Married filing separately - child dependent care credit

[ssam2020]

We are married filing separately and have 2 children under the age of 17. one of them has daycare expenses and per IRS "Generally, you may not take this credit if your filing status is married filing separately. " How else can i claim dependent care expenses while filing taxes when i am paying for daycare? 

[DoninGA]

If you lived with your spouse at any time during the last six months of the year and are filing as Married Filing Separately you cannot claim the child dependent care credit.

See IRS Publication 503, Child and Dependent Care Expenses - https://www.irs.gov/forms-pubs/about-publication-503

[ssam2020]

thank you. i am aware of IRS publication 503. for personal reasons we cannot file jointly and it feels unfair for not being able to claim dependent care credits when i am paying for it while going to work to make a living. Will using an FSA help with getting a tax deductible/credits? well, i am looking for a solution/option here to get those credits rightfully.

[NCperson]

@ssam2020 

if you are legally married, but not filing "Joint". the only way to do it is if you qualify for HOH filing status. Are you living with your spouse or not? 

The real question is why are you filing Separate?  Unless the lesser earning spouse is on a student loan repayment plan, I have yet to see a case where it financially makes sense to file separate.  96% of married couples file joint because Congress only passes laws that protect the sactimony of marriage.  That other 4% - either are emotionally unwilling to sign the same tax return or are nieve. 

Page 9: 

What’s Your Filing Status?
Generally, married couples must file a joint return to take the credit. However, if you are legally separated or living apart from your spouse, you may be able to file a separate return and still take the credit.

Legally separated.

You aren't considered married if you are legally separated from your spouse under a decree of divorce or separate maintenance. You may be eligible to take the credit on your return using head of household filing status.

Married and living apart. You aren't considered married and are eligible to take the credit if all the following apply.
1. You file a return apart from your spouse.
2. Your home is the home of a qualifying person for more than half the year.
3. You pay more than half the cost of keeping up your home for the year.
4. Your spouse doesn't live in your home for the last 6 months of the year.

[VolvoGirl · Accepted solution]

And if you are filing Married filing Separate do you know the other credits you don't get?

Many people think they come out better when filing Married Filing Separate but they are probably doing it wrong.  If one person itemizes deductions on Schedule A then the other one must itemize too, even if it's less than the standard deduction, even if it is ZERO!  And if you are in a Community Property state it can be complicated to figure out.

And there are several credits you can't take when filing separately, like the

EITC Earned Income Tax Credit

Child Care Credit

Educational Deductions and Credits

And contributions to IRA and ROTH IRA are limited when you file MFS.

Also if you file Married Filing Separately up to 85`% of your Social Security becomes taxable right away even with zero other income.

See …….

https://ttlc.intuit.com/community/married/help/is-it-better-for-a-married-couple-to-file-jointly-or-...

[Mike9241]

@ssam2020 the only option is if you qualify for head of household filing status. that requires you live apart from your spouse for the last 6 months of a calendar year and you would have to pay more than 1/2 the cost of maintaining the household for your children.  Your husband would have to use married filing separately if he's required to file. 

[NCperson]

@VolvoGirl 

<<Also if you file Married Filing Separately up to 85`% of your Social Security becomes taxable right away even with zero other income.>>

If you file MFS and you live together, then 85% of your SS is automatically part of your gross income and therefore subject to tax. 

if you file MFS and don't live together, then the normal rules of determining whether social security income is part of gross income apply. 

[Opus 17]

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@ssam2020 wrote:

thank you. i am aware of IRS publication 503. for personal reasons we cannot file jointly and it feels unfair for not being able to claim dependent care credits when i am paying for it while going to work to make a living. Will using an FSA help with getting a tax deductible/credits? well, i am looking for a solution/option here to get those credits rightfully.

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Fairness doesn't usually enter into laws made by Congress.  I suppose they had a good reason to deny the dependent care credit to MFS, but you would have to ask them (probably back in 1986).

You can use a tax-free dependent care FSA to pay for care expenses even when married filing separately.  However, the maximum deferral is $2500, and only the spouse who claims the child as a dependent can get the tax-free benefit.  If the other spouse uses a DCFSA, or if the spouse who claims the child has reimbursement more than $2500, the unallowable portion is added back to their taxable income, although there is no additional penalty for doing this.  If your qualified expenses are more than $2500, there is no additional credit (you are disqualified).  All this is reconciled on form 2441 and Turbotax can correctly handle this situation on an MFS tax return.

