For a person or a couple, if filing jointly, there are several requirements that must be met in order to claim the Child Care Tax Credit. The Internal Revenue Service (IRS) refers to these requirements as “tests” in order to claim the credit. These include the filing of a 1040 or 1040A (but not the 1040EZ) and the person or couple must have had income during that tax year. The person for whom the tax credit is being claimed, and who must be listed as a dependent on the tax form, must be under age 13 and for those children who turn 13 during the tax year, only the expenses incurred up until the 13th birthday may be used. For those children who are handicapped to the point that they require constant care, the age 13 requirement is waived.
The IRS does have a few special items associated with the child tax credit. Some of these include that the person you are paying for child and dependent care must be at least 19 and cannot be a person who is claimed on the tax return. Additionally, the person you make payments to cannot be your spouse or the parent of the claimed child. For those who are married it is generally required that couples file jointly although single and head of household tax filers may also claim the credit. Lastly, the care provider must be identified on the required form by name and social security number or tax identification number.
While the IRS does have a few special items in order to claim the tax credit it also has a few special exemptions that can be very helpful for some or can be an unintended invitation to a tax audit and possible penalties for others. One of the more common one is that a student parent can claim the credit if they are a full time student for at least 5 months of the year and in this case they are also considered to be employed and to have income. Another case where the credit can be claimed is when both parents work but because they work different shifts one of them needs to sleep while the other works and child care expenses that allow the parent to sleep so they can work is considered a work related expense. It is even permitted to count the expenses of child care when looking for work but if that includes dinner for both parents then prepare for an audit.
Provided that you have met the requirements listed above the next step is to use IRS Form 2241 in order to claim the tax credit. An important thing to remember is that while one child is worth up to $3000 in allowance toward claiming the tax credit, the maximum amount that can be claimed for 2 or more children is $5000. The child tax credit is a valuable deduction/tax credit to working parents and passing on this means that the taxpayer is missing out on a significant amount of money. For further details and to check on special situations, please consult IRS Publication 503.