rom 2441

Department of the Treasury
Internal Revenue Service

Credit for Child and Dependent Care Expenses 1978

D> Attach to Form 1040. D> See Instructions below.

Name(s) as shown on Form 1040

Your social security number

1 See the definition for ‘qualifying person” in the instructions. Then read the instructions for line 1.

(a) Name of qualifying perso

jn (b) Date of birth

(©) Relationship

(d) During 1978, the person
lived with you for:

Months Days

2 Persons or organizations who cared for those listed on line 1.

See the instructions for line 2.

(a) Name and address
(if more space is needed,
attach schedule)

(b) Social security num-

(c) Relationship,
ber, if applicable if any

From
Month—Day

(d) Period of care (e) Amount of 1978 ex-
penses (include those
To not paid during the year)
Month—Day

To Figure Your Credit, You MUST Complete ALL Lines That Apply

3 Add the amounts in column 2(e)

4 Enter $2,000 ($4,000 if you listed two or more names in line 1) or amount on line 3, whichever is
less 2 6 ee ee he

5 Earned income (wages, salaries, tips, etc.). See the instructions for line 5. An entry MUST be made on this line.
(a) If unmarried at end of 1978, enter yourearnedincome. . . . . . «=e

|

(b) If married at end of 1978, enter your earned income or your spouse’s, whichever is less. WWM!|’"_JTM,
6 Enter the amount on line 4 or line 5, whichever is less. . 2 6. 1 6 1 6 ew ew ee 6
7 Amount on line 6 paid during 1978. An entry MUST be made onthisline. . . . . . . . BI] 7_
8 Child and dependent care expenses for 1977 paid in 1978. See instructions forline8. . . . - | 8
9 Add amounts onlines7and8. 6 6. ee ee ee ee ee ee LOT
10 Multiply line 9 by 20 percent. This is your credit for child and dependent care expenses. Enter here
and on Form 1040, line 40. . . . ss wo, . -. - . . {10
11 If payments listed on line 2 were made to an individual, complete the following: |_Yes | No
(a) If payment of $50 or more in a calendar quarter was made to an individual, were the services performed in yourhome?. . . .
(b) If “Yes,” have appropriate wage tax returns on wages for services in your home been filed (see instructions for line 11)?.. . . .

(c)_if answer to (b) is “Yes,”’ enter your employer identification number .

> |

General Instructions

What is the Child and Dependent Care
Expenses Credit?—This is a credit you can
take against your tax if you paid someone
to care for your child or dependent so that
you could work or look for work. You can
also take the credit if you paid someone to
care for your spouse. The instructions that
follow list conditions that must be met to
take the credit. If you need more informa
tion, please get Publication 503, Child Care
and Disabled Dependent Care.

For purposes of this credit, we have de-
fined some of the terms used here. Refer
to these when you read the instructions.

Definitions

A qualifying person can be:

© Any person under age 15 whom you
claim as a dependent. (If you are divorced,
legally separated, or separated under a
written agreement, please see the Child
Custody Test in the instructions.)

@ Your spouse who is mentally or physi-
cally not able to care for himself or herself.

@ Any person not able to care for him-
self or herself that you can claim as a de-
pendent, or could claim as a dependent ex-
cept that he or she had income of $750 or
more,

A relative is your child, stepchild,
mother, father, grandparents, brother,
sister, grandchild, uncle, aunt, nephew,
niece, stepmother, stepfather, stepbrother,
stepsister, mother-in-law, father-in-law,
brother-in‘law, sister-in-law, son-in-law,
and daughter-in-law. A cousin is not a
relative.

A full-time student is one who was en-
rolled in a day school for the number of
hours or classes that is considered full-
time attendance. The student must have
been enrolled at least 5 months during

8.

What Are Child and Dependent Care
Expenses?

These expenses are the amounts you
paid for household services and care of the
qualifying person.

Household Services.—These are serv-
ices performed by a cook, housekeeper,

governess, maid, cleaning person, baby-
sitter, etc. The services must have been
needed to care for the qualifying person
as well as run the home. For example, if
you paid for the services of a maid or a
cook, the services must have also been for
the benefit of the qualifying person.

