Question

Problem 1: John and Mary are married and file a joint return claiming their three children ages 4, 5, and 18, as dependents. Their AGI is $125,400 and their pre credit tax liability is $13, 431. They are not claiming any other tax credits in 2019. Complete the Child Tax Credit Worksheet Parts 1 and 2 to determine John and Mary’s child tax credit for 2019.

Problem 2: Jose and Jamie have a 5-year-old child. Jose has a salary of $18,200. Jamie is self-employed with a loss of $1,500. Jose and Jamie have received $200 in taxable interest during the year. Their earned income for the year is $16,700 and their adjusted gross income is $16,900. Use the earned income tax credit worksheet and the EIC table to calculate the amount of Earned Income Tax Credit.

Problem 3: Millie Smith (SS# 045-87-8963) has been widowed for 4 years and has one dependent child, Jackson Williams (SS# 564-89-1235). Millie’s adjusted gross income and her earned income is $90,000. Millie’s employer withheld $1,500 in the dependent care flexible spending account. This amount was excluded from her wage income. Assume her taxable income is $45,500, and her regular tax is $5,191. Millie paid child care expenses of $2,500 to Handprints Child Care (1 main street, New Haven, CT 06512, EIN# 05-8964213). Calculate Millie’s child and dependent care credit for 2019 using form 2441. Make realistic assumptions about any missing data.

Answer 1

Solution:

Problem 1: John and Mary are married and file a joint return claiming their three children ages 4, 5, and 18, as dependents. Their AGI is $125,400 and their pre credit tax liability is $13, 431. They are not claiming any other tax credits in 2019. Complete the Child Tax Credit Worksheet Parts 1 and 2 to determine John and Mary’s child tax credit for 2019

Child Tax Credit given to the American taxpayers for each qualifying dependent children who is under the age of 17 at the end of each tax year. Recent tax legislation passed is in December 2017 doubled of the credit to $ 2,000 per child and made much of it as refundable. Previously it was $ 1,000 non-refundable credit.

Now we know the Child Tax Credit how it Works:

The legislation of tax passed in December 2017, doubled the Child Tax Credit starting with the 2018 tax year til the end of 2025. The new $ 2,000 per qualifying dependent children credit makes as $ 1,400 of the Child Tax Credit as refundable. This means that even if the parent ends up owing of no taxes (or) owing less than $ 1,400 up to that the amount can be received as a tax credit refund if the child and parent both qualify. Only one of the both taxpayer can claim the Child Tax Credit even if the qualifying child divided time between more than one household during the tax year, If one of the parent had primary custody of the child that parent usually receives the tax credit.

Key Points as follows

   The child tax credit is an income tax credit of $ 2,000 per each eligible child for American taxpayers
   Eligible children are the legal dependents of under the age 17 y and who are the U.S. citizens US nationals.
   This tax credit is phased out for the high income families as it was intended to help low to middle income workers

Families Qualifying for Credit:

The IRS has established several factors that determines eligibility for the Child Tax Credit.
To qualify the child must be the U.S. citizen or U.S. national. He (or) she must also have lived with the person who is claiming the tax credit for more than the half of the tax year and to be claimed as a dependent on the taxpayer's return

In the new tax law increased these levels to $ 400, 000 for married couples and $ 200, 000 for singles head of household and qualifying widower filers. These higher levels will be at the end of 2025.

Child tax Credit for other dependents worksheet

Part 1:
1. Number of qualigyng children under the age of 17 with SSN are 2 * $ 2,000 = $ 4,000
2. Number of other dependent who are not under the age 17 as 1 then, 1 * $500 = $500
                           total = $ 4,500
Entering the total amount from form 1040 or form 1040-SR
Enter the amount for married filing jointly 125,400

Part 2:
Enter the amount from form 1040 or form 1040-SR or form 1040-NR
Enter the amount for claimiing any other credits

Problem 2: Jose and Jamie have a 5-year-old child. Jose has a salary of $18,200. Jamie is self-employed with a loss of $1,500. Jose and Jamie have received $200 in taxable interest during the year. Their earned income for the year is $16,700 and their adjusted gross income is $16,900. Use the earned income tax credit worksheet and the EIC table to calculate the amount of Earned Income Tax Credit.

The Earned Income Tax Credit helps low to moderate income workers and the families are get a tax break. Claiming the credit can reduce the tax you owe and may also give you larger refunds