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Common questions for Form 2441 Child and Dependent Care Expenses in Lacerte

by Intuit•1• Updated 1 year ago

Below, you'll find frequently asked questions about Child and Dependent Care Expenses (2441).

For tax year 2021 only:

The expense limit has been raised to $8,000 for one individual, and to $16,000 for more than one.
The maximum credit percentage has been increased to 50% and the credit itself is refundable.
AGI phaseout has been significantly increased. This will be seen in the calculations on Form 2441.
See the 2021 IRS Pub. 503 for more information.

This temporary increase was not extended for tax year 2022 returns.

How do I enter daycare or childcare expenses?

Go to Screen 33, Dependent Care Credit (2441).
Enter the dependent's information.
Enter the expenses paid in the current year.
Enter the care provider's information.

See How to enter Dependent Care Credit, Form 2441 in Lacerte for more information.

How does Lacerte calculate line 3?

If your client received any dependent care benefits, Lacerte will complete Part III of Form 2441 to determine how much of the care expenses were already covered by deductible or excluded benefits, and can't be used to calculate the credit.

Why aren't dependent care benefits from my client's partnership or sole proprietorship flowing to the 2441?

Dependent care benefits you enter on Schedule K-1, Schedule C, or Schedule F must also be entered on Screen 33, Dependent Care Credit (2441), under the General Information section, in the field labeled Sole proprietorship or partnership. This allows the program to calculate the amount of benefits that are deductible or taxable for purposes of the credit. Once the credit is calculated, you may need to adjust your inputs on Schedule K-1, C, or F to report only the amount of benefits that were deductible.

Why isn't Form 2441 generating?

This credit only applies when both the taxpayer (and spouse, if Married Filing Jointly), have taxable earned income. Earned income for Form 2441 includes:

Schedule C income
Schedule F income
Partnership K-1 net earnings from self-employment
S-Corporate K-1 net earnings from self-employment
Disability Pensions

If the taxpayer or their spouse were disabled or a full-time student:

Go to Screen 33, Dependent Care Credit (2441).
Enter the Number of months disabled or full-time student.
- An entry in this field will trigger Lacerte's calculation of the allowance provided for spouse's who are disabled or full-time students.
- See How to resolve diagnostic ref. 717 in Lacerte - Earned income requirement not met for dependent care credit more information.

If the Taxpayer/Spouse has a W-2, box 10 with an amount greater than the $3,000. You can verify the calculation on 2441 page 2 Part III. If the Taxpayer/Spouse has a tax liability and the W-2, box 10 is less than $3,000:

Go to Screen 2, Dependent Information.
Verify there is a qualifying dependent entered:
- Dependent has a valid SSN
- Dependent has a Date of Birth (a qualifying child must be under age 13.)
Go to Screen 33, Child and Dependent Care Expenses.
Select Persons & Expenses Qualifying for Dependent Care Cr. from the left hand navigation panel.
Verify the Dependents Name, Date of birth, and Social security number match the Dependent from Screen 2.
Enter the Qualified dependent care expense incurred and paid in 20XX (MANDATORY).
Click on Persons or Organization Providing Dependent Care from the top left navigation panel (Screen 33.2).
Verify the Person or Organization information is entered and complete.
Enter the Total amount paid to care provider in 20XX for all dependents.

Where do I enter dependent care benefits my client received?

Dependent Care Benefits reported on the W-2, box 10 should be entered in Screen 10, Wages, in the field, (10) Dependent care benefits (code 12). To enter Dependent Care Benefits not reported on W-2:

Go to Screen 33, Dependent Care Credit (2441).
Select General Information in the Dependent box on the left side of the screen.
Enter the appropriate amount in the appropriate field under Dependent Care Benefits.
Enter other applicable information as needed.

The total amount of dependent care benefits will show on page 2 of the Form 2441, Part III, Line 12. Part III of Form 2441 is used for computing the taxable benefits. The taxable amount of benefits will show on Form 2441, Line 26 and will also show in the space to the left of Line 7 of the 1040 with the initials "DCB".

Dependent Care Benefits (DCB) from a sole proprietorship or partnership should also be entered in the input screens for each respective business. For example, DCB from a Partnership K-1, box 13 would be entered in both Screen 33, Dependent Care Credit and Screen 20.1, Passthrough K-1's.

If filing Married Filing Jointly, both the taxpayer and the spouse's earned income are involved in determining taxable and nontaxable benefits. If either taxpayer or spouse do not have earned income, then the Dependent Care Benefits will be taxable, per the 2441 calculation and instructions.

Claiming the Dependent Care Credit in a married filing separate return with dependent care expenses:

When a taxpayer is filing MFS and has dependent care expenses, there are certain requirements that must be met to be able to take the credit. The taxpayer would be "treated as unmarried."

To exclude the dependent care benefits from the return:

Go to Screen 33, Dependent Care Credit (2441)
Click on Persons & Expenses Qualifying for Dependent Care Cr. from the left navigation panel
Click on the General Information button
Enter 1 in, 1 = married filing separate and treated as unmarried

See the Form 2441 instructions for more information:

"Married Persons Filing Separately

Generally, married persons must file a joint return to claim the credit. If your filing status is married filing separately and all of the following apply, you are considered unmarried for purposes of claiming the credit on Form 2441.

You lived apart from your spouse during the last 6 months of [current tax year].
Your home was the qualifying person's main home for more than half of [current tax year].
You paid more than half of the cost of keeping up that home for [current tax year].

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."

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