[NCperson]

@ssam2020 this isn't an issue of 'fairness', it's an issue of how Congress passed the law - it's that simple.  It was deemed fair when a majority of the House and a majority of the Senate sent the bill to the president, who signed it into law.  All our representatives determined it was fair.

You haven't mentioned why you are filing Separate, but that in of itself may be the strategy to resolve this issue.  Are you willing to explain (this board is anonymous).  Filing Separate is simply not a good financial outcome - the laws were not written to make it financially advantageous. 

By chance, is there a back taxes or back child support issue (or something similar) that is driving filing Separate? Many beleive that the way to protect their refund from the other spouse's past transgressions is to file Separate.  Rather, the way to go is file Joint and file the Injured Spouse Form, which protects the refund.  So it is the same refund protection as filing Separate but with the benefits of filing Joint.

https://www.irs.gov/forms-pubs/about-form-8379)

[ssam2020]

@NCperson Could you please explain what it means by Social Security is added to gross income and therefore s subject to tax and how it affects my current tax filing? Note : i am not drawing Social Security benefits at the moment.

[ssam2020]

@NCperson Here's my situation which is driving me to file separately -

1. i am not comfortable filing jointly for moral reasons on how my spouse files taxes and i do not want to be liable in case there's an audit and be part of it when filing jointly.

2. My spouse does not pay up taxes up front round the year and on the contrary i pay all my taxes due every month (from my paycheck). During tax filing theres a large sum that needs to be paid to IRS with our combined income and i do not want this to affect returns that are truly mine.

3. Third reason, disclosing my wages on W2 leads my spouse to contribute less for household expenses.

Any advise here to manage taxes is appreciated.

[VolvoGirl]

If you are not getting Social Security payments now, then don't worry about it,  

[Opus 17]

@ssam2020 

If your spouse is not entirely forthcoming on their tax return, you are probably correct in filing separately.

There are several deductions and credits that are disallowed or reduced if MFS, and some other tax provisions that you can't take advantage of.  But filing separately is still probably the right thing to do unless your spouse straightens out their finances.  (Of course, no one can tell you this for sure except your own financial advisor or tax preparer whose advice you pay for and who understands all the confidential details of your situation.)

[NCperson]

@ssam2020 - 

1) you can protect your refund in case it gets to the point where your spouse is deliquent on her share.  File Joint with form 8379 (Injured Spouse)

2) your issue is a marital issue (trust!) and not a financial issue.  This is why the IRS created the filing status of Married - Filing Separate.  If you two are not comfortable signing the same tax return, then Filing "Separate" becomes the only viable option.  The IRS gives each married couple the absolute choice to file MFS or MFJ. 

 Congress only passes tax laws that protect the sactimony of marriage and therefore married couples are motivated to file Joint... and 96% of married couples do file Joint.  For that last 4%, and you are in this camp, the tax benefits are not as advantageous as filing Joint.   You may not see that as "fair", but the IRS and the Government just doesn't want to get involved in different viewpoints of a married couple, hence it avoids being a marriage counselor by creating the MFS filing status.  Make Sense?

[Opus 17]

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@NCperson wrote:

@ssam2020 - 

1) you can protect your refund in case it gets to the point where your spouse is deliquent on her share.  File Joint with form 8379 (Injured Spouse)

Not in this case.  The Injured Spouse form can only be filed after a divorce.  

The original poster has correctly identified that both spouses are jointly and severally liable for any deficiency on a joint return, and the IRS can come after either or both spouses even if only one spouse was responsible for the deficiency.   The injured spouse form is used after a divorce, when one ex-spouse is being pursued by the IRS to recover a deficiency caused by the other spouse.  The "injured" spouse can try to have their liability reduced based on the argument that they didn't know about the problem, or they can ask for "equitable relief" (agreeing they owe some part of the debt but not all of it).  However, the injured spouse form can only be filed after divorce, and if a spouse tries to claim they were injured by signing a joint return, but they are still married, the IRS won't even consider the form.   While this is not legal advice, it seems the taxpayer has correctly identified that the best way to not be liable for their spouse's tax return is to not sign a joint return.