Tax News Blog

How to qualify for the Child Tax Credit?

Posted by Divya Hansraj on June 16, 2017
Last modified: June 16, 2017

Oh, the joys of having children!

Today, it is difficult for parenthood to have its rewards. Children want us to buy them the most expensive toys and clothing and that spending can sometimes feel fruitless. As with struggling to finish a marathon, we strive, hoping there will be a light at the end of the tunnel. Luckily the IRS understands this struggle and gives parents a little something back. The Child Tax Credit and the Additional Child Tax Credit serve as the cushioned shoe inserts that help us finish.

Child Tax Credit (CTC) Facts:

  • You must have a qualifying child.
  • You must have earned greater than $3000 of Income.
  • Each child can receive up to $1000.

 

What is a qualifying child?

In order for your child to be a qualifying child, they must meet the following requirements:

Age: Must be under 17 before December 31.

Dependent: Must be claimed as a dependent on your tax return.

Citizenship: Must be a United States citizen, a national United States citizen, or a green card holder

Residency: Must have lived with you for half the year or more.

Support: Must have been provided more than 50% of their finances by you.

Income: The CTC is determined according to your filing status and Adjusted Gross Income. Thus, the higher your income bracket, the lower the credit.

Relationship: The child must be related to you in one of the followings:

  • Son or daughter
  • Legally adopted son or daughter
  • Stepson or stepdaughter
  • Brother or sister
  • Stepbrother or stepsister
  • Grandchild
  • Niece or nephew
  • Foster son or daughter 

 

Did you answer yes to all of those requirements? Congratulations, you qualify!

 

What causes the Child Tax Credit to decrease?

Based on your Filing Status, if your income exceeds the following thresholds below, the child tax credit decreases $50 for every $1000 above the income threshold.

  • $55,000 for married filing separately
  • $75,000 for single or head of household, qualifying widow or widower filers
  • $110,000 for married couples filing jointly.

Two examples: 

  1. Grace has an AGI of $80,000, has one child and is electing the head of household filing status. Therefore, Grace exceeds this threshold by $5000 since the Head of Household threshold is $75,000.  As a result, her CTC was reduced by $250 so she received $750.
  2. William has an AGI of $53,000, filing two dependents and he is electing the filing married separately. The married filing separately threshold is $55,000. Therefore he falls under the married filing status threshold. As a result, each child qualifies for a total of $1000. He will receive the CTC for $2000.

 

What is the limit of the Child Tax Credit?

The Child Tax Credit is a non-refundable credit which can only reduce your income tax to zero. Furthermore, the Child Tax Credit limits your credit to cover your tax due. Let’s say you qualify for the $1000 CTC but your income tax is $500. The CTC is limited to your tax and you will receive a credit of $500.

 

What happens to the rest of the credit?

The remainder of the credit is the Additional Child Tax Credit (ACTC). This credit is treated as a refundable tax credit. 

Let’s look at an example to see how this credit works.

John and Sally are married filing jointly and have one dependent who is under 17. Although they received a total of $1000 for their child the Child Tax Credit was limited to $500. As a result, the remaining $500 is treated as a refundable ACTC credit.

 

What if I have more than one child?

The more the merrier! If you have more than one qualifying child, then you are eligible to receive up to $1000 per child.

Someone else claimed my Dependent.

Imagine this.

You had taken care of your child all year, provided the world of happiness, bore numerous expenses and then you come to realize that the IRS rejected your return due to this dependent? You have no need to worry. We can help you figure this out.

Can I still get the CTC?

Since the IRS works on a first come first serve basis, we advise that you file your return as soon as possible. If someone else has claimed the exemption and you are confident that this is your qualifying dependent, you can still claim the credit. However, the return must be paper filed. Once you do so, the IRS will provide you with further instructions.

 

Can I get the Child Tax Credit if I did not work?

The IRS only grants a credit if you worked and earned taxable income, whether it is from your job or business. Unfortunately, if you did not earn any income, you cannot receive a tax credit. 

 

How will I know if I met the Requirement for the CTC?

