Question

Colaboration of Tax forms

1 we understood the interaction of tax forms, and why we needed them to submit our tax report. please elaboration on the transition of the forms required when we apply for the child tax credit?

2 please, mention all the forms required, the interaction of the CTC AND ADITIONAL CTC, the TAX LIABILITY and the total outcome in the 1040? refund or debt.

Answer 1

1.Elaboration on the transition of the forms required when we apply for the child tax credit?

As per FORM-14815: Supporting Documents to Prove the Child Tax Credit (CTC)

1.Taxpayer identification number: Dependent’s social security card if the dependent was issued a Social Security Number (SSN) by the Social Security Administration. However there is an exception if the dependent was born in the United States (U.S.)

2. U.S. citizen, national or resident: Documents proving the dependent was present in the U.S. during the year. Examples: Rental property lease, records for school or child care enrollment and attendance, government benefits or assistance, legal or financial matters, medical care or health insurance, or similar documents. Documents provided for dependents who were issued an ITIN or ATIN, or whose social security card is printed with the words “Not Valid for Employment” or “Valid for Work Only With DHS Authorization.” However there is an exception if the dependent was born in the United States (U.S.). If the dependent wasn’t a U.S. citizen, national or resident during the year we’re examining, STOP. You can’t claim the CTC or the ODC for the dependent.

3. Relationship: The dependent’s birth certificate, and if needed, the birth and marriage certificates of any individuals, including yourself, that prove the dependent is related to you. For an adopted dependent, send an adoption decree or proof the child was lawfully placed with you or someone related to you for legal adoption. For a foster child, send proof of authorized placement. These documents are not neede if the dependent isn’t related.

4.Residency: Documents to show where he lived and where each dependent lived for the entire year, such as: − A rental property lease or statement from the property owner or agent with the address, parties to the lease, time period of the lease, and names of persons residing there; mortgage payment records or real estate tax statement. − Records for school or child care enrollment, government benefits, legal or financial matters, medical care or health insurance, or other similar documents showing your address and the address of the dependent. Or, if he is the non-custodial parent of a child whose parents are divorced, separated or living apart: − Form 8332, Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent, in effect for the year examining, and − Divorce decree, separation agreement or custody order if in effect for the year examining.

5.Support : Information to show who provided the dependent’s financial support for the year: − documents and estimates of total amounts paid for the dependent’s support, such as proof of payment for housing and utilities, and estimates of amounts paid for personal living expenses, such as clothing, medical care, and transportation. −and Stating how much of the total support was provided by the dependent, and by other sources. Other sources include individuals, as well as governmental, tribal, and private entities. And sending the names of the other individuals and entities, if any. – and sending written declarations from others contributing to the dependent’s support that they will not claim the individual as a dependent if the dependent individual’s support was provided under a multiple support agreement. However, there is an exception:these documents are not required if the dependent was under age 17 at the end of the year AND either: • Lived with parent for more than half the year examining, or • Lived with someone who signed Form 8332 for more than half the year.

6. Disabled dependent: If the dependent was over age 18 at the end of the year and was permanently and totally disabled, send the documents to prove the dependent was permanently and totally disabled. See Publication 501, Exemptions, Standard Deduction, and Filing Information, for the definition of permanently and totally disabled.

7. Student : If the dependent was over age 18 at the end of the year and was a full-time student, send school records showing the dependent was considered a full-time student for any part of any five months of the year we’re examining. The school records must show the child’s name and the dates the child attended school during the year. See Publication 501, Exemptions, Standard Deduction, and Filing Information, for the definition of a student.

8.Child who is the qualifying child of more than one taxpayer: If the dependent is the qualifying child of any other taxpayer(s): − Documents to show whether the dependent resided with him for the longest period of time during the year, and − The name and, if known, the SSN or ITIN of any other individual(s) who can claim the dependent as a qualifying child.

U.S. resident alien – If a dependent isn’t a U.S. citizen, national, or lawful permanent resident with a green card, the dependent must have been present in the U.S. for a minimum number of days. See ‘Substantial Presence Test’ in Publication 519, U.S. Tax Guide for Aliens.

2. All the forms required, the interaction of the CTC AND ADITIONAL CTC, the TAX LIABILITY and the total outcome in the 1040? refund or debt.

Form 8812 and Wks 8812 are used to calculate and report information required for Child Tax Credit (CTC), Additional Child Tax Credit (ACTC), or the Other Dependent Credit (ODC). Each of these credits has different requirements and thresholds and the software will attempt to carry the dependent to the form based on your entries, however, you should make the appropriate selection on the dependent screen to indicate a dependent's eligibility to ensure that the form and credits are calculated correctly. On screen 2, choose the appropriate code from the Eligible for Child Tax OR Other Dependent Credit drop list. Codes are as follows:

• C - Eligible for Child Tax Credit
• O - Eligible for Other Dependents Credit
• N - Not Eligible for Child Tax Credit OR Other Dependents Credit

After being calculated, the CTC and ODC carry to Form 1040, line 12a; ACTC flows to Form 1040, line 17b.

Calculations for the CTC and ACTC are pulled from entries made elsewhere in the software, however, there are overrides provided on the 8812 screen, located on the first Credits tab, for Form 8812, line 6 total earned income and Form 8812, line 9/Wks 8812, page 3, line 7

Child Tax Credit
Maximum credit is $2,000 per child.

The credit begins to phase out at these AGI levels:

• $400,000 MFJ
• $200,000 MFS/S/HOH/QW

A child is a qualifying child for purposes of the child tax credit only if they meet all seven conditions

The child must be under age 17 by the end of the year (IRS sometimes determines a child to be 17 on 12/31 if the child turned 17 on 1/1, which may require paper filing).

This credit is non-refundable, so if the tax liability is 0 (zero) there is nothing against which to apply the credit.

Additional Child Tax Credit

The software automatically calculates the amount of Additional Child Tax Credit (ACTC) and produces Form 8812 on a qualifying return. The ACTC flows from Form 8812 to Form 1040, line 17b.

The ACTC is a credit that may be available to a taxpayer who qualified for the Child Tax Credit (CTC), but who could not get the full amount of the CTC. The ACTC is a refundable credit, which means that it can produce a refund even if there is no tax liability on the return.

The ACTC cannot exceed $1,400 times the number of qualifying children, less the CTC on the taxpayer's return. Within that limit, the ACTC is generally 15% of the taxpayer's earned income over $2,500.

• Note: for taxpayers with three or more qualifying children, ACTC is the greater of:
  • 15% of the taxpayer's earned income over $2,500, or
  • the excess of the taxpayer's Social Security taxes for the year over the taxpayer's earned income credit for the year.

· Other Dependent Credit

· Dependents who do NOT qualify for the Child Tax Credit could be eligible for a non-refundable credit of up to $500 for each qualifying dependent. The number of other dependents is displayed on the Wks 8812, line 2.

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