Care of the Qualifying Person.—For the
purposes of this credit, care includes cost
of services for the well-being and protec
tion of the qualifying person.

Care does not include expenses for food
and clothes. If you paid for care that in-
cluded these items and you cannot sepa-
rate their cost, claim the total payment.

Example: You paid a nursery school to
care for your child and the school gave the
child lunch, Since you cannot separate the
cost of the lunch from the cost of the care,
you can claim the entire amount that you
paid to the school.

This example would not apply if you had
educational costs for a child in the first
grade or above because these costs can-
not be included in figuring the credit.

You can claim care provided outside
(Continued on back)
263-145-1



your home if the care was for your de-
pendent under age 15.

You can claim medical expenses you
paid for the qualifying person if the ex-
penses were required so you could work.
If you itemized deductions, you may want
to take all or part of these expenses on
Schedule A. For example, if you can’t take
all of the medical expenses on Form 2441
because your costs for care have reached
the limit ($2,000 or $4,000), you can
claim the rest of the medical expenses on
Schedule A. If you show all of the medical
expenses on Schedule A, you cannot claim
on Form 2441 that part which is not de-
ductible on Schedule A because of the 3
percent limit.

To Take This Credit.—You must file
Form 1040, not Form 1040A, and you
meet all of the conditions listed below.

(1) It was necessary for you to make
child and dependent care payments so you
(and your spouse if you were married)
could work or look for work.

(2) One or more qualifying persons lived
in your home.

(3) You (and your spouse if you were
married) paid more than half the cost of
keeping up your home. This cost includes
rent or mortgage payments; utility
charges; maintenance and repairs; prop-
erty taxes and property insurance; and
food costs (but not dining out).

(4) You must file a joint return if you
were married. There are two exceptions to
this rule. You can file a separate return if:

(a) You were legally separated; or

(b) You were living apart and:

© The qualifying person lived in your
home for more than 6 months; and

@ You paid more than half the cost of
keeping up your home; and

e Your spouse did not live in your
home during the last 6 months of your tax
year.

Child Custody Test—If you were di-
vorced, legally separated, or separated
under a written agreement, your child is
a qualifying person if you had custody for
the longer period during 1978. The child
must also have:

@ Received over half of his or her sup-
port from the parents, and

© Been in the custody of one or both
parents for more than half of 1978, and

@ Been under 15, or physically or men-
tally unable to care for himself or herself.

(5) You paid someone, other than a de-
pendent relative or your spouse, to care for
the qualifying person.

You are allowed to pay a relative who
was not your dependent if their services
are considered employment for social se-
curity purposes. However, if the relative is
your child, he or she must have been at
least 21. If the relative is your parent, both
of the following conditions must have been
met for 4 continuous weeks during a calen-
dar quarter:

(a) The qualifying person was your child
under 18 or whose physical or mental con-
dition required care by an adult.

(b) You were a widow(er) or divorced;
or your spouse was physically or mentally
unable to care for the child under 18.

Credit Limitation.—The credit is gener-
ally 20 percent of the amount you paid
someone to care for the qualifying person.
The most you can figure the credit on is
$2,000 a year for one qualifying person
($4,000 for two or more).

Line-by-Line Instructions

Line 1.—1In column (a) list the name of
each qualifying person who was cared for
during 1978 so you could work. In column
(b) show the date of birth of each person.
In column (c) show that person's relation
ship to you (for example: son or daughter).
In column (d) show the number of months
and days each person lived in your home
during 1978. Include only the times when
the person was qualified.

Line 2.—In column (a) show the name
and address of the person or organization
who cared for each qualifying person. If
you listed a person who was your em-
ployee and provided the care in your home,
then in column (b) enter that person’s so-
cial security number. Leave column (b)
blank if: the person was not your em-
ployee; or was self-employed; an employee
of an organization, or a partnership, or
did not provide the care in your home.

In column (c) write none if the person
who provided the care was not related to
you. If the care was provided by a relative,
show the relationship to you. See defini-
tion of relative on the front of the form.

In column (d) show the period of time
each person or organization provided care,

In column (e) list amounts you paid or
still owe for care provided in 1978.

Line 3.—Add the amounts in column
2(e) and enter the total.

