   3,300   2) Jim's earned income $   29,000   3) Income considered earned by Sharon (11 × $250) $    2,750   Jim and Sharon can use $2,750 to figure the credit and treat the balance of $550 ($3,300 − $2,750) as a medical expense. Www.taxact.com However, if they use the $3,300 first as a medical expense, they cannot use any part of that amount to figure the credit. Www.taxact.com Dollar Limit There is a dollar limit on the amount of your work-related expenses you can use to figure the credit. Www.taxact.com This limit is $3,000 for one qualifying person, or $6,000 for two or more qualifying persons. Www.taxact.com If you paid work-related expenses for the care of two or more qualifying persons, the applicable dollar limit is $6,000. Www.taxact.com This limit does not need to be divided equally among them. Www.taxact.com For example, if your work-related expenses for the care of one qualifying person are $3,200 and your work-related expenses for another qualifying person are $2,800, you can use the total, $6,000, when figuring the credit. Www.taxact.com Yearly limit. Www.taxact.com   The dollar limit is a yearly limit. Www.taxact.com The amount of the dollar limit remains the same no matter how long, during the year, you have a qualifying person in your household. Www.taxact.com Use the $3,000 limit if you paid work-related expenses for the care of one qualifying person at any time during the year. Www.taxact.com Use $6,000 if you paid work-related expenses for the care of more than one qualifying person at any time during the year. Www.taxact.com Example 1. Www.taxact.com You pay $500 a month for after-school care for your son. Www.taxact.com He turned 13 on May 1 and is no longer a qualifying person. Www.taxact.com You can use the $2,000 of expenses for his care January through April to figure your credit because it is not more than the $3,000 yearly limit. Www.taxact.com Example 2. Www.taxact.com In July of this year, to permit your spouse to begin a new job, you enrolled your 3-year-old daughter in a nursery school that provides preschool childcare. Www.taxact.com You paid $300 per month for the childcare. Www.taxact.com You can use the full $1,800 you paid ($300 × 6 months) as qualified expenses because it is not more than the $3,000 yearly limit. Www.taxact.com Reduced Dollar Limit If you received dependent care benefits that you exclude or deduct from your income, you must subtract that amount from the dollar limit that applies to you. Www.taxact.com Your reduced dollar limit is figured on Form 2441, Part III. Www.taxact.com See Dependent Care Benefits, earlier, for information on excluding or deducting these benefits. Www.taxact.com Example 1. Www.taxact.com George is a widower with one child and earns $24,000 a year. Www.taxact.com He pays work-related expenses of $2,900 for the care of his 4-year-old child and qualifies to claim the credit for child and dependent care expenses. Www.taxact.com His employer pays an additional $1,000 under a qualified dependent care benefit plan. Www.taxact.com This $1,000 is excluded from George's income. Www.taxact.com Although the dollar limit for his work-related expenses is $3,000 (one qualifying person), George figures his credit on only $2,000 of the $2,900 work-related expenses he paid. Www.taxact.com This is because his dollar limit is reduced as shown next. Www.taxact.com   George's Reduced Dollar Limit 1) Maximum allowable expenses for one qualifying person $3,000 2) Minus: Dependent care benefits George excludes from income −1,000 3) Reduced dollar limit on expenses George can use for the credit $2,000 Example 2. Www.taxact.com Randall is married and both he and his wife are employed. Www.taxact.com Each has earned income in excess of $6,000. Www.taxact.com They have two children, Anne and Andy, ages 2 and 4, who attend a daycare facility licensed and regulated by the state. Www.taxact.com Randall's work-related expenses are $6,000 for the year. Www.taxact.com Randall's employer has a dependent care assistance program as part of its cafeteria plan, which allows employees to make pre-tax contributions to a dependent care flexible spending arrangement. Www.taxact.com Randall has elected to take the maximum $5,000 exclusion from his salary to cover dependent care expenses through this program. Www.taxact.com Although the dollar limit for his work-related expenses is $6,000 (two or more qualifying persons), Randall figures his credit on only $1,000 of the $6,000 work-related expense paid. Www.taxact.com This is because his dollar limit is reduced as shown next. Www.taxact.com   Randall's Reduced Dollar