Child tax credit?

[TAXMAN]

OK here goes: Daughter lives in apartment with 2 kid.(hers) Works sometimes but mostly not. Father no where to be found and thus no child support. Mom and dad pay all bills including rent, auto gas etc. Counted all days Grandkids resided in their(grandparents) house equalling 4 months. Daughter did not have to even file this year(2012). Grandma brought in a signed form 2120.(someone told her she needed it)

I believe I can make the exemption work for the grandparents. What I am not 100% sure is the CTC. I don't think so but sometimes the more you read the smarter you unbecome.

If you can respond please do so. Thanks

[mcb39]

Dependency may be Qualifying Relative. Generally taxpayers with one or more qualifying child may be able to claim a child tax crdit. I am thinking dependency (yes); child tax credit (no). What about the daughter? Does she make more than $3,800? She could also be a qualifying relative. These rules make your head spin.

[Guest Taxed]

I am not near my pub 17 but won't the grand kids have to live with grandma for more than 6 months and grandma has to pay more than 50% of the living expenses. If those conditions are met and mom's agi is less than grandma's and she is not claiming her kids, I think grandma can claim the kids on her return and qualify to get CTC.

Also if mom is getting any public benefits for her kids that has to be accounted??

[mcb39]

For qualifying relative the person must either (a) live with the taxpayer all year as a member of the household or ( be related to the taxpayer and have gross income less than $3800. The taxpayer must provide more than half of the person's total support for the year. Hence Qualifying Relative Dependency for possibly all three, but no Child Tax Credit. IMO

[Guest Taxed]

Qualifying Child

The child must be your son, daughter, stepchild, foster child,

brother, sister, half brother, half sister, stepbrother, stepsister, or

a descendant of any of them.

So for Grandma, her grandkids could qualify as a qualifying child (if other conditions, support, residency etc.) are met. A qualifying child needs only more than 6 months not a full year like qualifying relative.

In the example above I think they are short 2 months, but who is counting???

[Cathy]

Don't forget about considering EIC for the children's mother. And note I said "considering" rather than the mother definitely qualifies. Just need to take a look at the entire picture. The Tax Book has a section for answers for different scenarios such as the one you have.

[MsTabbyKats]

Qualifying Child

The child must be your son, daughter, stepchild, foster child,

brother, sister, half brother, half sister, stepbrother, stepsister, or

a descendant of any of them.

So for Grandma, her grandkids could qualify as a qualifying child (if other conditions, support, residency etc.) are met. A qualifying child needs only more than 6 months not a full year like qualifying relative.

In the example above I think they are short 2 months, but who is counting???

I'd be the last one to count....but, where are the kids listed as residing according to school records and medical records? If the IRS were to question....this is what they would want proof of.

I had a similar situation....parents not married. All 4 kids technically lived with their mom in one building. In actuality they bounced between mom & dad (who lived with his own mom across the street). Dad actually bounced between the mom of his kids and his mom. They each claimed HH with 2 of the 4 kids. Mom didn't have a problem. Dad did. Dad couldn't prove anything because the school/doctor had all the kids at mom's address. He could prove support because his mommy (kids grandmother) paid all the bills for her own apt. His priest wrote a letter explaining...that he supported the kids (which he did) but the IRS didn't buy it.

[Guest Taxed]

I don't do too many EIC cases because i stopped taking walk in taxpayers. But back in the day when I had walk in's that was generally the case with most unmarried parents with multiple kids.

The kids all lived with the mom, and school records or doctor records or welfare records showed the mom's address. Dad was bouncing back between the kids mom and perhaps other girlfiends? And they wanted to split the kids so each could qualify for HH and get EIC?

If they did NOT make EIC refundable but instead a carry forward non refundable credit, I bet half of the BS we see each year goes away?? IMHO!

