[Anonymous]

These type of tax questions always get me:

To qualify for the child care credit on a joint return, at least one spouse must:

A.have an adjusted gross income of $15,000 or less.

B.be gainfully employed when related expenses are incurred.

I will always answer neither, because you don’t need to be gainfully employed. You can be a fulltime student or also be searching for work to qualify for the credit. I do not understand why they want you to answer that B is a correct response.

Any tips to break myself from this habit?

[Anonymous]

The IRC says, “…amounts paid for the following expenses, but only if such expenses are incurred to enable the taxpayer to be gainfully employed…”

So, I'm guessing the question is checking if you know that the term “gainfully employed” is included in the code. Unfortunately, we are trained to look at each question as if it is trying to trick us with the exceptions (since it usually is) & I don't know how to distinguish between the 2 types of questions.

Here is how the Federal Tax Coordinator Analysis explains it…

“The expenses must be for the care of a qualifying individual or household services performed during periods in which the taxpayer (and the taxpayer's spouse, if filing jointly) is gainfully employed or is in active search of gainful employment.

So, for this purpose, work (employment) also includes actively looking for work. But, if the taxpayer doesn't find a job and has no earned income for the year (see ¶ A-4304), the taxpayer can't take the credit.”

I hope this helps a little!

[Anonymous]

Where did this question come from? I'm 99% sure I had this question in Gleim and the correct answer did NOT include “be gainfully employed,” with the answer explanation saying expenses can be incurred while searching for work. Sounds like a potential wrong answer to me.

[Tncincy]

child care credit not earned credit. This means you are paying for babysitting. so I would pick both. can't get credit if you don't or didn't work. don't know about searching for work, i guess unemployment would provide the search income.

It begins with a 75
Been here too long as a cheerleader....ready to pass

[Anonymous]

Your answer key is definitely wrong. This is from Gleim, and I have NEVER seen a wrong answer in Gleim.

Child and Dependent Care Credit. A taxpayer is eligible for this credit only if 1) and 2) below are satisfied.

1) Child and dependent care expenses are incurred to enable a taxpayer to maintain gainful employment. The expenses may be incurred when the taxpayer is employed or actively seeking employment.

2) The taxpayer provides more than half the cost of maintaining a household for a dependent under age 13 or an incapacitated spouse or dependent.

I also found the same MCQ in Gleim just to make extra sure and it says “no” for both – meaning your gut instinct to go with “neither” is correct. Their explanation is “The IRC allows a nonrefundable credit to a provider of care to dependents for a limited portion of expenses necessary to enable gainful employment. The credit claimant must have qualified child care expenses when the claimant is employed or actively seeking gainful employment. The credit amount is not eliminated when AGI exceeds $15,000, only phased down from 35% to 20% in increments of 1% for each $2,000 AGI exceeds $15,000. “

[Author]

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