Line 4.—Enter $2,000 ($4,000 if more
than one person is listed in line 1) or the
amount on line 3, whichever is less.

Line 5.—This line is used to figure your
earned income. Generally, you can figure
earned income using steps (a) through (e).
If you_are unmarried, enter your amounts
from Form 1040 when they are needed for
the steps below. If you are married, each
spouse’s earned income will have to be fig-
ured separately.

(a) Enter one spouse's
income from Form
1040, line8. .

Enter the same
spouse’s net profit
from Schedule C or
Schedule F (Form

(b)

(c) Add the amounts

from (a) and (b) .
(d) Enter the same
spouse's portion of
income exclusion
(spouse's portion of
Form 1040, line 30)
Subtract (d) from
(c). This is one
spouse's earned in-
come . :

If you are unmarried, enter the amount
from (e) on line 5. If you are married, go
back and figure the other spouse’s earned
income using steps (a) through (e). Decide
which spouse had the lower earned in-
come. Enter that amount on line 5.

If your spouse was a full-time student at
an educational organization or incapable of
self-care, use the greater of your spouse’s
monthly earned income or $166 ($333 if
you listed two qualifying persons on line
1(a)) to determine his or her total yearly
income,

If, in the same month, both husband
and wife were full-time students and did

‘ty US, GOVERNMENT PRINTING OFFICE : 1978—-O-263-145

not work, no amounts paid that month may
be used to figure the credit. The same ap-
plies to a couple who did not work because
both are incapable of self-care.

Line 6.—Enter the amount from line 4
or line 5, whichever is less.

Line 7.—How much of the amount on
line 6 did you actually pay in 1978? Enter
this amount on line 7. Do not list any
amounts for 1978 that you did not pay
until 1979.

Line 8.—If you had child and dependent
care expenses for 1977 that were not paid
until 1978, add them and enter on thi:
line. Be sure it is not over your 1977 limit.
Attach a sheet similar to the example be-
low, showing how you figured the amount
you are carrying over to 1978.

Example: In 1977 you had child care ex-
penses of $2,100 for your 12-year-old son.
For one child, you were limited to $2,000.
Of the $2,100, you paid $1,800 in 1977
and $300 in 1978. Your spouse’s earned
income of $5,000 was less than your
earned income. You would be allowed to
figure a credit on $200 in 1978, as follows:

(1) 1977 child care expenses paid in 1977 . $1,800

(2) 1977 child care expenses paid in 1978. __300
@) Total. Le 2,100
(4) Limit for one qualifying person . 2,000
(5) Earned income reported in 1977. . . 5,000
(6) Smaller of lines 3, 4, and 5 . 2,000
(7) Subtract child care expenses on which

credit was figured in 1977... 1,800
(8) 1977 child care expenses carried over

for credit this year (1978). . . . $ 200

Line 9.—Add lines 7 and 8 and write the
total on line 9.

Line 10.—Multiply the amount on line
9 by 20 percent. Enter the result on this
line and on Form 1040, line 40. This is
your credit for child and dependent care
expenses.

Line 11.—On line 11(a), check yes or no
box if you paid cash wages for a household
employee who performed services of a
household nature in your home. In general,
if you paid cash wages of $50 or more in a
calendar quarter for household services to
a person such as a cook, housekeeper, gov-
erness, maid, cleaning person, babysitter,
etc., you are required to file an employment
tax return. If you are not sure whether you
should file an employment tax return, ask
the Internal Revenue Service or obtain
Form 942, Employer’s Quarterly Tax Re-
turn for Household Employees. Note: Be-
ginning in 1978, employees doing house-
hold duties are covered by the Federal Un-
employment Tax Act (FUTA). If you paid
$1,000 or more for household duties in a
calendar quarter in 1978, you should file
Form 940, Employer's Annual Federal Un-
smployment Tax Return by January 31,
1 A

In line 11(b), check yes or no box de-
pending on whether or not you have filed
Form 942, Employer's Quarterly Tax Re-
turn for Household Employees, for services
performed in your home.

On line 11(c), enter your employer iden-
tification number. If you do not have a
number, and are liable, file Form 942, and
enter “none” in the space for “Employer
identification number.””

263-145-1