[jainen]

>>he supported the kids (which he did) but the IRS didn't buy it<<

Perhaps because supporting the kids is not relevant to the question of dependency and head of household. All that matters is where they lived. Since his preparer would be "the last one to count" days in various homes, I agree that the weight of the evidence you have mentioned shows that the children's main home was not with their father.

[MsTabbyKats]

I don't do too many EIC cases because i stopped taking walk in taxpayers. But back in the day when I had walk in's that was generally the case with most unmarried parents with multiple kids.

The kids all lived with the mom, and school records or doctor records or welfare records showed the mom's address. Dad was bouncing back between the kids mom and perhaps other girlfiends? And they wanted to split the kids so each could qualify for HH and get EIC?

If they did NOT make EIC refundable but instead a carry forward non refundable credit, I bet half of the BS we see each year goes away?? IMHO!

I think that's an excellent idea.

This was several years ago (5 or so)....and I also don't do many EITCs now (same reason...I discourage people off the street).

I don't know what ever happened...I offered to re-do moms return so she could claim the 4 kids....but neither of them ever came back to me.

[Guest Taxed]

I have never been a great fan of refundable credits because the opportunity of distorting facts to fit the situation to claim the credit.

When I see how they filled out the organizer and how they answer the checklist questions, I can tell what they are trying to achieve.

[MsTabbyKats]

I have never been a great fan of refundable credits because the opportunity of distorting facts to fit the situation to claim the credit.

When I see how they filled out the organizer and how they answer the checklist questions, I can tell what they are trying to achieve.

Some people deserve, and I have no problem.

But at least I wish they stopped using the term "refund"...because it's not.

I may have written this a few months ago:

One of "my foreigners", married, with a child...had a very low income. His "refund" was about $8000. He was the only person who ever questioned the terminology. "How can I get a refund of $8000 if I only paid in $500?". My response was something like "Welcome to America"...followed by this is why the economy is so screwed up!

[Guest Taxed]

I don't want to sound insensitive but in my town there is one tax prep shop that actually puts on the window in bold "You may be entitled to a refund" Then in small print Get your free EITC review. Basically he is trying to generate foot traffic and sadly enough one of my clients fell for the trap few years back! I do her father's taxes also and he was livid after finding out what she paid for the prividedge of not having to wait for 2 weeks for her refund.

[jainen]

>>I wish they stopped using the term "refund"...because it's not.<<

Yes, it is. From the beginning (Gerald Ford) Earned Income Credit was structured as an offset to Social Security taxes, which low income workers pay at a higher rate than many others. Ronald Reagan expanded it as "the best job creation measure to come out of the Congress." Although some on this forum view EIC as a give-away, most politicians understand that it is the most effective anti-poverty program we have. It pays for itself with increased payroll taxes and economic activity, as well as reduced welfare costs. That's why more than half the states have added to it.

[JohnH]

Yes, it's a very effective way for the government to steal what one citizen has earned and give it to another who hasn't earned it. Robin Hood government at a highly refined level.

Incidentally, it hasn't affected the overall economy in the slightest, because in the process the government doesn't create any new wealth - it simply transfers it. Whatever spending the recipient is enabled to do is offset dollar-for-dollar by the spending ability that the victim of the theft loses.

But it is very effective in buying votes. (Which is the primary reason the cynical politicians in those states have adopted it)

[Guest Taxed]

Now why would Gerald Ford and Ronald Reagan want to buy votes?

Perhaps the Republican candidates can run on that platform next year to eliminate it!

If you are talking about Govt. stealing money from one taxpayer and giving it to another with EITC. Then using the same logic you can say that there should be no deduction for depreciation or lower divident tax rates etc. which generally benefit upper income taxpayers!

