MsTabbyKats Posted February 4, 2014 Report Share Posted February 4, 2014 Mom works on a W-2....and has $5000 in dependent care benefits. Dad works as a research scholar on gets paid on a 1099-misc ...Box 3....other income. My program is allowing the credit....$600....but adding $5000 to her wages....because he doesn't have a C or F or W-2. Comments or opinions..... This is a new client...very rigid people. Quote Link to comment Share on other sites More sharing options...
NECPA in NEBRASKA Posted February 4, 2014 Report Share Posted February 4, 2014 Is there somewhere to show him as a student? Quote Link to comment Share on other sites More sharing options...
Margaret CPA in OH Posted February 4, 2014 Report Share Posted February 4, 2014 Why not report the income on a Schedule C? Quote Link to comment Share on other sites More sharing options...
MsTabbyKats Posted February 4, 2014 Author Report Share Posted February 4, 2014 Why not report the income on a Schedule C? It's $52,000.....that would be a lot of SE tax! His income is not subject to FICA tax Quote Link to comment Share on other sites More sharing options...
Mr. Pencil Posted February 4, 2014 Report Share Posted February 4, 2014 My program is allowing the credit....$600....but adding $5000 to her wages....because he doesn't have a C or F or W-2. The DCB is only related to her wages. It sounds like you are not correctly entering the data for Part III of Form 2441, which should exclude the income without generating a credit (if one child). By the way, Box 3 does NOT mean he isn't self-employed. 2 Quote Link to comment Share on other sites More sharing options...
MsTabbyKats Posted February 4, 2014 Author Report Share Posted February 4, 2014 The DCB is only related to her wages. It sounds like you are not correctly entering the data for Part III of Form 2441, which should exclude the income without generating a credit (if one child). By the way, Box 3 does NOT mean he isn't self-employed. He is Not self-employed. He gets paid thru a grant. I'm getting the credit when I manually enter his money. Otherwise nothing... I think that for the dcb they both need to pay in FICA tax. I'm probably gonna pass on this one. She wants the biggest refund possible , but the owe about $4000. Quote Link to comment Share on other sites More sharing options...
MsTabbyKats Posted February 4, 2014 Author Report Share Posted February 4, 2014 His income is technically an award. Quote Link to comment Share on other sites More sharing options...
Margaret CPA in OH Posted February 4, 2014 Report Share Posted February 4, 2014 Okay, so he isn't self-employed and is funded through a grant. Then I wonder why the income isn't on a 1099-G and reported on line 21 as a taxable grant. Or it could just be linked to that line as other income. Could he be considered a student as a graduate student? I guess I don't understand why the software is not allowing the credit. It is limited to actual expenses paid but I assume the payments for care at least meet this amount. Quote Link to comment Share on other sites More sharing options...
MsTabbyKats Posted February 4, 2014 Author Report Share Posted February 4, 2014 The software is allowing a credit...when I adjust it,....but it's not allowing the $5000 dcb. It puts it back into income. The instructions say income must be from a W-2, C or F. This is how a lot of institutions pay foreign researchers, I do these all the time. I just never had one with the spouse claiming the dcb, Well anyway....I told the mom she wouldn't be happy with my results. Remember....I like life without complications, I don't want to manipulate things. And then she gets one of those letters. I want to enter exactly as reported. Eta....it is on Line 21....but it needs to be w-2, F or C income. Sorry this is confusing....is it any wonder I tired of these international things! Quote Link to comment Share on other sites More sharing options...
kcjenkins Posted February 4, 2014 Report Share Posted February 4, 2014 Can't have it both ways. If it's a grant and not subject to FICA he's getting a good deal, but it's not going to count on the 2441. Quote Link to comment Share on other sites More sharing options...
MsTabbyKats Posted February 4, 2014 Author Report Share Posted February 4, 2014 I seem to remember that the software will add the income back as wages until you enter the amounts paid for dependent care to the providers. As Mr Pencil said, I think you have missed entering the data that the software requires to calculate this correctly. Nope....everything was entered Box 10 on the W-2.....the provider....the amount paid....the tax id....the address......the kid..... It says right on (my program)....2441....part III....line 12....income can be from W-2, C, F or K-1 Everything subject to FICA........ When I did a dummy with dad having a C......it did the dcb correctly. I, for one, learned something new. An Award is not earned income. In thinking about it....if it was for less....he couldn't get an EIC either. Quote Link to comment Share on other sites More sharing options...
jklcpa Posted February 4, 2014 Report Share Posted February 4, 2014 Yes, I just deleted my post as you posted yours. Quote Link to comment Share on other sites More sharing options...
MsTabbyKats Posted February 4, 2014 Author Report Share Posted February 4, 2014 Btw...Mr Pencil....why do you assume I did something wrong? Quote Link to comment Share on other sites More sharing options...
Mr. Pencil Posted February 4, 2014 Report Share Posted February 4, 2014 Btw...Mr Pencil....why do you assume I did something wrong? I did not assume that. I said that's what it sounded like, something about Part III of Form 2441. Now that you have given more information, it sounds different. Anyway, I'm obviously not in your office and don't even use the same software. So take my ideas if they are helpful, or ignore them. Quote Link to comment Share on other sites More sharing options...
