11750: 2441 - Child and Dependent Care Credit

Form 2441 appears in a 1040 return. Page 2 of the 2441 (Part III) does not produce unless employer contribution information is entered in box 10 of the W2 screen or line 12 of screen 2441. 

Entering the credit in Drake Tax

1. Enter data on both screens 2 Dependents and 2441. Be sure to enter an amount in qualifying childcare expenses incurred and paid in 20YY (even if zero - see below for details) and portion of qualifying expenses provided by employer. The sum of all qualifying childcare expenses incurred and paid entered on screen(s) 2 must match the sum of the amounts entered on screen 2441 for amount paid. 

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If a taxpayer is claiming the credit for a disabled spouse, enter the spouse on screen 2 as a dependent, select OTHER from the Relationship drop list, and check the options Disabled and Not a dependent. If the spouse has no earned income, see 2. next.
2. Both the taxpayer and spouse must have earned income to be eligible for this credit, except when one or both are either full-time students or permanently disabled. In this exception, you must enter the taxpayer’s Earned income for 2441 purposes only on the 2441 in order to qualify. Make the entry on lines 4, 5, 18, 19 at the bottom of the 2441 screen. The entry can be up to the $3,000 allowed for one child or $6,000 for 2 or more dependents. Multiply $250 by the number of months disabled or a full-time student up to $3,000 for one child or $500 times months up to $6,000 for two or more dependents.

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3. Earned income includes wages, salaries, tips, and other taxable employee compensation, and net earnings from self-employment. A net loss from self-employment reduces earned income. Publication 503.
4. Filing status
   1. cannot be (3) MFS;
   2. The Taxpayer did not live with spouse drop list can be The taxpayer did not live with the spouse for the last 6 months or Taxpayer did not live with the spouse even 1 day during the year. (In Drake13 and earlier software, can be filing status 6 or 9.)

Also take into consideration: 

• An amount in box 10 on the W-2 - The taxpayer’s credit is reduced by dependent care benefits provided by an employer under a qualified plan. Such benefits, up to a $5,000 limit, are also excluded from taxable income. Any amount above the $5,000 limit (or above the taxpayer’s qualified expenses, the taxpayer’s or the spouse’s earned income, whichever is smallest) appears as follows, depending on the year of Drake Tax:
  • Form 1040, line 1e as Taxable dependent care benefits from Form 2441, line 26 in Drake22. 
  • Form 1040 as income with the literal DCB (Dependent Care Benefits) beside the line in Drake21 and prior.
• A dependent may still be considered a qualifying child even if they do not have current year expenses. See the IRS definition of a qualifying person in the 2441 Instructions for details. If this applies, enter a zero for Qualifying Childcare Expenses in 20YY on screen 2 for that dependent. 
  
• This is a non-refundable credit. If the tax liability is already 0 (zero), there is nothing to which to apply the credit.
• The dependent must be under age 13 or totally and permanently disabled. For a dependent over 13, the software assumes that the dependent is disabled and qualifies for the credit. It generates a note suggesting you review the child’s qualifications.
• The length of the child-care provider's name field is dictated by IRS EF requirements, and can not be expanded.

​​See Publication 503, Child and Dependent Care Expenses for details. For more information about the Child and Dependent Care credit, or exclusion, and other limitations see the 2441 Instructions. 

Note: DC does not allow e-filing if a foreign country is listed for a provider on the 2441.