Research Your Supervisor Has Asked You To Research

Researchyour Supervisor Has Asked You To Research The Following Situat

Research your supervisor has asked you to research the following situation concerning Scott and Heather Moore. Scott and Heather are married and file a joint return. Scott works full-time as a wildlife biologist, and Heather is a full-time student enrolled at Online University. Scott’s earned income for the year is $36,000. Heather does not have a job and concentrates solely on her schoolwork. The university she is enrolled in offers courses only through the Internet. Scott and Heather have one child, Elizabeth (age 8), and pay $3,000 for child care expenses during the year.

Required: Go to the IRS website, locate and review Publication 503. Write a file memorandum stating the amount of child and dependent care credit that Scott and Heather Moore can claim.

Paper For Above instruction

The purpose of this paper is to determine the amount of the Child and Dependent Care Credit that Scott and Heather Moore can claim based on their financial situation, following the guidelines outlined in IRS Publication 503. This analysis involves identifying eligible expenses, understanding the calculation process, and applying the relevant rules to their specific circumstances to derive the credit amount.

The Child and Dependent Care Credit is designed to assist taxpayers who pay for the care of qualifying children or dependents so they can work or look for work. In the case of Scott and Heather Moore, their income, expenses, and filing status form the basis of eligibility and calculation of the credit. The IRS stipulates that the credit amount is a percentage of allowable childcare expenses, which varies according to the taxpayer’s adjusted gross income (AGI).

First, it’s essential to establish their eligibility. Scott and Heather are married filing jointly, and they have paid $3,000 for child care expenses for their child Elizabeth, aged 8. IRS rules specify that the child must be under age 13 to qualify for the credit. Since Elizabeth is 8, she qualifies as a dependent for the Child and Dependent Care Credit. The expenses must have been incurred to enable Scott to work or look for work. Given that Heather is a full-time student, which qualifies as employment for this purpose, and Scott works full-time, the expenses paid are eligible, provided they were paid for the purpose of childcare that allows Scott to work.

Next, examining the allowable expenses and the credit rate is critical. The IRS permits taxpayers to claim up to $3,000 in qualifying expenses for one child. The total child care expenses paid by Scott and Heather amount to $3,000, which is at the maximum eligible limit for one qualifying individual. Since the total expenses paid are equal to the maximum, they are eligible to calculate the credit based on these expenses.

The percentage of expenses that can be claimed as a credit depends on the taxpayer’s AGI. For 2023, IRS Publication 503 indicates that the percentage ranges from 20% to 35%, decreasing as income increases. For the Moore family, with an earned income of $36,000, the applicable percentage is approximately 20%, as families with income between $15,000 and $43,000 typically qualify for the 20% rate.

Applying the 20% rate to the allowable expenses, the calculation is straightforward: $3,000 (expenses) multiplied by 20% (credit rate) equals $600. Therefore, Scott and Heather Moore can claim a Child and Dependent Care Credit of $600 for the year.

In conclusion, based on IRS Publication 503, the eligible expenses paid, and their income level, Scott and Heather Moore are entitled to a Child and Dependent Care Credit amounting to $600. This credit will reduce their tax liability, and they should include this amount when filing their joint return.

References

  • Internal Revenue Service. (2023). Publication 503: Child and Dependent Care Expenses. https://www.irs.gov/forms-pubs/about-publication-503
  • Internal Revenue Service. (2023). Child and Dependent Care Credit. https://www.irs.gov/taxtopics/tc602
  • U.S. Department of the Treasury. (2023). IRS guidelines for the Child and Dependent Care Credit. https://www.irs.gov/newsroom/child-and-dependent-care-credit
  • Tax Foundation. (2023). Child and Dependent Care Tax Credit. https://taxfoundation.org/child-dependent-care-tax-credit
  • TaxAct. (2023). How does the Child and Dependent Care Credit work? https://www.taxact.com/tax-information/child-and-dependent-care-credit
  • H&R Block. (2023). Child and Dependent Care Expenses. https://www.hrblock.com/tax-center/irs/income/child-and-dependent-care-expenses
  • Liberty Tax. (2023). Understanding the Child and Dependent Care Credit. https://www.libertytax.com/tax-tips/learn-about-the-child-and-dependent-care-credit/
  • Investopedia. (2023). Child and Dependent Care Credit Definition. https://www.investopedia.com/terms/c/child-and-dependent-care-credit.asp
  • TurboTax. (2023). Child and Dependent Care Credit Explained. https://turbotax.intuit.com/tax-tips/family/child-and-dependent-care-credit/L7z2S9YNo
  • AccountingCoach. (2023). Child and Dependent Care Credit. https://www.accountingcoach.com/blog/child-and-dependent-care-credit

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