Limit 1) Maximum allowable expenses for two qualifying persons $6,000 2) Minus: Dependent care benefits selected from employer's cafeteria plan and  excluded from Randall's income −5,000 3) Reduced dollar limit on work-related expenses Randall can use for the credit $1,000 Amount of Credit To determine the amount of your credit, multiply your work-related expenses (after applying the earned income and dollar limits) by a percentage. Www.taxact.com This percentage depends on your adjusted gross income shown on Form 1040, line 38; Form 1040A, line 22; or Form 1040NR, line 37. Www.taxact.com The following table shows the percentage to use based on adjusted gross income. Www.taxact.com   IF your adjusted gross income is: THEN the       Over:       But not over:   percentage is:       $0   —   $15,000   35%       15,000   —   17,000   34%       17,000   —   19,000   33%       19,000   —   21,000   32%       21,000   —   23,000   31%       23,000   —   25,000   30%       25,000   —   27,000   29%       27,000   —   29,000   28%       29,000   —   31,000   27%       31,000   —   33,000   26%       33,000   —   35,000   25%       35,000   —   37,000   24%       37,000   —   39,000   23%       39,000   —   41,000   22%       41,000   —   43,000   21%       43,000   —   No limit   20%   To qualify for the credit, you must have one or more qualifying persons. Www.taxact.com You should show the expenses for each person on Form 2441, line 2, column (c). Www.taxact.com However, it is possible a qualifying person could have no expenses and a second qualifying person could have expenses exceeding $3,000. Www.taxact.com You should list -0- for the one person and the actual amount for the second person. Www.taxact.com The $6,000 limit that applies to two or more qualifying persons would still be used to compute your credit unless you already excluded or deducted, in Part III of Form 2441, certain dependent care benefits paid to you (or on your behalf) by your employer. Www.taxact.com Example. Www.taxact.com Roger and Megan Paris have two qualifying children. Www.taxact.com They received $1,000 of dependent care benefits from Megan's employer during 2013, but they incurred a total of $19,500 of child and dependent care expenses. Www.taxact.com They complete Part III of Form 2441 to exclude the $1,000 from their taxable income (offsetting $1,000 of their expenses). Www.taxact.com Roger and Megan continue to line 27 to figure their credit using the remaining $18,500 of expenses. Www.taxact.com Line 30 tells them to complete line 2 without including any dependent care benefits. Www.taxact.com They complete line 2 of Form 2441, listing both Susan and James, as shown in the Line 2 example above. Www.taxact.com Line 2 Example (a) Qualifying person's name (b) Qualifying person's social security number (c) Qualified expenses you incurred and paid in 2013 for the person listed in column (a) First Last Susan Paris 123-00-6789 -0- James Paris 987-00-4321 18,500. Www.taxact.com 00 All of Susan's expenses were covered by the $1,000 of employer-provided dependent care benefits. Www.taxact.com However, their son James has special needs and they paid $18,500 for his care. Www.taxact.com Line 3 imposes a $5,000 limit for two or more children ($6,000 limit, minus $1,000 already excluded from income = $5,000) and Roger and Megan continue to complete the form. Www.taxact.com Even though line 2 indicates one of the Paris children did not have any dependent care expenses, it does not change the fact that they had two qualifying children for the purposes of Form 2441. Www.taxact.com Payments for prior year's expenses. Www.taxact.com   If you had work-related expenses in 2012 that you paid in 2013, you may be able to increase the credit on your 2013 return. Www.taxact.com Attach a statement to your form showing how you figured the additional amount from 2012. Www.taxact.com Then enter “CPYE” (Credit for Prior Year Expenses) and the amount of the credit on the dotted line next to line 9 on Form 2441. Www.taxact.com Also enter the name and taxpayer identification number of the person for whom you paid the prior year's expenses. Www.taxact.com Then add this credit to the amount on line 9, and replace the amount on line 9 with the total. Www.taxact.com See Worksheet A. Www.taxact.com Example. Www.taxact.com In 2012, Sam and Kate had childcare expenses of $2,600 for their 12-year-old child. Www.taxact.com Of the $2,600, they paid $2,000 in 2012 and $600 in 2013. Www.taxact.com Their adjusted gross income for 2012 was $30,000. Www.taxact.com Sam's earned income of $14,000 was less than Kate's