Publication 503 - Child And Dependent Care Expenses

However, if you can show that you used due diligence in

qualify as work-related expenses and also as medical

trying to supply the information, you can still claim the

expenses. You can use them either way, but you cannot

credit.

use the same expenses to claim both a credit and a

You can show due diligence by getting and keeping the

medical expense deduction.

provider’s completed Form W –10 or one of the other

If you use these expenses to figure the credit and they

sources of information listed earlier. Care providers can be

are more than the earned income limit or the dollar limit,

penalized if they do not provide this information to you or if

discussed later, you can add the excess to your medical

they provide incorrect information.

expenses. However, if you use your total expenses to

figure your medical expense deduction, you cannot use

Provider refusal. If the provider refuses to give you the

any part of them to figure your credit. For information on

identifying information, you should report whatever infor-

medical expenses, see Publication 502, Medical and Den-

mation you have (such as the name and address) on the

tal Expenses.

form you use to claim the credit. Enter “See Page 2” in the

columns calling for the information you do not have. On the

Amounts excluded from your income under your

bottom of page 2, explain that you requested the informa-

employer’s dependent care benefits plan cannot

tion from the care provider, but the provider did not give

be used to claim a medical expense deduction.

CAUTION

you the information. This statement will show that you used

due diligence in trying to furnish the necessary information.

Employer-Provided Dependent

Care Benefits

How To Figure the Credit

Dependent care benefits include:

Your credit is a percentage of your work-related expenses.

1) Amounts your employer pays directly to either you or

Your expenses are subject to the earned income limit and

your care provider for the care of your qualifying

the dollar limit. The percentage is based on your adjusted

person while you work, and

gross income.

2) The fair market value of care in a day-care facility

Figuring Total

provided or sponsored by your employer.

Work-Related Expenses

Your salary may have been reduced to pay for these

benefits. If you received benefits, they should be shown on

To figure the credit for 2002 work-related expenses, count

your Form W –2, Wage and Tax Statement. See State-

only those you paid by December 31, 2002.

ment for employee, later.

Expenses prepaid in an earlier year. If you pay for

Exclusion. If your employer provides dependent care

services before they are provided, you can count the pre-

benefits under a qualified plan, you may be able to exclude

paid expenses only in the year the care is received. Claim

these benefits from your income. Your employer can tell

the expenses for the later year as if they were actually paid

you whether your benefit plan qualifies. If it does, you must

in that later year.

complete Part III of either Form 2441 or Schedule 2 (Form

1040A) to claim the exclusion even if you cannot take the

Expenses not paid until the following year. Do not

credit. You cannot use Form 1040EZ.

count 2001 expenses that you paid in 2002 as work-related

The amount you can exclude is limited to the smallest

expenses for 2002. You may be able to claim an additional

of:

credit for them on your 2002 return, but you must figure it

separately. See Payments for previous year’s expenses

1) The total amount of dependent care benefits you

under Amount of Credit, later.

received during the year,

If you had expenses in 2002 that you did not pay

2) The total amount of qualified expenses you incurred

TIP

until 2003, you cannot count them when figuring

during the year,

your 2002 credit. You may be able to claim a

credit for them on your 2003 return.

3) Your earned income,

4) Your spouse’s earned income, or

Expenses reimbursed. If a state social services agency

5) $5,000 ($2,500 if married filing separately).

pays you a nontaxable amount to reimburse you for some

of your child and dependent care expenses, you cannot

count the expenses that are reimbursed as work-related

Statement for employee. Your employer must give you a

expenses.

Form W –2 (or similar statement), showing in box 10 the

total amount of dependent care benefits provided to you

Example. You paid work-related expenses of $3,000.

during the year under a qualified plan. Your employer will

You are reimbursed $2,000 by a state social services

also include any dependent care benefits over $5,000 in

agency. You can use only $1,000 to figure your credit.

your wages shown in box 1 of your Form W –2.

Medical expenses. Some expenses for the care of quali-

Forfeitures. Forfeitures are amounts credited to your

fying persons who are not able to care for themselves may

dependent care benefit account (flexible spending ac-

Page 10

Publication 503 - Child And Dependent Care Expenses - 2002 Page 10

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