what to do when child care provider doesnt want to give tax info

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The Ins and Outs of the Child and Dependent Care Tax Credit

Updated for Revenue enhancement Year 2021 • July 24, 2021 01:51 PM

OVERVIEW

If you lot are paying someone to take care of your children or another person in your household while you work, you might exist eligible for the child and dependent care credit. This credit "gives back" a portion of the money you spend on care, and tin reduce your tax bill by hundreds or even thousands of dollars.

For information on the tertiary coronavirus relief package, delight visit our "American Rescue Plan: What Does it Mean for You and a Third Stimulus Check" weblog post.

child and dependent care credit

Benefits of the tax credit

The Kid and Dependent Intendance Credit is a tax break specifically for working people to help starting time the costs associated with caring for a child or dependent with disabilities.

There are two major benefits of the credit:

This is a tax credit, rather than a revenue enhancement deduction. A tax deduction simply reduces the amount of income that you must pay tax on. A $i,000 deduction, for example, might reduce your tax bill by merely $150 or $200 depending on your revenue enhancement subclass. A tax credit, all the same, direct reduces your taxes, dollar for dollar. A $ane,000 tax credit cuts your tax bill by $1,000.
Yous can merits the credit regardless of your income. A lot of tax breaks take income limits and are not bachelor at all to people with incomes in a higher place those limits. The Child and Dependent Care Credit does go smaller at higher incomes, just it doesn't disappear.

Care you can claim

To qualify for the child and dependent intendance credit, yous must have paid someone, such as a daycare provider, to care for i or more than of the following people:

A child age 12 or younger at the finish of the yr whom you claim as a dependent on your taxation render
Your spouse, if that person is unable to accept care of himself or herself and has lived in your abode for at least one-half the yr
Any other person claimed equally a dependent on your return, if that person can't take intendance of himself or herself and has lived in your home at least half the year

Limits on who can provide intendance

Yous can claim the credit for money you paid for care every bit long every bit the person you paid was not ane of the post-obit people:

Your spouse
A parent of the child being cared for—for example, you couldn't claim the credit if you pay your ex-husband or ex-married woman to care for the children you have together
Anyone listed as a dependent on your tax return
Your own child age 18 or younger, regardless of whether he or she is a dependent on your tax return—for example, y'all couldn't pay your 17-year-onetime child to look afterward an viii-year-old sibling and so merits the credit

Other requirements

There are several other tests you lot must meet to claim the credit:

You (and your spouse, if y'all're married) must have "earned income," meaning coin earned from a job. Non-piece of work income, such every bit investment profits, doesn't count.
You must have paid for the care so that you lot could work or wait for work. Being a full-time educatee or a parent unable to care for themselves does count as "working" for the purposes of the credit, fifty-fifty if y'all don't receive any income for it.
If you are married, you must file a joint tax return.
Yous must provide the name, address and Taxpayer Identification Number (TIN) of the person who provided the care. The taxpayer ID number is either a Social Security number (SSN) or an Employer Identification Number (EIN). Enquire your care provider for the number.

Figuring the credit

The size of your credit is based on how much yous spend for child and dependent care, as well as your income. TurboTax guides you through the process of figuring your credit and fills in the proper course for y'all, but in general, information technology works like this:

Add together upwardly the full amount of your intendance expenses that qualify for the credit.
If your employer gives you coin to pay child care expenses, or if you take money withheld from your pay on a pre-tax basis, you lot must decrease this money received from your allowable expenses.
Compare your claimed expenses with your earned income and, if you're married, your spouse's earned income. Take the smallest of all these amounts. These are your "allowable expenses." Your credit is a percentage of your commanded expenses.
The higher your income, the smaller your percentage, and therefore the smaller your credit. There is no upper limit on income for claiming the credit.

For tax twelvemonth 2020, the maximum amount of intendance expenses yous're allowed to claim is $three,000 for 1 person, or $6,000 for two or more people. The percentage of your qualified expenses that you can claim ranges from 20% to 35%.

The American Rescue Plan brings significant changes to the amount and style that the child and dependent care tax credit can be claimed for 2021. The programme increases the amount of expense eligible for the credit, relaxes the credit reduction due to income levels, and as well makes it fully refundable. This ways that, unlike in other years, you tin still go the credit fifty-fifty if you don't owe taxes.

For tax year 2021 (the taxes you file in 2022):

The amount of qualifying expenses increases from $three,000 to $8,000 for one qualifying person and from $6,000 to $16,000 for two or more qualifying individuals
The percentage of qualifying expenses eligible for the credit increases from 35% to fifty%
The kickoff of the reduction of the credit is increased from $15,000 to $125,000 of adjusted gross income (AGI).

Also for revenue enhancement year 2021, the maximum amount that tin can be contributed to a dependent intendance flexible spending business relationship and the amount of revenue enhancement-free employer-provided dependent care benefits is increased from $5,000 to $x,500.

Considering alternatives

While the kid and dependent care credit is bonny, you may save even more than money with other options. For example, if your employer provides a way to pay for kid intendance with "pre-tax" dollars—that is, money that's taken out of your paycheck before taxes are calculated—the amount you save in taxes may be greater than what y'all become with the credit.

This may be possible with a Flexible Spending Account or similar account.
Consider checking with your employer's human resources department to explore your options.

And while you're at it, take time to larn about other tax breaks available to parents.

Remember, with TurboTax, we'll ask you lot simple questions most your life and help yous fill up out all the correct taxation forms. With TurboTax you tin can exist confident your taxes are done right, from uncomplicated to complex tax returns, no matter what your situation.

All you need to know is yourself

Reply simple questions about your life and TurboTax Free Edition will accept care of the rest.

For elementary revenue enhancement returns only

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The to a higher place commodity is intended to provide generalized financial data designed to brainwash a broad segment of the public; it does not give personalized taxation, investment, legal, or other business and professional advice. Before taking whatsoever action, you should always seek the assistance of a professional person who knows your particular state of affairs for advice on taxes, your investments, the law, or any other business and professional matters that affect yous and/or your business.

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Source: https://turbotax.intuit.com/tax-tips/family/the-ins-and-outs-of-the-child-and-dependent-care-tax-credit/L2H7rzUWc

what to do when child care provider doesnt want to give tax info