Child Tax Credit A nonrefundable credit up to $1,000 per qualifying child.
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Transcript of Child Tax Credit A nonrefundable credit up to $1,000 per qualifying child.
Child Tax Credit
A nonrefundable credit up to $1,000 per qualifying child
Qualifying Child
• Age• Citizenship• Relationship• Support• Residency
Child Tax Credit
• Exception to “Time-Lived-With-You” Requirement–Child born/died in 2013–Kidnapped Child–Special Rules for Children of
Divorced or Separated Parents.
Review Tax Withholding
• The child tax credit decreases the tax liability dollar for dollar, but not below zero.
• The taxpayer may want to adjust his or her withholding, if he or she is having too much tax withheld.
Additional Child Tax Credit
A refundable credit
Who can take the Additional Child Tax
Credit?• Taxpayers who
–have earned income greater than $3,000
–have three or more children
Other Credits
Nonbusiness energy efficient property credit
Must be installed on main home• Examples:
exterior doors and windows storm windows skylights metal roofs insulation central air conditioning and heating water heaters
ENERGY STAR products
• Not all EnergyStar products qualify for the credit.
• See Department of Energy’s EnergyStar Web site and the EnergyStar Frequently Asked Questions site.
• Schedule R• Few qualify• TaxWise automatically
calculates• 1040, Line 53 Box C
Credit for the Elderly and Disabled
Other Taxes
• Additional Taxes on IRAs and Qualified Plans
• First Time Homebuyer’s Credit repayment
Additional Taxes on IRAs
1st Time Homebuyer Credit Payback
• Homes purchased in 2008• $7,500 credit actually a loan• Repayment of $500 • First repayment due on 2010
return
• Complete line 4 & 5• Carries to Form 1040, line 59, box
c
Refundable Credits
Who Can Claim EITCGeneral Eligibility Rules
• Earned income and adjusted gross income is limited
• Have valid SSN • No MFS filing status • A US citizen or
resident alien (ITIN)
Who Can Claim The EITCGeneral Requirements -
continued
• Not file Form 2555 or 2555-EZ
• Cannot be qualifying child of another person
• Investment income limitation $3,300
Investment Income
Includes:–Taxable interest–Tax-exempt interest–Ordinary dividends–Capital gain net income
Is this Earned Income?
• Review Pub 4012, I-1
– While an inmate?
– While a household employee?
– Disability benefits • Below minimum retirement age?
• Retirement age?
–Disability insurance payments?
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Earned Income Tax CreditEarned Income is less than:
$46,227 ($51,567 if MFJ) “3 or more” qualifying children
-$43,038 ($48,378 if MFJ) “2” qualifying children
-$37,870 ($43,210 if MFJ) “1” qualifying child
-$14,340 (19,680 if MFJ) with “no” qualifying children
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Earned Income Tax Credit
Maximum Credits
– “3 or more” qualifying children - $6,044
– “2” qualifying children - $5,372
– “1” qualifying child - $3,250
– “No” qualifying children - $487
EITC Interview Tips
EITC General Eligibility Rules
Pub 4012
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EITC Assistant
EITC Assistant:• Online tool for determining
EITC eligibility.
• In English and Spanish.
• At www.irs.gov, 24 hours a day 7 days a week.
Who Can Claim The Credit With A Qualifying Children
Must meet all 3 tests–Relationship Test–Age Test –Residency Test
Two new definitions
A “qualifying child” must• Be younger than the person
claiming the child • Not have filed a joint return
other than to claim a refund
Additional Definitions
• Eligible foster child
• Adopted child• Permanently and
totally disabled• Child who was
kidnapped
Qualifying Child of More than One Taxpayer
• Cannot be used by more than one person
• EITC Tie-Breaker Rule
Who Can Claim the EITC Without a Child
• Lived in the United States more than half the tax year.
• At least 25 but under age 65 on Dec. 31.
• Not qualify as the dependent of another person.
EITC Eligibility Requirements - Summary
• Rules for Everyone• Rules If You Have a Qualifying
Child• Rules If You Do Not Have a
Qualifying Child• Earned Income and AGI
Limitations
TaxWise and EITC
By ALWAYS marking that the taxpayer’s dependent is eligible for EITC on the main info page. . .
TaxWise brings up the EITC worksheet and you MUST answer questions for each potentially eligible dependent
EITC – General Information • Common EITC Return Errors• Disallowed Earned Income Credit