Department of the Treasury

Internal Revenue Service

2003 Instructions for Schedule 2 (Form 1040A)

If you paid someone to care for your child or other qualifying person so you (and your Child and spouse if filing a joint return) could work or look for work in 2003, you may be able

to take the credit for child and dependent care expenses. But you must have had earned

income to do so. If you can take the credit, use Schedule 2 to figure the amount of Dependent Care your credit.

If you (or your spouse if filing a joint return) received any dependent care Expenses for benefits for 2003, you must use Schedule 2 to figure the amount, if any, of the

benefits you may exclude from your income on Form 1040A, line 7. You must Form 1040A complete Part III of Schedule 2 before you can figure the credit, if any, in Part II.

Additional Information. See Pub. 503 for more details about the credit.

Filers

dependent. If your child is not your dependent, he or she is a Changes To Note qualifying person only if all five of the following apply. • The dollar limit on the amount of qualified expenses that 1. You had custody of the child for a longer time in 2003 can be used to figure the credit has been increased to $3,000 than the other parent. See Pub. 501 for the definition of for one qualifying person; $6,000 for two or more qualifying custody. persons.

2. One or both of the parents provided over half of the • The maximum credit has been increased to $1,050 for the child’s support in 2003. care of one qualifying person; $2,100 for the care of two or

more qualifying persons. 3. One or both of the parents had custody of the child for

more than half of 2003.

4. The child was under age 13 or was disabled and could not Definitions take care of himself or herself.

Dependent Care Benefits. These include amounts your 5. The other parent claims the child as a dependent

employer paid directly to either you or your care provider for because—

the care of your qualifying person(s) while you worked. These • As the custodial parent, you signed Form 8332 or a benefits also include the fair market value of care in a day-care similar statement agreeing not to claim the child’s exemption facility provided or sponsored by your employer. Your salary for 2003 or

may have been reduced to pay for these benefits. If you • Your divorce decree or written agreement went into effect received dependent care benefits, they should be shown in before 1985 and it states that the other parent can claim the box 10 of your 2003 Form(s) W-2. child as a dependent and the other parent gave at least $600 for

Qualifying Person(s). A qualifying person is: the child’s support in 2003. But this rule does not apply if your

decree or agreement was changed after 1984 to say that the • Any child under age 13 whom you can claim as a other parent cannot claim the child as a dependent. dependent (but see Exception for children of divorced or

separated parents on this page). If the child turned 13 during If this exception applies, the other parent cannot treat the the year, the child is a qualifying person for the part of the year child as a qualifying person even though the other parent claims he or she was under age 13. the child as a dependent. • Your disabled spouse who is not able to care for himself

or herself. Qualified Expenses. These include amounts paid for household

• Any disabled person not able to care for himself or herself services and care of the qualifying person while you worked or

whom you can claim as a dependent (or could claim as a looked for work. Child support payments are not qualified

dependent except that the person had gross income of $3,050 or expenses. Also, expenses reimbursed by a state social service

more). But if this person is your child, see Exception for agency are not qualified expenses unless you included the

children of divorced or separated parents on this page. reimbursement in your income.

To find out who is a dependent, see the instructions for Household services. These are services needed to care for

Form 1040A, line 6c. the qualifying person as well as to run the home. They include,

for example, the services of a cook, maid, babysitter,

To be a qualifying person, the person must have housekeeper, or cleaning person if the services were partly for

shared the same home with you in 2003. the care of the qualifying person. Do not include services of a

chauffeur or gardener. CAUTION

!

You can also include your share of the employment taxes

paid on wages for qualifying child and dependent care services. Exception for children of divorced or separated parents.

If you were divorced, legally separated, or lived apart from the Care of the qualifying person. Care includes the cost of

other parent during the last 6 months of 2003, you may be able services for the qualifying person’s well-being and protection. It

to take the credit or the exclusion even if your child is not your does not include the cost of clothing or entertainment.

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You can include the cost of care provided outside your • You lived apart from your spouse during the last 6 months home for your dependent under age 13 or any other qualifying of 2003, and person who regularly spends at least 8 hours a day in your • The qualifying person lived in your home more than half home. If the care was provided by a dependent care center, the of 2003, and center must meet all applicable state and local regulations. A • You provided over half the cost of keeping up your home. dependent care center is a place that provides care for more

than six persons (other than persons who live there) and If you meet all the requirements to be treated as unmarried receives a fee, payment, or grant for providing services for any and meet items 2 through 6 listed earlier, you can take the of those persons, even if the center is not run for profit. credit or the exclusion. If you do not meet all the requirements

You can include amounts paid for items other than the care to be treated as unmarried, you cannot take the credit.