File with our website, and we automatically determine whether you qualify for the Child Tax Credit, you do not need to pull out the calculator to determine your credit amount. Our website will conveniently calculate the credit for you. Our staff is ready to answer any additional questions you may have. Feel free to contact us for any additional questions or clarifications.

Child Tax Credit

Unfiled tax returns have you drowning?

Posted by admin on June 6, 2017
Last modified: June 16, 2017

Overwhelmed With Prior Year Unfiled Tax Returns?

While most Americans finish or have finished their current year taxes, others have stacks of unfiled tax returns from previous years. You may feel swamped with the pressures of work and within a blink of an eye, you wake up to find an IRS notice in the mailbox. Let’s face it, life gets busy. Nevertheless, you have forgotten about those prior year tax returns, but the IRS hasn’t. Here are some common questions for those taxpayers who are stuck in the mud with unfiled tax returns:

Should I file my Unfiled tax returns?

Read the rest of this entry »

New Tax Plan: Trump’s Six Big Changes

Posted by admin on May 23, 2017
Last modified: May 31, 2017

Is Trump’s new tax plan making filing simpler, or is it really just a helping hand for the wealthy?

We’re reminded daily of the new guy in town…or office. Whether that reminder comes from seeing his face on a t-shirt or a protester’s sign outside your office window is a different story. Let’s put the opinions aside for a moment, shall we? If all goes according to Trump’s proposal, many changes will be taking place in the tax world. Here’s a breakdown of Trump’s new tax plan.

There will only be three tax brackets.

Read the rest of this entry »

Obamacare VS. Trumpcare: 3 Ways Taxes Will Be Affected

Posted by admin on April 14, 2017
Last modified: May 31, 2017

Obamacare made it through the election. Will it stay on your tax return?

Every new president brings on a new aura for Americans to bask in, and while emotions run high, opinions begin to surface. Suddenly, cheerful holiday dinners turn into political debates. Some chime in while the rest of us are just trying to decide between pecan pie or pumpkin. One debate is the replacement of Obamacare, or the American Health Care Act. Lately, we’ve introduced a new word into our vocabulary that will likely stick; TrumpCare

 

Flexible Spending Account (FSA) for Over-the-Counter Medicine

According to the IRS in 2011, under the Affordable Care Act (aka Obamacare), “Distributions from health FSAs and HRAs will be allowed to reimburse the cost of over-the-counter medicines or drugs if they are purchased with a prescription.” This will remain accurate until Obamacare is no longer in effect. However, there are limits to the Flexible Spending Account. For example, the pre-tax dollars you can have contributed to your account adjusts each year depending on inflation. The FSA limit is currently $2,500. Read the rest of this entry »

20 Facts About Filing an Amended Prior Year Tax Return

Posted by admin on February 7, 2017
Last modified: February 7, 2017

Did you take the wrong step with your tax return? Don’t be too hard on yourself.

Mistakes happen. If you filed your tax return with incorrect or missing information, the IRS will give you a chance to fix your mishap. Before insisting you 100% need to amend your return, though, take a look at our list of when you should, when you shouldn’t, and other need-to-know info about doing so.

 

What it is and where to file

1.Another name for an amended tax return is 1040X.

2.If you are amending multiple tax returns at once, you will need a prepared 1040X for each one. They will also need to be mailed in separate envelopes to the IRS.

3.You can prepare your amended tax return with PriorTax whether you filed your original return with us or a different tax preparer.

4.The address to mail your amended tax return is:

Department of the Treasury

Internal Revenue Service

Austin, Texas 73301-0215

Or if you are using a private delivery service:

Internal Revenue Service

3651 South I-H 35, Stop 6055 AUSC

Austin, Texas 78741

 

Fixing Information VS. Adding Additional Information

5.You don’t need to file an amended return for calculation mistakes. The IRS has calculators of their own which will update the information automatically on your return. Read the rest of this entry »

Someone Used My Social Security Number to File Taxes – What Should I Do?

Posted by admin on January 10, 2017
Last modified: January 25, 2017

Victim of identity theft? Don’t let panic get the best of you.

