| Instructions for Form 1040A Schedule 2 |
2006 Tax Year |
Child and Dependent Care Expenses for Form 1040A Filers
This is archived information that pertains only to the 2006 Tax Year. If you
are looking for information for the current tax year, go to the Tax Prep Help Area.
If you paid someone to care for your child or other qualifying person so you (and your spouse if filing a joint return) could
work or look for work
in 2006, you may be able to take the credit for child and dependent care expenses. You (and your spouse if filing a joint
return) must have earned
income to take the credit. (See the
instructions for line 5.) If you can take the credit, use Schedule 2 to figure the amount of your credit.
If you (or your spouse if filing a joint return) received any dependent care benefits for 2006, you must use Schedule 2 to
figure the amount, if
any, of the benefits you may exclude from your income on
Form 1040A, line 7. You must complete Part III of Schedule 2 before you can figure the credit, if any, in Part II.
Additional information.
See
Pub. 503 for more details.
Dependent care benefits.
These include amounts your employer paid directly to either you or your care provider for the care of your qualifying
person(s) while you worked.
These benefits also include the fair market value of care in a daycare facility provided or sponsored by your employer. Your
salary may have been
reduced to pay for these benefits. If you received dependent care benefits, they should be shown in box 10 of your
2006 Form(s) W-2.
Qualifying person(s).
A qualifying person is:
-
A qualifying child under age 13 whom you can claim as a dependent. If the child turned 13 during the year, the child is a
qualifying person
for the part of the year he or she was under age 13.
-
Your disabled spouse who is not able to care for himself or herself.
-
Any disabled person not able to care for himself or herself whom you can claim as a dependent (or could claim as a dependent
except that the
person had gross income of $3,300 or more or filed a joint return.)
-
Any disabled person not able to care for himself or herself whom you could claim as a dependent except that you (or your spouse
if filing a
joint return), could be claimed as a dependent on someone else's 2006 return.
If you are divorced or separated, see
Special rule for children of divorced or separated parents below.
To find out who is a qualifying child and who is a dependent, see
Pub. 501, Exemptions, Standard Deduction, and Filing Information.
To be a qualifying person, the person must have lived with you for more than half of 2006. Special rules may apply for people
who had to relocate
because of Hurricane Katrina, Rita, or Wilma. See
Pub. 4492 for details.
Special rule for children of divorced or separated parents.
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 physically or mentally not able to care for himself or herself, and
-
You were the child's custodial parent (the parent with whom the child lived for the greater part of 2006).
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.
Qualified expenses.
These include amounts paid for household services and care of the qualifying person while you worked or looked for
work. Child support payments are
not qualified expenses. Also, expenses reimbursed by a state social service agency are not qualified expenses unless you included
the reimbursement in
your income.
Household services.
These are services needed to care for the qualifying person as well as to run the home. They include, for example,
the services of a cook, maid,
babysitter, housekeeper, or cleaning person if the services were partly for the care of the qualifying person. Do not include
services of a chauffeur
or gardener.
You can also include your share of the employment taxes paid on wages for qualifying child and dependent care services.
Care of the qualifying person.
Care includes the cost of services for the qualifying person's well-being and protection. It does not include the
cost of clothing or
entertainment.
You can include the cost of care provided outside your home for your dependent under age 13 or any other qualifying
person who regularly spends at
least 8 hours a day in your home. If the care was provided by a dependent care center, the center must meet all applicable
state and local
regulations. 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.
You can include amounts paid for items other than the care of your child (such as food and schooling) only if the
items are incidental to the care
of the child and cannot be separated from the total cost. But do not include the cost of schooling for a child in kindergarten
or above. You can
include the cost of a day camp, even if it specializes in a particular activity, such as soccer. But, do not include any expenses
for sending your
child to an overnight camp.
Medical expenses.
Some disabled spouse and dependent care expenses may qualify as medical expenses if you itemize deductions. But you
must use Form 1040. However,
you cannot claim the same expense as both a dependent care expense and a medical expense. See
Pub. 502 and
Pub. 503 for details.
Who Can Take the Credit or Exclude Dependent Care Benefits?
You can take the credit or the exclusion if all five of the following apply.
-
Your filing status is single, head of household, qualifying widow(er), or married filing jointly. But see
Married persons filing separate returns below.
-
The care was provided so you (and your spouse if filing a joint return) 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 your spouse was a student or disabled,
see the
instructions for line 5.
-
The care was for one or more qualifying persons.
-
The person who provided the care was not your spouse, the parent of your qualifying child under age 13, or a person whom you
can claim as a
dependent. If your child provided the care, he or she must have been age 19 or older by the end of 2006.