However, you can take the exclusion if you meet items 2 of your child (such as food and schooling) only if the items are

through 6. incidental to the care of the child and cannot be separated from

the total cost. But do not include the cost of schooling for a

child in the first grade or above. Also, do not include any

expenses for sending your child to an overnight camp. Part I

Medical expenses. Some disabled spouse and dependent care Persons or Organizations Who Provided the

expenses may qualify as medical expenses if you itemize Care

deductions. But you must use Form 1040. See Pub. 503 and

Pub. 502 for details. Line 1

Earned Income. This is the amount shown on Form 1040A, Complete columns (a) through (d) for each person or

line 7, minus (a) any amount included for a scholarship or organization that provided the care. You can use Form W-10

fellowship grant that was not reported to you on a Form W-2 or any other source listed in its instructions to get the

and (b) any amount received as a pension or annuity from a information from the care provider. If you do not give correct

nonqualified deferred compensation plan or a nongovernmental or complete information, your credit (and exclusion, if

section 457 plan. This amount may be reported in box 11 of applicable) may be disallowed unless you can show you used

your Form W-2. If you received such an amount but box 11 is due diligence in trying to get the required information.

blank, contact your employer for the amount received as a Due Diligence. You can show a serious and earnest effort (due pension or annuity. For purposes of Part III of Schedule 2, diligence) to get the information by keeping in your records a earned income does not include any dependent care benefits Form W-10 completed by the care provider. Or you may keep shown on line 12 of Schedule 2. If filing a joint return, figure one of the other sources of information listed in the instructions your and your spouse’s earned income separately. for Form W-10. If the provider does not give you the

Special situations. If you are filing a joint return, information, complete the entries you can on line 1 of

disregard community property laws. If your spouse died in 2003 Schedule 2. For example, enter the provider’s name and

and had no earned income, see Pub. 503. If your spouse was a address. Enter “See Page 2” in the columns for which you do

student or disabled in 2003, see the instructions for line 5. not have the information. Then, on the bottom of page 2,

explain that the provider did not give you the information you

asked for.

Who Can Take the Credit or Exclude Columns (a) and (b). Enter the care provider’s name and Dependent Care Benefits? address. If you were covered by your employer’s dependent

You can take the credit or the exclusion if care plan and your employer furnished the care (either at your all six of the

workplace or by hiring a care provider), enter your employer’s following apply. name in column (a). Next, enter “See W-2” in column (b). 1. Your filing status is single, head of household, qualifying Then, leave columns (c) and (d) blank. But if your employer widow(er), or married filing jointly. But see Married Persons paid a third party (not hired by your employer) on your behalf Filing Separate Returns on this page. to provide the care, you must give information on the third

2. The care was provided so you (and your spouse if you party in columns (a) through (d).

were married) could work or look for work. However, if you

did not find a job and have no earned income for the year, you Column (c). If the care provider is an individual, enter his or

cannot take the credit or the exclusion. But if your spouse was her social security number (SSN). Otherwise, enter the

a student or disabled, see the instructions for line 5. provider’s employer identification number (EIN). If the provider

is a tax-exempt organization, enter “Tax-Exempt.” 3. You (and your spouse if you were married) paid over half

the cost of keeping up your home. The cost includes rent, Column (d). Enter the total amount you actually paid in 2003 mortgage interest, real estate taxes, utilities, home repairs, to the care provider. Also, include amounts your employer paid insurance on the home, and food eaten at home. to a third party on your behalf. It does not matter when the

4. You and the qualifying person(s) lived in the same home. expenses were incurred. Do not reduce this amount by any

5. The person who provided the care was not your spouse or reimbursement you received.

a person whom you can claim as a dependent. If your child

provided the care, he or she must have been age 19 or older by

the end of 2003. Part II

6. You report the required information about the care Credit for Child and Dependent Care provider on line 1 and, if taking the credit, the information Expenses about the qualifying person on line 2.