After entering your tax information, you finally hit the e-file button, only to have your return rejected by the IRS. The reason; a tax return has already been filed with your social security number!

There’s a sinking feeling in your gut and an enveloping sense of dread. What do you do? How will you ever get your refund money now? Remain Calm. You’ll get through this.

 

Here’s what you should do now

Step #1

The first thing to do is double check all of the information on your return, especially your name and Social Security number and those of your spouse and dependents. Sometimes this error can be caused by a simple typo. Read the rest of this entry »

Calculate Your Prior Year Tax Refunds with Tax Calculators

Posted by Michelle O'Brien on January 5, 2017
Last modified: January 13, 2017

The IRS has never been keen on surprises. Know what to expect.

Whether you’re slightly behind on your taxes or up to date and ready to conquer tax season 2017, it’s nice to have a starting point. Taxes are intimidating if you go into it not knowing whether you owe the IRS or can expect a refund. Why not figure that out first?

 

Accessing prior year tax calculators online

With PriorTax, you can find out what your tax refund will be before you even think about the IRS. You don’t even need to create an account or enter any personal information at all. In fact it’s completely anonymous. And did I mention it’s 100% free?

We offer tax calculators dating back to 2011. You can access any of them by clicking the buttons below: Read the rest of this entry »

What Does Being Audited By The IRS Mean?

Posted by Michelle O'Brien on December 23, 2016
Last modified: December 23, 2016

Feel like the IRS has all eyes on you?

Think of filing your taxes as going through security at an airport. Your tax return is you. The security checkpoint is the IRS. Just like you can be stopped while going through security, your tax return can be stopped by the IRS. With a security checkpoint, you’re either stopped because you were the lucky number of the hour or because something triggered suspicion. The same goes for your tax return and the next step is an IRS audit.

 

What is an audit?

An audit is simply an examination of the information you reported on the tax return you filed for a specific year. Contrary to popular belief, the IRS is not employed with millions of accountants checking each return that comes through their doors. In fact, much of the processing is computerized now. You can imagine how technology can be manipulated a bit by fraud accounts and identity theft. Audits are necessary to help stop that from occurring as well.

 

What triggers your return for an audit?

Just like at the airport security check, the IRS can stop a tax return randomly or for suspicious activity. Here is a list of the most common audit triggers we’ve come across: Read the rest of this entry »

IRS Address to File a Late Tax Return

Posted by admin on December 15, 2016
Last modified: January 13, 2017

If you need to file a prior year tax return, you’ll have to mail it to the IRS…

Still need to get caught up on a prior year tax return? You’ll most likely need to paper file it. If this is the case, you’ll need the IRS address to send your return to.

You’ll be able to prepare any previous year tax return online, but you won’t be able to electronically file it. You’ll need to mail it to the IRS.

IRS address to file a late tax return

The address you’ll send your prior year tax return to will depend on what state you live in. Below, are five separate addresses on where to send a late tax return to. Please note that if you received a notice from the IRS with an alternate address, you should use that one.  Read the rest of this entry »

Student Loan Interest Deduction Income Limit

Posted by admin on December 15, 2016
Last modified: December 16, 2016

Strapped for cash as a recent grad? See if you qualify for a student loan interest deduction.

College is over and you’ve been blasted with a taste of reality…or should I say adulthood? It’s tough but you’ll get through it. Even the IRS is on your side with certain deductions available to those of us who used our after-high school lives to pick up a college education. College is expensive. The student loan interest deduction can help you out a bit. Let’s see if you’re eligible.

Are there income limits?

Here are the income limits that apply to the student loan interest deduction. Note that prior tax years have slightly different income limits:

Single filers with a modified adjusted gross income (MAGI) below $80,000 and married couples filing jointly with incomes below $160,000 can take the full deduction.

Taxpayers whose MAGIs are above these limits can only take a reduced deduction or no deduction at all. The deduction phases out between MAGIs of $65,000 and $80,000 for single filers. For married couples filing jointly, the deduction phases out between MAGIs of $130,000 and $160,000. Read the rest of this entry »