First, a quick last-minute tax season question from a reader, then our weekly roundup. 
The question:
“Can kindergarten count as dependent care expenses for the related credit? Another family at our school is claiming it–or their tax preparer is, anyway.”
The answer, according to IRS Publication 503:
“Expenses for a child in nursery school, pre-school, or similar programs for children below the level of kindergarten are expenses for care. Expenses to attend kindergarten or a higher grade are not expenses for care. Do not use these expenses to figure your credit. However, expenses for before- or after-school care of a child in kindergarten or a higher grade may be expenses for care.”
(Emphasis mine.) Looks like potential trouble for the other family.
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Tax-Related Articles
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And Just for Fun
David of TaxCodes.org created a pictorial representation of the most-used words on this site. As you can see, it has a bit of recency bias. I thought it was still cute though:
Thanks for reading!
Happy You-Know-What to You-Know-Who
Mike’s reply: Happy birthday to you too, Neal.
This Q&A about the dependent care expense brings up a good point about our complex tax system based on voluntary compliance. The taxpayers are supposed to know the rules and follow the rules voluntarily.
Here, suppose the taxpayer mistakenly claimed the deduction, not cheating on purpose, I bet the taxpayer will still get away with it. Unlike when you file an expense report with your employer, the tax return requires no receipts. Nobody knows whether the dependent care expenses claimed are for kindergarten itself or for before- and after-school care. The audit rate is very low. By the time an audit comes, it will be beyond the statute of limitation.
The cure? Get rid of these deductions. Tax strictly on income, which is reported by the employer. Fewer chances for mistakes and intentional cheats.
The cure? Get rid of these deductions. Tax strictly on income, which is reported by the employer. Fewer chances for mistakes and intentional cheats.
I go out of my way to avoid talking politics on this blog, but one thing I’m comfortable saying is that I agree with this general premise–in no small part because I think the amount our economy spends attempting to comply with tax code complexity is a complete waste.
It wasn’t meant to be political. You can still set the tax rates progressively and take into consideration of the number of children and their ages. Those are hard facts, much easier to understand and calculate.
On second thought, I changed my mind. They should make the rules more complex. It’s good for bloggers’ income. We want people to buy Mike’s tax books, buy tax software that pays affiliates, search for tax related terms in Google and land on our blogs. It’ll be a nightmare if all those go away.
I agree that the amount our country spends trying to collect what it’s owed in tax is ridiculous. But at least we don’t live in England where the tax payers have to fund a $40 million wedding for a monarch
thanks for the mention on the renters insurance post!
Hi Mike, thanks for posting my NPV article. Other good reads to check out!