Final answer:
The inquirer is asking about calculating the Child and Dependent Care Credit, which is part of the tax code designed to aid individuals like single parents dealing with the 'poverty trap.' To calculate this, one would consider the individual’s paid child care expenses, dependent care benefits, and earned income.
Step-by-step explanation:
The student's question pertains to calculating the Child and Dependent Care Credit on the tax return. This question is rooted in the broader context of how the Earned Income Tax Credit (EITC) and other tax provisions help mitigate the “poverty trap.” When a person’s increase in income results in a nearly equal reduction in government benefits, they face this trap, which can disincentivize work. The EITC aims to avoid this by phasing out benefits slowly as income rises. For a single parent with two children, as per the 2013 figures from the Tax Policy Center, the EITC remains constant between $13,430 and $17,530 of earnings. Then, it decreases by 21.06 cents for each dollar earned past $17,530, phasing out completely when income reaches $46,227.
To calculate Joann’s credit for child care expenses, which is separate from the EITC and based on her taxable income and the amount of qualifying expenses up to certain limits. Since she paid $6,200 for child care and has $2,000 reported in box 10 for dependent care benefits, her allowable expenses for calculation would be the lesser of her earned income, the caregiver's income, or the $3,000 for one dependent or $6,000 for two or more dependents limit, reduced by the amount of dependent care benefits.