Lion EA Posted April 11, 2016 Report Share Posted April 11, 2016 Do I understand this correctly? Taxpayer with W-2 job and dependent care benefits. Spouse self-employed and a LOSS for 2015. Cannot take DCB, right? (I know they get added back in to wages, was just hoping there was some deemed employment amount such as for student or disabled.) Quote Link to comment Share on other sites More sharing options...
Pacun Posted April 11, 2016 Report Share Posted April 11, 2016 It depends how much they paid, how much was put aside by the employer and if the other person was working. Losses doesn't mean that the other person didn't work. Let's say that I buy a big building and I work and operate a Bed and Breakfast, I work 12 hours everyday for the whole year and at the end I have a loss because of depreciation or business not doing so well. I deserve to qualify for DCB if my spouse works. So if the W-2 shows 2K pretax for child care, and we paid 5K for dependent care, I will use 3K on form 2441 and the computer will correctly use only 1K when calculating the credit. Be care to enter box 10 on W-2 so everything flow correctly. Quote Link to comment Share on other sites More sharing options...
RitaB Posted April 11, 2016 Report Share Posted April 11, 2016 2 hours ago, Pacun said: It depends how much they paid, how much was put aside by the employer and if the other person was working. Losses doesn't mean that the other person didn't work. Let's say that I buy a big building and I work and operate a Bed and Breakfast, I work 12 hours everyday for the whole year and at the end I have a loss because of depreciation or business not doing so well. I deserve to qualify for DCB if my spouse works. So if the W-2 shows 2K pretax for child care, and we paid 5K for dependent care, I will use 3K on form 2441 and the computer will correctly use only 1K when calculating the credit. Be care to enter box 10 on W-2 so everything flow correctly. Instructions for Form 2441 say you have to have earned income. A loss would prohibit earned income, would it not? "https://www.irs.gov/instructions/i2441/ar01.html#d0e189 And, I'm not with you on the part where if you have 3K in expenses "the computer will correctly use only 1K when calculating the credit". Does your computer know something that mine doesn't? 4 Quote Link to comment Share on other sites More sharing options...
jklcpa Posted April 11, 2016 Report Share Posted April 11, 2016 8 hours ago, Lion EA said: Do I understand this correctly? Taxpayer with W-2 job and dependent care benefits. Spouse self-employed and a LOSS for 2015. Cannot take DCB, right? (I know they get added back in to wages, was just hoping there was some deemed employment amount such as for student or disabled.) Right. The SE loss reduces earned income. No credit. 5 Quote Link to comment Share on other sites More sharing options...
Pacun Posted April 11, 2016 Report Share Posted April 11, 2016 Rita, The computer will know because you entered the W-2 correctly. If one person works, and the other pays baby sitter to go and look for jobs, pay babysitter to go to job interviews, 2441 is in order and they get a credit even the other spouse never got a job. Quote Link to comment Share on other sites More sharing options...
jklcpa Posted April 11, 2016 Report Share Posted April 11, 2016 6 minutes ago, Pacun said: Rita, The computer will know because you entered the W-2 correctly. If one person works, and the other pays baby sitter to go and look for jobs, pay babysitter to go to job interviews, 2441 is in order and they get a credit even the other spouse never got a job. Nope, they can't take the credit if the one looking for a job is unsuccessful in gainful employment. From the instructions: 2. The care was provided so you (and your spouse if filing jointly) could work or look for work. However, if you did not find a job and have no earned income for the year, you cannot take the credit or the exclusion. But if you or your spouse was a full-time student or disabled, see the instructions for lines 4 and 5, later. 3 Quote Link to comment Share on other sites More sharing options...
RitaB Posted April 11, 2016 Report Share Posted April 11, 2016 12 minutes ago, Pacun said: Rita, The computer will know because you entered the W-2 correctly. Why will the computer use 1K for expense when you have 5K in child care expenses and 2K in DCB? Quote Link to comment Share on other sites More sharing options...
Pacun Posted April 11, 2016 Report Share Posted April 11, 2016 Id you enter 2K on W-2 box 10, and you have only one child, then if you enter 3K on 2441, the computer will take only 1K and calculate the credit. The best is to enter 5K on 2441 but again the computer will only take 1K because you entered 2K on box 10. 1 Quote Link to comment Share on other sites More sharing options...
jasdlm Posted April 11, 2016 Report Share Posted April 11, 2016 Pacun, 3K is the max per child, but the $5K might be for more than one child. Best practice is to enter correct W2 information, correct expense information BY CHILD, and then double-check the calculation. I think I see what you are saying, but you are assuming 1 child. Also, I'm not sure why you would ever enter $3k if $5k was the actual expense, unless for some reason you were using some type of software that did not factor in the maximum per child. I think the best approach is to always go with the actual numbers and then double-check yourself against the tax rules to make sure the calculation is accurate. 2 Quote Link to comment Share on other sites More sharing options...
Lion EA Posted April 11, 2016 Author Report Share Posted April 11, 2016 He had $5,000 in box 10 which I entered. He spent over $12,000 for a full-time preschool program while both parents worked. But, one spouse was self-employed and had a loss for 2015 (profit in 2014, so it hadn't come up last year). Add back the $5,000 to wages, computer does that for me. Just hoping there was some help for the SE spouse with no taxable income -- but, I hadn't found any myself. Thank you all for confirming. 2 Quote Link to comment Share on other sites More sharing options...
RitaB Posted April 11, 2016 Report Share Posted April 11, 2016 13 minutes ago, Pacun said: Id you enter 2K on W-2 box 10, and you have only one child, then if you enter 3K on 2441, the computer will take only 1K and calculate the credit. The best is to enter 5K on 2441 but again the computer will only take 1K because you entered 2K on box 10. OK, I missed the part about one child. Quote Link to comment Share on other sites More sharing options...
RitaB Posted April 11, 2016 Report Share Posted April 11, 2016 4 hours ago, RitaB said: A loss would prohibit earned income, would it not? Preclude. That's the word. Yes, I have been thinking about it this whole time. 3 Quote Link to comment Share on other sites More sharing options...
Lion EA Posted April 12, 2016 Author Report Share Posted April 12, 2016 Now he tells me they had a baby in 2015 and gives me the details. But, his wife still has negative earned income, so still no child care credit. Helps with another exemption, though. And, he's really cute! 2 Quote Link to comment Share on other sites More sharing options...
jklcpa Posted April 12, 2016 Report Share Posted April 12, 2016 How does someone forget about a baby?! 5 Quote Link to comment Share on other sites More sharing options...
Lion EA Posted April 12, 2016 Author Report Share Posted April 12, 2016 3 Quote Link to comment Share on other sites More sharing options...
GeneInAlabama Posted April 12, 2016 Report Share Posted April 12, 2016 14 hours ago, jklcpa said: How does someone forget about a baby?! We can't be expected to remember ALL the minor details. 3 Quote Link to comment Share on other sites More sharing options...
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