earned income. Www.taxact.com A credit for their 2012 expenses paid in 2013 is not allowed in 2012. Www.taxact.com It is allowed for the 2013 tax year, but they must use their adjusted gross income for 2012 to compute the amount. Www.taxact.com The filled-in Worksheet A they used to figure this credit is shown later. Www.taxact.com Sam and Kate add the $162 from line 13 of this worksheet to their 2013 credit and enter the total on their Form 2441, line 9. Www.taxact.com They enter “CPYE $162” and their child's name and SSN in the space to the left of line 9. Www.taxact.com Worksheet A. Www.taxact.com Worksheet for 2012 Expenses Paid in 2013 Use this worksheet to figure the credit you may claim for 2012 expenses paid in 2013. Www.taxact.com 1. Www.taxact.com   Enter your 2012 qualified expenses paid in 2012 1. Www.taxact.com     2. Www.taxact.com   Enter your 2012 qualified expenses paid in 2013 2. Www.taxact.com     3. Www.taxact.com   Add the amounts on lines 1 and 2 3. Www.taxact.com     4. Www.taxact.com   Enter $3,000 if care was for one qualifying person ($6,000 if for two or more) 4. Www.taxact.com     5. Www.taxact.com   Enter any dependent care benefits received for 2012 and excluded from your income (from your 2012 Form 2441, line 25) 5. Www.taxact.com     6. Www.taxact.com   Subtract the amount on line 5 from the amount on line 4 and enter the result 6. Www.taxact.com     7. Www.taxact.com   Compare your earned income for 2012 and your spouse's earned income for 2012 and enter the smaller amount 7. Www.taxact.com     8. Www.taxact.com   Compare the amounts on lines 3, 6, and 7 and enter the smallest amount 8. Www.taxact.com     9. Www.taxact.com   Enter the amount on which you figured the credit for 2012 (from your 2012 Form 2441, line 6) 9. Www.taxact.com     10. Www.taxact.com   Subtract the amount on line 9 from the amount on line 8 and enter the result. Www.taxact.com If zero or less, stop here. Www.taxact.com You cannot increase your 2013 credit by any previous year's expenses 10. Www.taxact.com     11. Www.taxact.com   Enter your 2012 adjusted gross income (from your 2012 Form 1040, line 38; Form 1040A, line 22; or Form 1040NR, line 37) 11. Www.taxact.com     12. Www.taxact.com   Find your 2012 adjusted gross income in the table below and enter the corresponding decimal amount here 12. Www.taxact.com             IF your 2012 adjusted gross income is:   THEN the decimal                 Over:   But not over:     amount is:                 $0 — $15,000     . Www.taxact.com 35                 15,000 — 17,000     . Www.taxact.com 34                 17,000 — 19,000     . Www.taxact.com 33                 19,000 — 21,000     . Www.taxact.com 32                 21,000 — 23,000     . Www.taxact.com 31                 23,000 — 25,000     . Www.taxact.com 30                 25,000 — 27,000     . Www.taxact.com 29                 27,000 — 29,000     . Www.taxact.com 28                 29,000 — 31,000     . Www.taxact.com 27                 31,000 — 33,000     . Www.taxact.com 26                 33,000 — 35,000     . Www.taxact.com 25                 35,000 — 37,000     . Www.taxact.com 24                 37,000 — 39,000     . Www.taxact.com 23                 39,000 — 41,000     . Www.taxact.com 22                 41,000 — 43,000     . Www.taxact.com 21                 43,000 — No limit     . Www.taxact.com 20           13. Www.taxact.com   Multiply line 10 by line 12. Www.taxact.com Add this amount to your 2013 credit and enter the total on your 2013 Form 2441, line 9. Www.taxact.com Enter the following on the dotted line next to line 9 of Form 2441: “CPYE” The amount of this credit for a prior year's expenses           Also, attach a statement to your tax return showing the name and taxpayer identification number of the person for whom you paid the prior year's expenses and how you figured the credit 13. Www.taxact.com       Worksheet A. Www.taxact.com Filled-in Worksheet for 2012 Expenses Paid in 2013 Use this worksheet to figure the credit you may claim for 2012 expenses paid in 2013. Www.taxact.com 1. Www.taxact.com   Enter your 2012 qualified expenses paid in 2012 1. Www.taxact.com   $2,000 2. Www.taxact.com   Enter your 2012 qualified expenses paid in 2013 2. Www.taxact.com   600 3. Www.taxact.com   Add the amounts on lines 1 and 2 3. Www.taxact.com   2,600 4. Www.taxact.com   Enter $3,000 if care was for one qualifying person ($6,000 if for two or more) 4. Www.taxact.com   3,000 5. Www.taxact.com   Enter any dependent care benefits received for 2012 and excluded from your income (from your 2012 Form 2441, line 25) 5. Www.taxact.com   0 