You may be
misinterpreting the Form 2441 instructions relating to Schedule C income.
Your wife's entry on
line 4 or 5 of Form 21 would be line 1 of Schedule C, if she's a statutory employee. A statutory employee would have the
"Statutory employee" box checked in box 13.
If that box is
checked on her W-2, and she's actually a statutory employee, make sure the box
is checked on the W-2 that you've entered in TurboTax. The computation should be fine then.
If she's not a
statutory employee, then her earned income, based on what you're saying, would
actually be zero, and you wouldn't be eligible for the credit.
Just as an FYI,
please see the IRS' Statutory
Employees page to see what qualifies as a statutory employee.
