Why no child tax credit?

jiggreenJanuary 30, 2009

I just ran all of our info through TaxAct and am perplexed about not receiving the child tax credit.

My husband and I have 3 dependents, an 18 year old, a 20 year old and a 10 year old. I know the older ones don't count towards the child tax credit, but apparently neither does the 10 year old!

We file married/joint, taxable income after all deductions/exemptions is $26,418, our tax liability on that $26,418 is $3,161 , we have a hope learning credit for $1800.00 and paid $4360.00 in federal taxes in 2008. As you can see, we are under the $110,000 threshold for the child tax credit. I am perplexed as to what about our situation makes us ineligable to receive the $1000.00 child tax credit for our 10 year old.

This the only information TaxAct provides regarding the child tax credit...

"The child tax credit provides a $1,000 credit for each qualifying dependent under age 17.

The credit under this provision for this return is $0.

The basic credit amount is shown on Form 1040A, line 33.

The amount of the child tax credit may end up being less than $1,000 per child as a result of being limited by the amount of income tax, other tax credits, or income in excess of the limitation amounts. The number of children who qualify for the child tax credit is determined by entries in the Dependents section of the Basic Information Topic. To review those entries, select Basic Information from the topic list. "

I reviewed our dependent information to make sure I had my daughter's date of birth and social security # entered correctly and everything was accurate. I did research the information regarding this on the irs website, but it made me even more confused!

It's driving me crazy...what am I missing here?

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This is from TaxCut (I hope this makes sense to you):

Effect of Earned Income and Tax Liability on the Child Tax Credit

You must owe income tax to claim the child tax credit. Either you didn't owe any tax, or your income tax was eliminated by 1 or more of these credits:

* Child care credit
* Credit for elderly
* Education credits
* Foreign tax credit
* Retirement savings credit

The additional child tax credit can provide you with a refund of all (or part) of your child tax credit, even if your tax liability is completely eliminated. This is called a refundable credit. To get the additional tax credit:

* You must have 3 or more qualifying children or more than $11,300 of earned income such as wages or self-employment income.
* Alimony, unemployment compensation, and investment income aren't considered earned income.
* Your additional child tax credit is limited to 15% of your earned income exceeding $11,300
* Other restrictions apply if you have more than 3 qualifying children.

For more information, see the IRS instructions for Form 1040 and Form 8812: Additional Child Tax Credit, and IRS Publication 972: Child Tax Credit.

Good luck.

    Bookmark   January 31, 2009 at 12:55PM
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I looked back at my old taxes and I claimed both Hope credit and child tax credit with no problem in 2000. I could find no information on the IRS website or in publication 972 that prohibits claiming both. I would call the IRS to get the answer because maybe the rules have changed since 2000.

TurboTax made a mistake on our state forms this year so they aren't infallible. It kept insisting on adding the state tax refund as income when we did not itemize last year. I've never claimed it as income previously because I don't subtract it by itemizing, if that makes sense! I even used TurboTax last year so it imported our information from last year. I spent a couple hours yesterday redoing everything but it still kept showing up as income. I had to override it.

    Bookmark   January 31, 2009 at 1:58PM
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Thanks for responding!

I did a little more research and here's what it says on the irs website:

"In general, the child tax credit is limited also by the sum of your income tax liability and any alternative minimum tax liability. For example, if the amount of the credit is $600, but the amount of your income tax is $500, the credit ordinarily will be limited to $500. However, there are two exceptions to this general rule. First, if the amount of your child tax credit is greater than the amount of your income taxes, you may be able to claim an "additional" tax child tax credit if your earned income exceeds the base amount for the year. Second, if you have three or more qualifying children, you may be able to claim an additional child tax credit up to the amount of Social Security taxes you paid during the year, less any earned income credit you receive. If you qualify under both these exceptions, you receive the greater of the two additional amounts. You can find the base amount, as well as more information on qualifying with three or more children in the Publication 972, Child Tax Credit. "

So in my situation....our taxes liability is 3161.00, reduced by the 1800.00 Hope Learning Credit, which still leaves a tax liability of $1361.00, which is more than the child tax credit? I'm just not seeing how/why we are losing it?

Perhaps it is a glitch in TaxAct...I think I'll run the figures again and use TurboTax or TaxCut and see what happens.

I want that extra $1,000.00...but, equally as much (ok, maybe not quite equally..lol) I want to understand it! ( I hate being confused!!)

    Bookmark   January 31, 2009 at 2:53PM
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Hmmmm...I just did the child care credit worksheet (publication 972) the ol' fashioned way (pencil and paper, remember those days? lol!)
and it shows me as eligible to receive a 1,000.00 credit...something in TaxAct is screwy I think. I'm going to run the information through Turbo Tax and Tax Cut later on this evening and see if it's the program (or me!!) that is messed up.

    Bookmark   January 31, 2009 at 3:25PM
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Good luck jig - Don't know about the child care. But when I was doing my mothers income taxes last year (she's 83) I did them on 3 different programs and came up with 3 different amounts. She gets retirement income, stock income, divident income & social security. She pays quarterly estimated payments so we knew it would be an amount owed so which amount to pay.....

    Bookmark   February 1, 2009 at 7:36AM
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A couple of things to consider --
It seems unlikely that you have that many deductions, but the $110,000 threshold applies to the Adjusted Gross Income (line 31 on page 1), not your income after all deductions and credits. When you say "dependents," I assumed these are your children. With some exceptions, that's also required. Finally, this is a non-refundable credit but if the IRS is actually keeping $1361 in taxes, and your AGI is below the $110,000, then it appears likely that you are eligible for the credit. Just FYI, I volunteer with AARP to do taxes and you can get your taxes done and e-filed for free if you have such a service in your area. It's not just for the elderly or poor -- it's available to anyone, with the exception of those who need to file more complicated forms.