-
You report the required information about the care provider on
line 1 and, if taking the credit, the information about the qualifying person on
line 2.
Married persons filing separate returns.
If your filing status is married filing separately and all of the following apply, you are considered unmarried for
purposes of figuring the
credit and the exclusion on Schedule 2.
-
You lived apart from your spouse during the last 6 months of 2006.
-
The qualifying person lived in your home more than half of 2006.
-
You provided over half the cost of keeping up your home.
If you meet all the requirements to be treated as unmarried and meet
items 2 through 5 listed earlier, you can take the credit or the exclusion. If you do not meet all the requirements to be
treated as unmarried,
you cannot take the credit. However, you can take the exclusion if you meet items 2 through 5.
Part I Persons or Organizations Who Provided the Care
Complete columns (a) through (d) for each person or organization that provided the care. You can use
Form W-10 or any other source listed in its instructions to get the information from the care provider. If you do not give
correct or complete
information, your credit (and exclusion, if applicable) may be disallowed unless you can show you used due diligence in trying
to get the required
information.
Due diligence.
You can show a serious and earnest effort (due diligence) to get the information by keeping in your records a
Form W-10 completed by the care provider. Or you may keep one of the other sources of information listed in the instructions
for
Form W-10. If the provider does not give you the information, complete the entries you can on
line 1. For example, enter the provider's name and address. Enter “ See Page 2” in the columns for which you do not have the information.
Then, on the
bottom of page 2, explain that the provider did not give you the information you asked for.
Columns (a) and (b).
Enter the care provider's name and address. If you were covered by your employer's dependent care plan and your employer
furnished the care (either
at your workplace or by hiring a care provider), enter your employer's name in column (a). Next, enter “ See W-2” in column (b). Then, leave
columns (c) and (d) blank. But if your employer paid a third party (not hired by your employer) on your behalf to provide
the care, you must give
information on the third party in columns (a) through (d).
Column (c).
If the care provider is an individual, enter his or her social security number (SSN). Otherwise, enter the provider's
employer identification
number (EIN). If the provider is a tax-exempt organization, enter “ Tax-Exempt.”
Column (d).
Enter the total amount you actually paid in 2006 to the care provider. Also, include amounts your employer paid to
a third party on your behalf. It
does not matter when the expenses were incurred. Do not reduce this amount by any reimbursement you received.
Part II Credit for Child and Dependent Care Expenses
Complete columns (a) through (c) for each qualifying person. If you have more than two qualifying persons, attach a statement
to your return with
the required information. Be sure to put your name and social security number (SSN) on the statement. Also, enter “See Attached” in the space to
the left of
line 3.
Column (a).
Enter each qualifying person's name.
Column (b).
You must enter the qualifying person's SSN. Be sure the name and SSN entered agree with the person's social security
card. Otherwise, at the time
we process your return, we may reduce or disallow your credit. If the person was born and died in 2006 and did not have an
SSN, enter “ Died” in
column (b) and attach a copy of the person's birth certificate. To find out how to get an SSN, see
Social Security Number (SSN) on
page 18 of the Form 1040A instructions. If the name or SSN on the person's social security card is not correct, call the Social
Security
Administration at
1-800-772-1213.
Column (c).
Enter the qualified expenses you incurred and paid in 2006 for the person listed in column (a). Prepaid expenses are
treated as paid in the year
the care is provided. Do not include in column (c) qualified expenses:
-
You incurred in 2006 but did not pay until 2007. You may be able to use these expenses to increase your 2007 credit.
-
You incurred in 2005 but did not pay until 2006. Instead, see the instructions for line 9.
-
You prepaid in 2006 for care to be provided in 2007. These expenses can only be used to figure your 2007 credit.
If you paid qualified expenses for the care of two or more qualifying persons, the $6,000 limit does not need to be divided
equally. For example,
if you incurred and paid $2,500 of qualifying expenses for the care of one qualifying person and $3,500 for the care of another
qualifying person, you
can use the total, $6,000, to figure the credit.
Earned income for figuring the credit includes the following amounts. If filing a joint return, figure your and your spouse's
earned income
separately.
-
The amount shown on
Form 1040A, line 7, minus (a) any amount included for a scholarship or fellowship grant that was not reported to you on a
Form W-2, and (b) any amount received as a pension or annuity from a nonqualified deferred compensation plan or a nongovernmental
section 457(b)
plan. This amount may be reported in
box 11 of your Form W-2. If you received such an amount but box 11 is blank, contact your employer for the amount received
as a pension or
annuity.
-
Certain nontaxable earned income such as meals and lodging provided for the convenience of your employer and nontaxable combat
pay. See
Pub. 503 for details.
