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?

24

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

25

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

27

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