6. Www.taxact.com   Subtract the amount on line 5 from the amount on line 4 and enter the result 6. Www.taxact.com   3,000 7. Www.taxact.com   Compare your earned income for 2012 and your spouse's earned income for 2012 and enter the smaller amount 7. Www.taxact.com   14,000 8. Www.taxact.com   Compare the amounts on lines 3, 6, and 7 and enter the smallest amount 8. Www.taxact.com   2,600 9. Www.taxact.com   Enter the amount on which you figured the credit for 2012 (from your 2012 Form 2441, line 6) 9. Www.taxact.com   2,000 10. Www.taxact.com   Subtract the amount on line 9 from the amount on line 8 and enter the result. Www.taxact.com If zero or less, stop here. Www.taxact.com You cannot increase your 2013 credit by any previous year's expenses 10. Www.taxact.com   600 11. Www.taxact.com   Enter your 2012 adjusted gross income (from your 2012 Form 1040, line 38; Form 1040A, line 22; or Form 1040NR, line 37) 11. Www.taxact.com   30,000 12. Www.taxact.com   Find your 2012 adjusted gross income in the table below and enter the corresponding decimal amount here 12. Www.taxact.com   . Www.taxact.com 27         IF your 2012 adjusted gross income is:   THEN the decimal                 Over   But not over     amount is:                 $0 — $15,000     . Www.taxact.com 35                 15,000 — 17,000     . Www.taxact.com 34                 17,000 — 19,000     . Www.taxact.com 33                 19,000 — 21,000     . Www.taxact.com 32                 21,000 — 23,000     . Www.taxact.com 31                 23,000 — 25,000     . Www.taxact.com 30                 25,000 — 27,000     . Www.taxact.com 29                 27,000 — 29,000     . Www.taxact.com 28                 29,000 — 31,000     . Www.taxact.com 27                 31,000 — 33,000     . Www.taxact.com 26                 33,000 — 35,000     . Www.taxact.com 25                 35,000 — 37,000     . Www.taxact.com 24                 37,000 — 39,000     . Www.taxact.com 23                 39,000 — 41,000     . Www.taxact.com 22                 41,000 — 43,000     . Www.taxact.com 21                 43,000 — No limit     . Www.taxact.com 20           13. Www.taxact.com   Multiply line 10 by line 12. Www.taxact.com Add this amount to your 2013 credit and enter the total on your 2013 Form 2441, line 9. Www.taxact.com Enter the following on the dotted line next to line 9 of Form 2441: “CPYE” The amount of this credit for a prior year's expenses             Also, attach a statement to your tax return showing the name and taxpayer identification number of the person for whom you paid the prior year's expenses and how you figured the credit 13. Www.taxact.com   $162   How To Claim the Credit To claim the credit, you can file Form 1040, Form 1040A, or Form 1040NR. Www.taxact.com You cannot claim the credit on Form 1040EZ or Form 1040NR-EZ. Www.taxact.com Form 1040, Form 1040A, or Form 1040NR. Www.taxact.com    You must complete Form 2441 and attach it to your Form 1040, Form 1040A, or Form 1040NR. Www.taxact.com Enter the credit on your Form 1040, line 48; Form 1040A, line 29; or Form 1040NR, line 46. Www.taxact.com Limit on credit. Www.taxact.com    The amount of credit you can claim is limited to your tax. Www.taxact.com For more information, see the Instructions for Form 2441. Www.taxact.com Tax credit not refundable. Www.taxact.com   You cannot get a refund for any part of the credit that is more than this limit. Www.taxact.com Recordkeeping. Www.taxact.com You should keep records of your work-related expenses. Www.taxact.com Also, if your dependent or spouse is not able to care for himself or herself, your records should show both the nature and length of the disability. Www.taxact.com Other records you should keep to support your claim for the credit are described under Provider Identification Test, earlier. Www.taxact.com Employment Taxes for Household Employers If you pay someone to come to your home and care for your dependent or spouse, you may be a household employer. Www.taxact.com If you are a household employer, you will need an employer identification number (EIN) and you may have to pay employment taxes. Www.taxact.com If the individuals who work in your home are self-employed, you are not liable for any of the taxes discussed in this section. Www.taxact.com Self-employed persons who are in business for themselves are not household employees. Www.taxact.com Usually, you are not a household employer if the person who cares for your dependent or spouse does so at his or her home or place of business. Www.taxact.com If you use a placement agency that exercises control over what work is done and