Married Persons Filing Separate Returns. Line 2 If your filing status

is married filing separately and all of the following apply, you Complete columns (a) through (c) for each qualifying person. If

are considered unmarried for purposes of figuring the credit and you have more than two qualifying persons, attach a statement

the exclusion on Schedule 2. to your return with the required information. Be sure to put

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your name and social security number (SSN) on the statement. increase the amount of your 2003 credit. To figure the credit,

Also, enter “See Attached” in the space to the left of line 3. see the worksheet under Amount of Credit in Pub. 503. If you

can take a credit for your 2002 expenses, enter the amount of Column (a). Enter each qualifying person’s name. the credit and “CPYE” in the space to the left of line 9. Also,

Column (b). You must enter the qualifying person’s SSN. Be enter the name and social security number of the person for sure the name and SSN entered agree with the person’s social whom you paid the prior year’s expenses next to this amount. security card. Otherwise, at the time we process your return, we Then, add the credit to the amount on line 9 and replace the may reduce or disallow your credit. If the person was born and amount on line 9 with that total. Also, attach a statement

died in 2003 and did not have an SSN, enter “Died” in column showing how you figured the credit. (b) and attach a copy of the person’s birth certificate. To find

out how to get an SSN, see Social Security Number (SSN) on

page 20 of the Form 1040A instructions. If the name or SSN Part III on the person’s social security card is not correct, call the

Social Security Administration at 1-800-772-1213. Dependent Care Benefits

Column (c). Enter the qualified expenses you incurred and paid Line 13 in 2003 for the person listed in column (a). Prepaid expenses

are treated as paid in the year the care is provided. Do not If you had a flexible spending account, any amount included on

include in column (c) qualified expenses: line 12 that you did not receive because you did not incur the

expense is considered forfeited. Enter the forfeited amount on • You incurred in 2003 but did not pay until 2004. You may line 13. Do not include amounts you expect to receive at a be able to use these expenses to increase your 2004 credit. future date. • You incurred in 2002 but did not pay until 2003. Instead,

see the instructions for line 9. Example. Under your employer’s dependent care plan, you

chose to have your employer set aside $5,000 to cover your • You prepaid in 2003 for care to be provided in 2004. 2003 dependent care expenses. The $5,000 is shown in box 10 These expenses can only be used to figure your 2004 credit. of your Form W-2. In 2003, you incurred and were reimbursed

If you paid qualified expenses for the care of two or for $4,950 of qualified expenses. You would enter $5,000 on

more qualifying persons, the $6,000 limit does not line 12 and $50, the amount forfeited, on line 13.

need to be divided equally. For example, if you

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incurred and paid $2,500 of qualifying expenses for Line 15

the care of one qualifying person and $3,500 for the care of Enter the total of all qualified expenses incurred in 2003 for the another qualifying person, you can use the total, $6,000, to care of your qualifying person(s). It does not matter when the figure the credit. expenses were paid.

Line 5 Example. You received $2,000 in cash under your employer’s

dependent care plan for 2003. The $2,000 is shown in box 10 Spouse Who Was a Student or Disabled. Your spouse was a of your Form W-2. Only $900 of qualified expenses were student if he or she was enrolled as a full-time student at a incurred in 2003 for the care of your 5-year-old dependent school during any 5 months of 2003. A school does not include child. You would enter $2,000 on line 12 and $900 on line 15. a night school or correspondence school. Your spouse was

disabled if he or she was not capable of self-care. Figure your Line 18 spouse’s earned income on a monthly basis.

If your filing status is married filing separately, see Married For each month or part of a month your spouse was a Persons Filing Separate Returns on page 2. Are you student or disabled, he or she is considered to have worked and considered unmarried under that rule? earned income. His or her earned income for each month is

considered to be at least $250 ($500 if more than one

qualifying person was cared for in 2003). If your spouse also  Yes. Enter your earned income (from line 17) on

worked during that month, use the higher of $250 (or $500) or line 18. On line 20, enter the smaller of the

his or her actual earned income for that month. If, in the same amount from line 19 or $5,000.

month, both you and your spouse were either students or  No. Enter your spouse’s earned income on line 18. disabled, only one of you can be treated as having earned If your spouse was a student or disabled in income in that month. 2003, see the instructions for line 5. On line

For any month that your spouse was not a student or 20, enter the smaller of the amount from 

disabled, use your spouse’s actual earned income if he or she line 19 or $2,500. worked during the month.

Line 9

Credit for Prior Year’s Expenses. If you had qualified expenses

for 2002 that you did not pay until 2003, you may be able to

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