    Bookmark   February 1, 2009 at 11:52AM
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The problem is within the TaxAct software (now it makes me wonder about prior years because I've used that program for at least the past 5 years!!)

Running all of the information through Turbo Tax increases my refund by $1,216.00 !!!!!

Thumbs up for Turbo Tax and definitely thumbs DOWN for Tax Act!!!!!!!!!!!

    Bookmark   February 1, 2009 at 10:25PM
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Yikes! Is this supposed to be the final version of TaxAct? I always use TaxAct too, and know that they update the software after it's first released.

annie - your situation reminds me of what Money Magazine used to do - send out the same tax information to a dozen different CPA firms. Most years each firm calculated the taxes differently. Our tax law is too complicated.

    Bookmark   February 2, 2009 at 1:52AM
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Yes, this is the final version of Tax Act!! I am VERY disappointed and thankful that I know enough about my tax situation to spot a problem, instead of blindly allowing the program to do it all for me!

The major difference I noticed was Turbo Tax DID allow me the child tax credit and it also made me put in the amount of my tax rebate check that I received last year (Tax Act did NOT ask for that info at all). The tax rebate check is not taxable, but Turbo Tax said the amount of the check was required. We had another dependent in 2008 compared to 2007 ('08 was my year to claim my younger son as a dependent instead of my ex), so Turbo Tax said we will receive an additional $216.00 of tax rebate!

Another cool thing about Turbo Tax was not having to manually type in all of the w-2 information.....it downloads right off the internet (kind of creepy though...how easy it was for the program to get that information)

Anyway, just a head's up for everyone out there using Tax Act...you might want to use a couple different programs and compare!

    Bookmark   February 2, 2009 at 8:38AM
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I manage my own taxes as a small contractor - we use HR Block Tax Software to figure our taxes. But every year it requires an upgrade which must be purchased.

But just to be sure, I always fill out a paper copy to compare against to catch any mistakes.

    Bookmark   February 2, 2009 at 11:11AM
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Kind of makes you wonder what you tell the IRS if you get "flagged" - "my program did it". I actually forget which program I ended up filing with on my Mom's. I think I did it like hiring a contractor - not the highest payment, not the lowest payment but the middle payment. It'll be interesting to see what they come up with this year.

    Bookmark   February 2, 2009 at 3:01PM
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Try going back to the dependents questions and look to see if you overlooked checking the box about how many months the dependent was in your home for the year. If you overlook this box, you will not qualify for the child tax credit. (I overlooked it last year and it drove me crazy too, until I figured out what I did wrong!)

    Bookmark   February 4, 2009 at 3:07PM
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I have the same problem as jiggreen. I can't believe more people are not complaining about this bug in the TaxACT software. I tried a Google search and this is the only forum thread it found on the problem

jiggreen, did you use the downloaded version or the on-line version?

    Bookmark   March 15, 2009 at 3:35PM
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I was trying to use the online version of Tax Act. I ended up using Turbo Tax instead, and was pleased with how easy (and nonfrustrating!) it was. Next year I will not waste my time with TaxAct at all.

    Bookmark   March 22, 2009 at 12:57AM
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"it also made me put in the amount of my tax rebate check that I received last year (Tax Act did NOT ask for that info at all)."

I use Taxact and it asked for the rebate amount on my version. I use the deluxe with a state version and one free e-file.

    Bookmark   March 22, 2009 at 9:23AM
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Do you have a flexible saving account for dependant care?

Child & Dependent Care Credit - Limit with ER Benefits
Although there are expenses in excess of the $5,000 of dependent care benefits, there is no credit when the dependent care benefit exceeds $3,000. The reason for this is that the maximum allowable expenses that can be used for the credit is $3,000. You have actually received a tax benefit for a total of $5,000 in expenses by using the dependent care benefit. Therefore, there is no expense that remains allowable for the credit.

The amount of the dependent care benefit disqualifies you from the child tax credit. Lines 28 - 32 of the Form 2441 will show this.

If you have, for example, a dependent care benefit amount of $2,000 with the $7,169 of expenses, only $1,000 would be allowed for the calculation of the credit.

The IRS does not allow the maximum dependent care benefit of $5,000 plus an addition of the maximum credit amount of $3,000 for the child. The dollars used for the benefit and the credit are overlapping.

Generally speaking, depending on the level of your income, the $5,000 in dependent care benefit is a better deal for an individual than the credit.

    Bookmark   February 17, 2011 at 1:51PM
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ummmmmmm... this thread is over TWO YEARS old.

I am sure the OP took care of this already!

    Bookmark   February 17, 2011 at 7:25PM
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I had the same problem, I thought, and this page came up when I did a search. Others might find the same page, and they need to know that you cannot get the goverment credit on $3000 if you have a flexible spending account with your employer.

    Bookmark   February 19, 2011 at 3:58PM
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Things are usually sort of quiet on this forum.

Everyone knows most everything, it seems - about skillful money management, at least.

ole joyful

    Bookmark   February 28, 2011 at 5:55PM
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The entire 77,000 page Tax Code should be thrown in the woodstove and we need to start over with something where EVERYBODY pays something.

76,000 pages of the Code are deductions and subsidies.

    Bookmark   March 4, 2014 at 8:28AM
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Those two statements are very incorrect and very exaggerated. Why not limit your comments to things you know or understand?

    Bookmark   March 5, 2014 at 7:02PM
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