how it will be done by a babysitter or companion who works in your home, the worker is not your employee. Www.taxact.com This control could include providing rules of conduct and appearance and requiring regular reports. Www.taxact.com In this case, you do not have to pay employment taxes. Www.taxact.com But, if an agency merely gives you a list of sitters and you hire one from that list, and pay the sitter directly, the sitter may be your employee. Www.taxact.com If you have a household employee, you may be subject to: Social security and Medicare taxes, Federal unemployment tax, and Federal income tax withholding. Www.taxact.com Social security and Medicare taxes are generally withheld from the employee's pay and matched by the employer. Www.taxact.com Federal unemployment (FUTA) tax is paid by the employer only and provides for payments of unemployment compensation to workers who have lost their jobs. Www.taxact.com Federal income tax is withheld from the employee's total pay if the employee asks you to do so and you agree. Www.taxact.com For more information on a household employer's tax responsibilities, see Publication 926 and Schedule H (Form 1040) and its instructions. Www.taxact.com State employment tax. Www.taxact.com   You may also have to pay state unemployment tax. Www.taxact.com Contact your state unemployment tax office for information. Www.taxact.com You should also find out whether you need to pay or collect other state employment taxes or carry worker's compensation insurance. Www.taxact.com For a list of state unemployment tax agencies, visit the U. Www.taxact.com S. Www.taxact.com Department of Labor's website. Www.taxact.com To find that website, use the link in Publication 926 or search online. Www.taxact.com How To Get Tax Help Whether it's help with a tax issue, preparing your tax return or a need for a free publication or form, get the help you need the way you want it: online, use a smart phone, call or walk in to an IRS office or volunteer site near you. Www.taxact.com Free help with your tax return. Www.taxact.com   You can get free help preparing your return nationwide from IRS-certified volunteers. Www.taxact.com The Volunteer Income Tax Assistance (VITA) program helps low-to-moderate income, elderly, people with disabilities, and limited English proficient taxpayers. Www.taxact.com The Tax Counseling for the Elderly (TCE) program helps taxpayers age 60 and older with their tax returns. Www.taxact.com Most VITA and TCE sites offer free electronic filing and all volunteers will let you know about credits and deductions you may be entitled to claim. Www.taxact.com In addition, some VITA and TCE sites provide taxpayers the opportunity to prepare their own return with help from an IRS-certified volunteer. Www.taxact.com To find the nearest VITA or TCE site, you can use the VITA Locator Tool on IRS. Www.taxact.com gov, download the IRS2Go app, or call 1-800-906-9887. Www.taxact.com   As part of the TCE program, AARP offers the Tax-Aide counseling program. Www.taxact.com To find the nearest AARP Tax-Aide site, visit AARP's website at www. Www.taxact.com aarp. Www.taxact.com org/money/taxaide or call 1-888-227-7669. Www.taxact.com For more information on these programs, go to IRS. Www.taxact.com gov and enter “VITA” in the search box. Www.taxact.com Internet. Www.taxact.com    IRS. Www.taxact.com gov and IRS2Go are ready when you are —24 hours a day, 7 days a week. Www.taxact.com Download the free IRS2Go app from the iTunes app store or from Google Play. Www.taxact.com Use it to check your refund status, order transcripts of your tax returns or tax account, watch the IRS YouTube channel, get IRS news as soon as it's released to the public, subscribe to filing season updates or daily tax tips, and follow the IRS Twitter news feed, @IRSnews, to get the latest federal tax news, including information about tax law changes and important IRS programs. Www.taxact.com Check the status of your 2013 refund with the Where's My Refund? application on IRS. Www.taxact.com gov or download the IRS2Go app and select the Refund Status option. Www.taxact.com The IRS issues more than 9 out of 10 refunds in less than 21 days. Www.taxact.com Using these applications, you can start checking on the status of your return within 24 hours after we receive your e-filed return or 4 weeks after you mail a paper return. Www.taxact.com You will also be given a personalized refund date as soon as the IRS processes your tax return and approves your refund. Www.taxact.com The IRS updates Where's My Refund? every 24 hours, usually overnight, so you only need to