MsTabbyKats Posted February 4, 2014 Author Report Share Posted February 4, 2014 My program is adding the $5000 back to the wife's W-2 because it seems that "other income" doesn't qualify as "working".....although he's probably finding a cure for cancer as I write this. The data entry is fine. Quote Link to comment Share on other sites More sharing options...
kcjenkins Posted February 5, 2014 Report Share Posted February 5, 2014 Tabby, you are thinking about this wrong, I think. He's already getting a significant tax break on the FICA exemption, so to let it also shield the tax credit would be double-dipping. Quote Link to comment Share on other sites More sharing options...
MsTabbyKats Posted February 5, 2014 Author Report Share Posted February 5, 2014 Tabby, you are thinking about this wrong, I think. He's already getting a significant tax break on the FICA exemption, so to let it also shield the tax credit would be double-dipping. Yes....I know all this. But, try to explain it to the wife....who wants the biggest refund possible .....but even with the dcb owes a few thousand! She already "explained to me blah blah....."........so I rejected the job. My point with this thread was if anyone else ever had a situation of knowledge of a situation where the income was reported in this manner...and the dcb was involved. In "the old days" I would have called the IRS to verify....but I'm not going to sit on hold for an hour....to be told what I thought....and then have the wife tell me I'm wrong anyway. Thanks everyone Quote Link to comment Share on other sites More sharing options...
Gail in Virginia Posted February 5, 2014 Report Share Posted February 5, 2014 I am glad you posted. I would have thought prior to this that because he was "working" for this money, even in an academic environment, that it would go on Sched. C even though reported as box 3, other income. So now I have learned that grants are not subject to SE tax. Good to know. Quote Link to comment Share on other sites More sharing options...
MsTabbyKats Posted February 5, 2014 Author Report Share Posted February 5, 2014 I am glad you posted. I would have thought prior to this that because he was "working" for this money, even in an academic environment, that it would go on Sched. C even though reported as box 3, other income. So now I have learned that grants are not subject to SE tax. Good to know. Gail- I've seen this kind of income handled in various ways. Sometimes the institution will issue W-2s....but without FICA tax withheld. Sometimes, and very often, it's from a foreign source and not-taxable....but the recipient isn't aware....and preparers do a C...because they aren't aware. It has to do with treaties,,,.and can get very complicated. I've amended many returns for "my scholars" who we're paying taxes they didn't owe. In this case if he got the W-2 without FICA .....the dcb would have worked. But...it is a major research institution, and I doubt they would reissue based one what my "almost client" wanted. Quote Link to comment Share on other sites More sharing options...
David1980 Posted February 6, 2014 Report Share Posted February 6, 2014 My program is adding the $5000 back to the wife's W-2 because it seems that "other income" doesn't qualify as "working".....although he's probably finding a cure for cancer as I write this. The data entry is fine. Is the program not ATX? What program? Quote Link to comment Share on other sites More sharing options...
MsTabbyKats Posted February 6, 2014 Author Report Share Posted February 6, 2014 Is the program not ATX? What program? Tax Act If the client were possibly getting a refund, and the IRS were available...and I got a badge number.....I probably would have entered the 1099-misc as W-2. (Assuming the rep agreed). But Box 3 could be "any income".....and when all the forms get reconciled....some time in the future....it would generate some kind of nasty letter. The funny thing was I was able to get a credit by manually entering his income as wages without a problem on the 2441....but the lines had to flow for the be benefit to work. Quote Link to comment Share on other sites More sharing options...
David1980 Posted February 7, 2014 Report Share Posted February 7, 2014 I think lines 4, 5, 18, and 19 of the 2441 will be where the interesting numbers are. On a quick test return I did in Tax Act, whichever spouse I issue the 1099-misc to is showing $0 on that line which is preventing any credit or exclusion of DCB from calculating. So Tax Act is adding in the DCB to line 7 and I'm also not getting a credit. Tax Act has a box "Earned income adjustment for student or disabled status" and if I enter an amount there for the spouse with no earned income it carries to both 4/18 or 5/19 (again, depending which spouse has no earned income). Quote Link to comment Share on other sites More sharing options...
jasdlm Posted February 7, 2014 Report Share Posted February 7, 2014 This is straight out of Pub 503: 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.S. trade or business, or Any amount received for work while an inmate in a penal institution I'm with KC on this one. Quote Link to comment Share on other sites More sharing options...
MsTabbyKats Posted February 7, 2014 Author Report Share Posted February 7, 2014 As I said...each institution has there own method of reporting. Generally...someone with a 1099-misc also has W-2 income....but this man doesn't. When mom sees she owes about $5000 (and not the biggest refund possible) she'll probably come running back......ugh Quote Link to comment Share on other sites More sharing options...
Lion EA Posted February 7, 2014 Report Share Posted February 7, 2014 Is Dad a graduate student? Quote Link to comment Share on other sites More sharing options...
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