Unused credit carryforward is any credit amount that you earned in a previous year, less any credit that you applied to unpaid tax in following tax years, less any credit that has expired. For example, if you earned a Dependent Care Assistance Program Credit in 2001 in the amount of $5,000, and you used $2,000 credit on your 2001 tax return, you had $3,000 left to carry forward for 2 years. On your 2002 tax return, you used $1,500. You now have $1,500 left to use on your 2003 tax return. This is your unused credit carryforward. On your 2003 Schedule 1299-C, Step 4, Line33, you would write $1,500. If you are not able to use all $1,500 on the 2003 return, the credit will expire and you will forfeit the excess credit.

Figure the amount of unused credit carryforward available from prior years (for Lines 33, 35, 37, 39, 41, 43, and 45). Use this Schedule 1299-C as a worksheet to determine how much of the credit you earned in a prior year was used in the following tax years and how much credit remains for you to use this year. Do not take the amounts directly from your prior year Schedule 1299-C. You must complete a separate worksheet for each tax year in which you earned or used credit.

Generally, if you earn two or more five-year credits in a given tax year, and you can not use all of the credit, it does not matter which credit is used first and which credit remains to be carried forward. However, effective for tax years ending on or after December 31, 2003, no Research and Development Credit or Training Expense Credit may be earned, and no carryforward of those credits from prior years may be taken. If, on your worksheet for 2002, you have five-year credit available for carryforward to 2003 that includes Research and Development Credit or Training Expense Credit, you should treat those credits as being used in 2002 before any other five-year credit is used.

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