Question: How should child care expenses be entered if the party received dependent care benefits?
Answer:
Follow these steps to make sure that the program is giving an accurate tax estimate in this situation.
- For gross wages, subtract the amount of dependent care benefits. For example, if gross wages are $100,000 and dependent care benefits $5,000, enter $95,000 as gross annual wages.
- If there are two or more children in daycare, enter as child care expenses (a) the smaller of $6,000 or total annual daycare expenses minus (b) the annual dependent care benefits. The result is often $1,000 per year, since annual daycare expenses are typically more than $6,000 and dependent care benefits are typically $5,000 per year (the maximum). You can easily convert the annual figure to a monthly or weekly figure by clicking in the child care expense field, clicking the # sign or calculator symbol, and entering the annual amount. The monthly amount for $1,000 is $83.
- If there is one child in daycare, enter as child care expenses (a) the smaller of $3,000 or total annual daycare expenses minus (b) the annual dependent care benefit. This amount is often $0 since dependent care benefits and expenses often exceed $3,000.
- After entering the amount in Step 2 or 3, go to View / Edit Taxes and make a note of any child care credit amount.
- Go back to the data entry screen and enter the full amount of child care expenses.
- Go to View/Edit Taxes and override the child care credit with the amount noted in step 4.