The Internal Revenue Service today updated frequently-asked-questions (FAQs) for the 2021 Child Tax Credit and Advance…
Whether you have just one on the way or five and counting, kids are expensive. That’s why you should take advantage of tax cuts whenever possible. In addition to claiming them as dependents, you may also qualify for some other credits. One that could end up benefiting you substantially is the Additional Child Tax Credit. Let’s see if this one is for you!
What is the Additional Child Tax Credit (VS. the Child Tax Credit)?
You’ve probably heard of the Child Tax Credit. I’ll sum it up for those of you who don’t. Basically, it is a credit that can reduce your tax liability up to $1,000 per qualifying child listed on your tax return. This credit is NON-refundable, meaning that it will reduce your tax liability to $0 but will never overflow into a refund for you.
Now that we’ve covered the Child Tax Credit, you’re probably wondering what the Additional Child Tax Credit is all about, right? This is the refundable credit that will fork over the difference that you weren’t able to claim from the Child Tax Credit.
The Thompson Family has three qualifying kids listed on their joint tax return. Their tax liability is $2,500. After applying for their Child Tax Credit at $1,000 per child, they were able to get their tax liability down to $0. They then figured out that they qualified for the Additional Child Tax Credit. The Thompson family was able to claim that additional $500 as a tax refund!
Here’s the math: $2,500 IRS tax liability – $3,000 total Child Tax Credit for three kids = – $500
Although the Additional Child Tax Credit sounds great, you still need to make sure you qualify to claim it before the IRS gives you the no-go. You’ll need to meet all of the following to claim the credit:
If you do not meet one or more of these, then you cannot claim the ACTC. However, the Child Tax Credit could still apply to you.
If you’re preparing your return online with a tax preparer, then you won’t need to worry about forms such as the 8812. However, if you do decide to take a whack at the tax prep yourself, then this form will help calculate your Additional Child Tax Credit.
Part I: Filers Who Have Certain Child Dependent(s) with an ITIN
Fill this out for your kids who have ITINs and qualify you for the Child Tax Credit (may not apply to ALL dependents being claimed).
Part II: Additional Child Tax Credit Filers
Complete this section to see if you qualify for the Additional Child Tax Credit based on your Child Tax Credit calculations.
Part III: Certain Filers Who Have Three or More Qualifying Children
Continue to this section if you have more than three kids who qualify you for the credit.
Part IV: Additional Child Tax Credit
This is the amount that you will receive as your refundable credit.
It’s important to realize that not all taxpayers receive the same amount of the Additional Child Tax Credit. It is based on several factors, including the following:
If you have one or two children who qualify for the credit, you’ll be issued the smaller of:
If you have three or more children who qualify for the credit, you’ll be issued the smaller of:
As some of you may already know, the IRS has taken precautions this tax season to reduce security issues. To do this, Congress has instituted a law within the Protecting Americans from Tax Hikes (PATH) Act. This law states that the IRS must wait until February 15th to issue certain tax refunds. The taxpayers that will be affected are all of those that claim the Earned Income Tax Credit (EITC) or Additional Child Tax Credit (ACTC). This doesn’t mean you should panic or not take advantage of the credits you’re entitled to. If anything, get a jump start on filing your tax return so that you can get in line for the IRS to issue you that refund!
Order would put an end to Navient’s years of abuse of students and taxpayers in…
Running a home-based business comes with many perks—flexibility, no daily commute, and the comfort of…
Tax season can be a time of anticipation and excitement, especially when you’re expecting a…
It's that time of year again – Tax Day 2024 is here! Today is the…
The Protecting Americans from Tax Hikes (PATH) Act was created in order to protect taxpayers…
The IRS’s “Where’s My Refund?” tool will be updated by February 17, 2024, for many…
This website uses cookies.