Tax Section 3 - Child and Dependent Care Credit

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In this section we will review when you can and cannot take the child and dependent care expenses credit. We will review how to figure the credit. You may be able to claim the credit if you pay someone to care for your dependent who is under age 13 or for your spouse or dependent who is not able to care for himself or herself. To qualify,  generally you must pay these expenses so you can work or look for work.

Please study  IRS Publication 503 to complete the following questions.

1. If you pay someone to come to your home and care for your dependent or spouse,         

A. You may be a household employer
B. You may have to pay employment taxes
C. You may be able to claim the credit for child and dependent care expenses 
D. Any of the above

A. Form 2441 if you file Form 1040.
B. Schedule 2 if you file Form 1040A.
C. Either A or B above.
D. None of the above.                            

3. To qualify for child and dependent care expenses credit, you      

A. Can pay for care so you will be able to go on vacation
B. Can hire your child who is under 19 years old
C. Can hire your aunt whom you can claim as a dependent
D. Must have a child that must live with you for more than half of the year and meet other requirements.

4. To claim the Child and Dependent Care Credit, you (and your spouse if you're married) must have earned income during the year. Your spouse is treated as having earned income for any month that he or she is                         

A. A full-time student.
B. Physically not able to care for himself or herself. 
C. Mentally not able to care for himself or herself.
D. Any of the above.

5. Generally, married couples must file a joint return to take the child and dependent care credit. You may be able to file a separate tax return and still take the credit if

A. You are legally separated. 
B. You are living apart from your spouse.
C. Both A and B above.
D. Your spouse signs an agreement not to claim the credit.

6. Your child and dependent care expenses must be for the care of one or more qualifying persons such as  

A. A child who is under 18 years-old when the care was provided.
B. Your dependent daughter who was under the age of 13 when the care was provided.
C. Your parents who are perfectly able to care for themselves.
D. A person who did not live with you.

7. You take your 4-year-old child to nursery school that provides lunch and a few educational activities as part of its pre-school child-care service. Which one of the following would be correct?                               

A. You can count the total cost as child care because the costs were partly to provide education.
B. You can count the total cost when you figure the child and dependent care credit if lunch and the educational activities are incidental to the childcare and the cost cannot be separated.
C. Expenses were for child's lunch so they do count.
D. All of the above

8. You pay a nanny to care for your 5-year-old son and 6-year-old daughter so you can work. You become ill and miss 5 months of work but received sick pay. You continue to pay the nanny to care for the children while you are ill.

A. Your absence is not a short temporary absence, and your expenses are not qualifying care expenses because they are not work related.
B. Your absence is a short temporary absence, and your expenses are qualifying care expenses.
C. An absence of 6 months or less is a short, temporary absence
D. An absence of more than 2 weeks may never be considered a short, temporary absence regardless of the circumstances.

9. You place your 12 year old child in a boarding school so you can work full-time. Which of the following would be correct?                          

A. You can only count the educational part of the boarding costs as qualifying expenses
B. You can't count the boarding cost because it was not for a pre-school child
C. You can count that part of the expense in figuring your child and dependent care credit if it can be separated from the cost of the education
D. If you place your child in boarding school, he will be away from the home and thus you can't claim the care credit

10. The work related expenses for the Child and Dependent Care Expenses Credit are expenses that

A. Allow you to work or look for work
B. Are not really for the qualifying person's care
C. Are for the cost of a babysitter while you and your spouse go out to eat.
D. Allow you to go on vacation from work

11. If your spouse is a student or is not able to care for him or herself, he or she is treated as having earned income for any month that he or she is      

A. Not your dependent even if her or she lived in your home.
B. Physically or mentally not able to care for him or herself or is a full time student
C. A partially disabled spouse capable of caring for him or herself.
D. A student that is attending full time only at night

12. You can count child care expense payments you make to relatives who are   

A. Not your dependents, even if they live in your home.
B. Your children who are under 19 years old, as long as they not your dependents.
C. Your dependents for whom you (or your spouse) can claim an exemption. 
D. Any of the above.

13. You, a single taxpayer, paid work related child care expenses of $3,000 in tax year 2009. You were reimbursed $2,400 by a state social services agency. If you have two qualifying dependents, which of the following is correct regarding the child and dependent care expenses credit?        

A. Since you were reimbursed, you can't take the child and dependent care expenses credit
B. You can use $1,000 to figure your credit
C. You can use $600 to figure your credit
D. You can use $2,600 to figure your credit

14. If the care provider information you give is incorrect or incomplete, your credit will not be allowed unless you                                            

A. Completely fill out Form 2441 or Schedule 2.
B. Show due diligence in trying to supply the correct information by keeping the care provider's completed Form W-10.
C. Show proof that you did pay.
D. Call the IRS and give them the telephone number of the care provider.

15. There are many ways the taxpayer can show due diligence. Which of the following is correct as far as showing due diligence?         

A. Get and keep the care provider's completed Form W-10.
B. Report whatever information you have and then attach a statement explaining that you requested the information from the care provider, but the provider did not give you the information.
C. Attach a statement that will show you used due diligence in trying to furnish the necessary information along with the information that you do have.
D. Any of the above

16. There is a dollar limit on the amount of your work related expenses that you can use to figure the child and dependent care expenses credit. This limit is set per qualifying person. The limit is      

A. $3,000 for one qualifying person.
B. $6,000 for two or more qualifying people.
C. Both A and B are correct.
D. $3,000 for each qualifying person.

17. You and your spouse (MFJ) paid $5,000 in child care, you earned $19,000 for the entire year. Your spouse did not work and was not a student or disabled. You have only one qualifying child. What is your child and dependent care expenses credit for tax year 2009?

A. $0 federal credit.
B. $1,750 federal credit.
C. $1,050 federal credit.
D. $2,100 federal credit.

18. I am single and want to file my return and have no tax liability.  If I claim the child and dependent care expenses credit for federal, would I get a refund?        

A. Yes, tax liability can be zero, and you can still qualify because for federal the credit is refundable.
B. No, you cannot get a refund for any part of the credit that is more than your regular tax because this tax credit is not refundable.
C. No, if you have tax, the child and dependent care credit would not cancel it and thus there is no reason to claim it.
D. No, the federal tax system does not have a Child and Dependent Care Expenses Credit.

19. Juan and Maria Escobedo are married and keep up a home for their two pre-school children. In tax year 2009, they claimed their children as dependents. Juan earned $15,200 and Maria earned $5,100. They paid $4,900 in work related child care expenses. What is their credit?

A. $0 for federal.
B. $1,750 for federal.
C. $1,568 for federal.
D. $1,632 for federal.

20. In tax year 2009, if you are single with one qualifying child and your gross income is $44,100, what would your federal child and dependent credit be if you paid $4,000 in child care?

A. $600.
B. $800.
C. $1,050.
D. $1,200.