[MsTabbyKats]

>>I wish they stopped using the term "refund"...because it's not.<<

Yes, it is. From the beginning (Gerald Ford) Earned Income Credit was structured as an offset to Social Security taxes, which low income workers pay at a higher rate than many others. Ronald Reagan expanded it as "the best job creation measure to come out of the Congress." Although some on this forum view EIC as a give-away, most politicians understand that it is the most effective anti-poverty program we have. It pays for itself with increased payroll taxes and economic activity, as well as reduced welfare costs. That's why more than half the states have added to it.

Do you always have to be contrary?

A refund..by definition...means getting back something you gave.

It should be re-labeled as "entitlement"....especially when someone files a Schedule C to get it.

[cathyan]

"It should be re-labeled as "entitlement"....especially when someone files a Schedule C to get it."

MsTabbyKats, I don't usually reply to these threads, but I must take umbrage with your blanket statement. I have many clients who file a "C", and have for years. They are drywallers, roofers, auto mechanics, lawn care providers, housekeepers, and even insurance salesmen. Some have employees, some use other IC'S. All keep good records, and have provided for their families quite well, and gladly paid any tax due. The last few years, though, after the economy tanked, many of them have gotten the EIC, much to their surprise.

I'm sure you meant those who file a "C" with poor or nonexistent records (who we shouldn't even be filing for anyway), but your statement maligns many hard working people who are having a hard time right now.

[Guest Taxed]

>>I'm sure you meant those who file a "C" with poor or nonexistent records (who we shouldn't even be filing for anyway), but your statement maligns many hard working people who are having a hard time right now.<<

You are are absolutely correct. There are many taxpayers who find themselves qualified for EITC because of the economy. Drastic loss of income compared to previous years. For many who have never qualified for EITC before, when i tell them they have to go through that checklist with me to receive it, it is a bitter sweet pill. Some even say I hope we get out of this situation next year.

BTW with Sch C taxpayer qualifying for EITC, we better keep good documentation because that is one area IRS will be giving more scrutiny.

[JohnH]

Now why would Gerald Ford and Ronald Reagan want to buy votes?

Perhaps the Republican candidates can run on that platform next year to eliminate it!

If you are talking about Govt. stealing money from one taxpayer and giving it to another with EITC. Then using the same logic you can say that there should be no deduction for depreciation or lower divident tax rates etc. which generally benefit upper income taxpayers!

Gerald Ford and Ronald Reagan were politicians just like the rest of the crowd in Washington. I don't withhold criticism just because of the jersey someone happens to wear. And a true conservative who understands economics WOULD advocate elimination of the EIC and moving its administration where it belongs.

As for your other comments, I disagree with the "job creation" myth associated with most business incentives. Depreciation is a legitimate deduction - accelerated depreciation is mostly a shell game for the gullible. Investment tax credits, job creation credits, and most of the remaining list of incentives are very similar to the EIC in their flawed logic. So on that point we are in agreement somewhat.

There are some marginally logical arguments for special long term capital gains rates, but a one year time frame is way too short. I think it should be scaled, probably beginning at about 3 years. (Depends upon your definition of "long term"). And special taxation of dividends makes no sense to me, but then I think corporations which pay dividends are engaging in a shell game of their own. A well-run corporation should not pay dividends at all, and its shareholders should demand that it not do so. If shareholders need income, they should sell shares, which will be increasing in value if management is doing its job. (I base that primarily on the reasoning of John Bogle and Warren Buffett).

[Guest Taxed]

Glad we are agreeing on some aspects of it. I think you will agree with me that both sides try to pass legislation that basically throws a "dog bone" to their base. They are in the business of getting re-elected! If you analyze all the legislation passed from a pure logical perspective it becomes quite clear!

Perhaps we should move this conversation to a Politics forum??

[JohnH]

Yes, politics at all levels is essentially the art of selling influence and buying votes.

By the time they get on the national scene, they are already owned by one or more special interests.

You're right - we're crossing the line here.

I'm going to stop.

Not because I don't find it interesting, but I have lots of work to do.

Need to earn that income so I can pay those taxes, and at several levels I'm grateful to have that sort of problem.