check once a day. Www.taxact.com Use the Interactive Tax Assistant (ITA) to research your tax questions. Www.taxact.com No need to wait on the phone or stand in line. Www.taxact.com The ITA is available 24 hours a day, 7 days a week, and provides you with a variety of tax information related to general filing topics, deductions, credits, and income. Www.taxact.com When you reach the response screen, you can print the entire interview and the final response for your records. Www.taxact.com New subject areas are added on a regular basis. Www.taxact.com  Answers not provided through ITA may be found in Tax Trails, one of the Tax Topics on IRS. Www.taxact.com gov which contain general individual and business tax information or by searching the IRS Tax Map, which includes an international subject index. Www.taxact.com You can use the IRS Tax Map, to search publications and instructions by topic or keyword. Www.taxact.com The IRS Tax Map integrates forms and publications into one research tool and provides single-point access to tax law information by subject. Www.taxact.com When the user searches the IRS Tax Map, they will be provided with links to related content in existing IRS publications, forms and instructions, questions and answers, and Tax Topics. Www.taxact.com Coming this filing season, you can immediately view and print for free all 5 types of individual federal tax transcripts (tax returns, tax account, record of account, wage and income statement, and certification of non-filing) using Get Transcript. Www.taxact.com You can also ask the IRS to mail a return or an account transcript to you. Www.taxact.com Only the mail option is available by choosing the Tax Records option on the IRS2Go app by selecting Mail Transcript on IRS. Www.taxact.com gov or by calling 1-800-908-9946. Www.taxact.com Tax return and tax account transcripts are generally available for the current year and the past three years. Www.taxact.com Determine if you are eligible for the EITC and estimate the amount of the credit with the Earned Income Tax Credit (EITC) Assistant. Www.taxact.com Visit Understanding Your IRS Notice or Letter to get answers to questions about a notice or letter you received from the IRS. Www.taxact.com If you received the First Time Homebuyer Credit, you can use the First Time Homebuyer Credit Account Look-up tool for information on your repayments and account balance. Www.taxact.com Check the status of your amended return using Where's My Amended Return? Go to IRS. Www.taxact.com gov and enter Where's My Amended Return? in the search box. Www.taxact.com You can generally expect your amended return to be processed up to 12 weeks from the date we receive it. Www.taxact.com It can take up to 3 weeks from the date you mailed it to show up in our system. Www.taxact.com Make a payment using one of several safe and convenient electronic payment options available on IRS. Www.taxact.com gov. Www.taxact.com Select the Payment tab on the front page of IRS. Www.taxact.com gov for more information. Www.taxact.com Determine if you are eligible and apply for an online payment agreement, if you owe more tax than you can pay today. Www.taxact.com Figure your income tax withholding with the IRS Withholding Calculator on IRS. Www.taxact.com gov. Www.taxact.com Use it if you've had too much or too little withheld, your personal situation has changed, you're starting a new job or you just want to see if you're having the right amount withheld. Www.taxact.com Determine if you might be subject to the Alternative Minimum Tax by using the Alternative Minimum Tax Assistant on IRS. Www.taxact.com gov. Www.taxact.com Request an Electronic Filing PIN by going to IRS. Www.taxact.com gov and entering Electronic Filing PIN in the search box. Www.taxact.com Download forms, instructions and publications, including accessible versions for people with disabilities. Www.taxact.com Locate the nearest Taxpayer Assistance Center (TAC) using the Office Locator tool on IRS. Www.taxact.com gov, or choose the Contact Us option on the IRS2Go app and search Local Offices. Www.taxact.com An employee can answer questions about your tax account or help you set up a payment plan. Www.taxact.com Before you visit, check the Office Locator on IRS. Www.taxact.com gov, or Local Offices under Contact Us on IRS2Go to confirm the address, phone number, days and hours of operation, and the services provided. Www.taxact.com If you have a special need, such as a disability, you can request an appointment. Www.taxact.com Call the local number listed in the Office Locator, or look in the phone book under Unit