@AmeliesUncle wrote:
I haven't looked up an court cases on the matter, but at first glance, I somewhat disagree with the prior conclusions.
I think it comes down to this: If you were not there, would they both be working?
If the answer is yes (they would still be working), they don't qualify for the credit, even if they would be really, really tired.
If the answer is no (one would no longer be working if you were not there), I think they qualify for the credit.
Ultimately, @blissfulsleepacademy is correct that it is up to the taxpayers to claim or not claim on their own risk. The care provider should not provide any extra documentation, just the paid invoices and their tax number.
There are two situations discussed here that have different tax treatments (see the code below).
If spouse A and B are both working, and the child care is necessary so they can work, then the care can be eligible even if care is not provided during working hours. For example, A works days and B works nights. Care is provided during the day so B can sleep. This is eligible.
However, if B is on family leave, B is not working, and the care is not eligible (See example 3 below). Unless B is so debilitated they are unable to care for themselves. It is not enough that B is unable to care for the child, B must be unable to care for themself.
The code says
"The term “employment-related expenses” means amounts paid for the following expenses, but only if such expenses are incurred to enable the taxpayer to be gainfully employed for any period for which there are 1 or more qualifying individuals with respect to the taxpayer:"
The regulation says
(c) Gainful employment—(1) In general. Expenses are employment-related expenses only if they are for the purpose of enabling the taxpayer to be gainfully employed. The expenses must be for the care of a qualifying individual or household services performed during periods in which the taxpayer is gainfully employed or is in active search of gainful employment. Employment may consist of service within or outside the taxpayer's home and includes self-employment. An expense is not employment-related merely because it is paid or incurred while the taxpayer is gainfully employed. The purpose of the expense must be to enable the taxpayer to be gainfully employed. Whether the purpose of an expense is to enable the taxpayer to be gainfully employed depends on the facts and circumstances of the particular case. Work as a volunteer or for a nominal consideration is not gainful employment.
There is also a specific example for spouses who work day and night shifts:
Example 1.
D works during the day and her husband, E, works at night and sleeps during the day. D and E pay for care for a qualifying individual during the hours when D is working and E is sleeping. Under paragraph (c)(1) of this section, the amount paid by D and E for care may be for the purpose of allowing D and E to be gainfully employed and may be an employment-related expense under section 21.
Example 3.
G, the custodial parent of two children who are qualifying individuals, hires a housekeeper for a monthly salary to care for the children while G is gainfully employed. G becomes ill and as a result is absent from work for 4 months. G continues to pay the housekeeper to care for the children while G is absent from work. During this 4-month period, G performs no employment services, but receives payments under her employer's wage continuation plan. Although G may be considered to be gainfully employed during her absence from work, the absence is not a short, temporary absence within the meaning of
paragraph (c)(2)(ii) of this section, and her payments for household and dependent care services during the period of illness are not for the purpose of enabling her to be gainfully employed. G's expenses are not employment-related expenses, and she may not take the expenses into account under section 21.