If you are filing a joint return, disregard community property laws. If your spouse died in 2006, see
Pub. 503. If your spouse was a student or disabled in 2006, see the
instructions for line 5.
Spouse who was a student or disabled.
Your spouse was a student if he or she was enrolled as a full-time student at a school during any 5 months of 2006.
A school does not include an
on-the-job training course, correspondence school, or a school offering courses only through the Internet. Your spouse was
disabled if he or she was
not capable of self-care. Figure your spouse's earned income on a monthly basis.
For each month or part of a month your spouse was a student or disabled, he or she is considered to have worked and
earned income. His or her
earned income for each month is considered to be at least $250 ($500 if more than one qualifying person was cared for in 2006).
If your spouse also
worked during that month, use the higher of $250 (or $500) or his or her actual earned income for that month. If, in the same
month, both you and your
spouse were either students or disabled, only one of you can be treated as having earned income in that month.
For any month that your spouse was not a student or disabled, use your spouse's actual earned income if he or she
worked during the month.
Special rules may apply for people who had to relocate because of Hurricane Katrina, Rita, or Wilma. See
Pub. 4492 for details.
Credit for prior year's expenses.
If you had qualified expenses for 2005 that you did not pay until 2006, you may be able to increase the amount of
your 2006 credit. To figure the
credit, see the worksheet under
Amount of Credit in
Pub. 503. If you can take a credit for your 2005 expenses, enter the amount of the credit and “ CPYE” in the space to the left of line 9.
Also, enter the name and social security number of the person for whom you paid the prior year's expenses next to this amount.
Then, add the credit to
the amount on line 9 and replace the amount on line 9 with that total. Also, attach a statement showing how you figured the
credit.
Part III Dependent Care Benefits
If you had an employer-provided dependent care plan, your employer may have permitted you to carry forward any unused amount
from 2005 to use
during a grace period in 2006. Enter on line 13 the amount you carried forward and used in 2006 during the grace period.
If you had an employer-provided dependent care plan, enter on line 14 the total of the following amounts included on line
12.
-
Any amount you forfeited. You forfeited an amount if you did not receive it because you did not incur the expense. Do not
include amounts
you expect to receive at a future date.
-
Any amount you did not receive but are permitted by your employer to carry forward and use in the following year during a
grace
period.
Example.
Under your employer's dependent care plan, you chose to have your employer set aside $5,000 to cover your 2006 dependent
care expenses. The $5,000
is shown in
box 10 of your Form W-2. In 2006, you incurred and were reimbursed for $4,950 of qualified expenses. You would enter $5,000
on line 12 and $50,
the amount forfeited, on line 14. You would also enter $50 on line 14 if, instead of forfeiting the amount, your employer
permitted you to carry the
$50 forward to use during the grace period in 2007.
Add the amounts on lines 12 and 13 and subtract from that total, the amount on line 14. Enter the result on line 15.
Enter the total of all qualified expenses incurred in 2006 for the care of your qualifying person(s). It does not matter when
the expenses were
paid.
Example.
You received $2,000 in cash under your employer's dependent care plan for 2006. The $2,000 is shown in box 10 of your
Form W-2. Only $900 of
qualified expenses were incurred in 2006 for the care of your 5-year-old dependent child. You would enter $2,000 on
line 12 and $900 on
line 16.
Earned income for figuring the amount of dependent care benefits you are able to exclude from your income includes the following
amounts. If filing
a joint return, figure your and your spouse's earned income separately.
-
The amount shown on
Form 1040A, line 7, minus (a) any amount included for a scholarship or fellowship grant that was not reported to you on a
Form W-2, and (b) any amount received as a pension or annuity from a nonqualified deferred compensation plan or a nongovernmental
section 457(b)
plan. This amount may be reported in
box 11 of your Form W-2. If you received such an amount but box 11 is blank, contact your employer for the amount received
as a pension or
annuity.
-
Nontaxable combat pay if you elect to include it in earned income. However, including this income will only give you a larger
exclusion if
your (or your spouse's) other earned income is less than the amount entered on line 17. To make the election, include all
of your nontaxable combat
pay in the amount you enter on line 18 (line 19 for your spouse if filing jointly). If you are filing a joint return and both
you and your spouse
received nontaxable combat pay, you can each make your own election. The amount of your nontaxable combat pay should be shown
in
box 12 of Form(s) W-2 with
code Q.
For purposes of line 18, earned income does not include any dependent care benefits shown on line 12.
If you are filing a joint return, disregard community property laws. If your spouse died in 2006, see
Pub. 503. If your spouse was a student or disabled in 2006, see the
instructions for line 5.
If your filing status is married filing separately, see
Married persons filing separate returns on page 2. Are you considered unmarried under that rule?
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