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Posted by mth0csc on February 20, 2007, 6:56 pm
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I have two kids (both "qualifying persons" per IRS
definition, e.g., pub 503 etc.), but pay for the care of
only one (because the other one is cared for by my parents).
Is the dollar limit on my child care expenses $3000 or
$6000?
The example below from pub 503 seems to suggest that I could
use $6000 as the limit even if I pay $5999 (or more) for one
and only $1 for the other. But I am not sure it would apply
to the case where I pay $0 for the care of the other.
"If you paid work-related expenses for the care of two or
more qualifying persons, the $6,000 limit does not need to
be divided equally among them. For example, if your
work-related expenses for the care of one qualifying person
are $3,200 and your work-related over: expenses for another
qualifying person are $2,800, you can use the total, $6,000,
when figuring the credit."
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Posted by A.G. Kalman on February 21, 2007, 6:28 pm
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mth0csc@gmail.com wrote:
> I have two kids (both "qualifying persons" per IRS
> definition, e.g., pub 503 etc.), but pay for the care of
> only one (because the other one is cared for by my parents).
> Is the dollar limit on my child care expenses $3000 or
> $6000?
>
> The example below from pub 503 seems to suggest that I could
> use $6000 as the limit even if I pay $5999 (or more) for one
> and only $1 for the other. But I am not sure it would apply
> to the case where I pay $0 for the care of the other.
>
> "If you paid work-related expenses for the care of two or
> more qualifying persons, the $6,000 limit does not need to
> be divided equally among them. For example, if your
> work-related expenses for the care of one qualifying person
> are $3,200 and your work-related over: expenses for another
> qualifying person are $2,800, you can use the total, $6,000,
> when figuring the credit."
The limit is $3000 per child for whom you incurred child
care expense. If you incurred expense of any amount for
each of two children, the allowable limit is $6000. So...
you have broken the code. Pay your mother some amount that
she has to declare as taxable income and you get to use up
to $6000 as qualified expense. As your mother would not
like to pay self-employment tax, keep the payment under
$433.
--
Alan
http://taxtopics.net
<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>
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Posted by Bruce E. Cobern on February 22, 2007, 2:08 am
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> The limit is $3000 per child for whom you incurred child
> care expense. If you incurred expense of any amount for
> each of two children, the allowable limit is $6000. So...
> you have broken the code. Pay your mother some amount that
> she has to declare as taxable income and you get to use up
> to $6000 as qualified expense. As your mother would not
> like to pay self-employment tax, keep the payment under
> $433.
I would be interested in a cite that states that you must
incur any expenses for the second qualifying child in order
to claim the larger amount. I haven't looked in a couple of
years, but when last I did, the statute applies the limit
based on the number of qualifying children of the TP, and
paying expenses for the child was not a requirement for
qualification. It might have been changed, but I have felt
the instructions for the 2441 have been incorrect for years.
--
Bruce E. Cobern, CPA
mailto:bec@pipeline.com
<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>
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Posted by A.G. Kalman on February 25, 2007, 12:01 am
Please log in for more thread options Bruce E. Cobern wrote:
>> The limit is $3000 per child for whom you incurred child
>> care expense. If you incurred expense of any amount for
>> each of two children, the allowable limit is $6000. So...
>> you have broken the code. Pay your mother some amount that
>> she has to declare as taxable income and you get to use up
>> to $6000 as qualified expense. As your mother would not
>> like to pay self-employment tax, keep the payment under
>> $433.
> I would be interested in a cite that states that you must
> incur any expenses for the second qualifying child in order
> to claim the larger amount. I haven't looked in a couple of
> years, but when last I did, the statute applies the limit
> based on the number of qualifying children of the TP, and
> paying expenses for the child was not a requirement for
> qualification. It might have been changed, but I have felt
> the instructions for the 2441 have been incorrect for years.
There are two parts in the equation. One is too have a
qualifying individual and the other is to incur an
employment related expense for that individual. The second
part is IRC Sec. 25(b)(2) where it defines a qualifying
expense. It's an amount paid for the care of a qualifying
individual. If you incur an expense for a qualifying
individual your limit is $3000. If you incur an expense for
another individual it is $6000. The code doesn't specify
how much the expense has to be, only that you must incur
that expense for the individual.
The dollar limit is in 25(c).
One may find the whole section ambiguous, but it is not
ambiguous to the software vendors, as you can't get the
$6000 limit unless you have an expense listed for two
children.
2) Employment-related expenses
(A) In general
The term ''employment-related expenses'' means
amounts paid for the following expenses, but only if
such expenses are incurred to enable the taxpayer to
be gainfully employed for any period for which there
are 1 or more qualifying individuals with respect to
the taxpayer:
(i) expenses for household services, and
(ii) expenses for the care of a qualifying individual.
Such term shall not include any amount paid for
services outside the taxpayer's household at a
camp where the qualifying individual stays
overnight.
--
Alan
http://taxtopics.net
<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>
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Posted by Bruce E. Cobern on February 26, 2007, 12:54 am
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> There are two parts in the equation. One is too have a
> qualifying individual and the other is to incur an
> employment related expense for that individual.
But there is NOTHING in the code that says that expenses
must be incurred for EACH qualifying individual. The
definition of a QI is in Sec. 21(b)(1) and says:
"(1) Qualifying individual
The term "qualifying individual" means—
(A) a dependent of the taxpayer (as defined in section 152
(a)(1)) who has not attained age 13,"
(other possible definitions omitted as not relevant)
Note that there is nothing here that specifies that any
expenses need be incurred for the individual. So, as long
as there are at least two dependent children under 13, the
TP has two or more QI's.
The limit definition is in Sec. 21(c) and reads:
"(c) Dollar limit on amount creditable
The amount of the employment-related expenses incurred
during any taxable year which may be taken into account
under subsection (a) shall not exceed:
(1) $3,000 if there is 1 qualifying individual with respect
to the taxpayer for such taxable year, or
(2) $6,000 if there are 2 or more qualifying individuals
with respect to the taxpayer for such taxable year."
Note, again, that this limit definition has NO reference to
whether expenses were incurred for each individual, only
that there BE 2 or more qualifying individuals with respect
to the taxpayer.
I know what the instructions for the 2441 say, and how the
software companies are interpreting this (I'm sure because
that is how the IRS instructions read), but I don't think
the section is ambiguous at all, and I don't believe that
you need incur expenses FOR two or more children to use the
$6,000 limit, only that you HAVE two QI's and incure at
least $6,000 of employment related expenses.
I was just wondering whether the statute had changed to
support the IRS position, but, apparently it has not. So, I
still hold that my position above is the one that actually
reflects the law, and that taxpayers should not be slaves to
their software and should override it when they believe, as
I do in this case, that the software does not properly
represent the law. (After all, we all know that the
instructions are not authoritative.)
--
Bruce E. Cobern, CPA
mailto:bec@pipeline.com
<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>
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