Married couple had $500k of income so can't claim AOC. Dependent child has $12,000 of earned income, $2500 of interest and $2,000 of other income. I am not claiming the child as a dependent on the parents return so the child can use AOC or LLC to reduce her tax to zero. On the child's return when I check the box the child is eligible to be a dependent and I check the box the child is not being claimed by the parent , then the box on 1040 is checked that the child can be claimed. I get a standard deduction for a dependent and I get the credit. In the past when that box is checked the child can't take the credit. When I check both boxes no the child gets the credit but gets a full $14,600 standard deduction which I know is wrong. Do Tax Book Members agree that this is a bug in the program or am I wrong and the IRS will allow the kid to claim the credit with that box on 1040 checked?
-
-
The child can claim the credit but it's not refundable (it can, however, eliminate the tax on the other income). -
Same answer, rbynaker beat me to it. See Pub 970. I am confused whether you are asking about the past or the present. You state that Pro Series gives the correct result, but that it didn't in prior years? Which are you asking about?"You said it, they'll never know the difference. Come on, we'll paint our way out!" - Moe Howard
"That's enough! When you didn't know what you were talking about, you really had something! [to Curly]" -Moe HowardComment
-
Standard deduction should be earned income amount plus $450 or 14,600 whichever is less. I just put through a test return in pro using 12K W2 income and 2,500 interest income and it correctly shows 12,450 as std ded.Comment
-
Income is $12,000 + $2,500 + $2,000 = 16,500. So there is taxable income and therefore tax to be offset by non-refundable AOC. This is consistent with OP: "I get a standard deduction for a dependent and I get the credit." OP further states that if he (incorrectly) indicates that the student is not a dependent, then they get the full regular standard deduction. So I'm still not sure what the question is, as everything seems to check out."You said it, they'll never know the difference. Come on, we'll paint our way out!" - Moe Howard
"That's enough! When you didn't know what you were talking about, you really had something! [to Curly]" -Moe HowardComment
-
This is a special situation to claim the non-refundable education credit. TP is a qualifying child of his parents, so he is not claiming his own dependency. Standard deduction in this case is earned income plus 450. He would also be subject to kiddie tax if investment income was higher than 2,600.Originally posted by Rapid Robert View Post
You can't just pick and choose if someone is a qualifying child, it is determined by the facts. If he is a full time student 5 months and did not provide 50% of his own support, then he is a qualifying child.Last edited by kathyc2; 03-13-2025, 06:20 PM.Comment
-
Yes, he is a QC. I never implied or stated otherwise. How does that relate to what I wrote?
"You said it, they'll never know the difference. Come on, we'll paint our way out!" - Moe Howard
"That's enough! When you didn't know what you were talking about, you really had something! [to Curly]" -Moe HowardComment
-
As I've already stated twice if someone is a QC their standard deduction is earned income plus 450. If you don't want to believe me, read the **** pub. https://www.irs.gov/publications/p50...link1000221069Originally posted by Rapid Robert View PostComment
-
"As I've already stated twice if someone is a QC their standard deduction is earned income plus 450"
No one in this thread has disagreed with or disputed that."You said it, they'll never know the difference. Come on, we'll paint our way out!" - Moe Howard
"That's enough! When you didn't know what you were talking about, you really had something! [to Curly]" -Moe HowardComment
-
To clarify, we agree standard deduction is earned income plus $450. However, when I get this result the box on Form 1040 is checked that the child can be claimed as a dependent. The issue is should that box be checked in this situation To me when IRS sees that check box they won't allow the credit to reduce tax to zero. . I am not talking about the refundable creditComment
-
Yes, check the box. Yes, he gets the nonrefundable credit, so his tax can be reduced all the way to zero if applicable. If the IRS disallows the credit, you will respond. I'm not talking about the refundable credit, either.Comment
-
"In the past when that box is checked the child can't take the credit"
"To me when IRS sees that check box they won't allow the credit to reduce tax to zero."
I can't imagine where you are getting your incorrect information from. To answer your original question, no I don't agree there is a bug in your ProSeries software.
Note that by checking the box "could be claimed", there is no indication whether or not the dependent is actually claimed (nor does the IRS ask for this information). For the education credit, it is up to the IRS to check whether or not another taxpayer claimed the dependent. However, in my software, there is a checkbox for both student loan interest and education credits to indicate that the dependent is not being claimed, but I'd wager this is not sent to the IRS, it's just for diagnostic purposes.Last edited by Rapid Robert; 03-15-2025, 01:33 PM."You said it, they'll never know the difference. Come on, we'll paint our way out!" - Moe Howard
"That's enough! When you didn't know what you were talking about, you really had something! [to Curly]" -Moe HowardComment
-
So a parent claims the dependent child but is ineligible for the AOC because of income, but the child can claim the AOC
credit up to the tax on their return, thus getting all their withholding back - just can't get any of the refundable amount.
Do I understand this correctly ?Comment
-
Almost. The parent qualifies to claim the dependent child but does NOT claim the child, thus making the child eligible for the nonrefundable AOC -- just none of the refundable AOC.
The parent does NOT claim the child as a dependent even through qualified. The child DOES check the box that someone can claim him, but because no one does claim him, he qualifies for the nonrefundable AOC. Not the refundable AOC. And, he does NOT claim his own exemption. I think the AOC is the only credit, deduction, or benefit that usually follows the parent or whoever can claim the child, but has this option to allow the child to claim part of the credit/AOC on his/her return. Very handy for higher-income parents when dependent benefits phase out but have college kids that have tax liabilities.
Charge enough for education benefits!! You can you shift part of AOC to a child if parents are higher-income and gain no/little benefit, as above. But you also can make part of CERTAIN scholarships taxable at the student's lower tax bracket to free up some taxable scholarship funds for the parents' return to take AOC when it's a benefit in the parents' tax bracket. Take into account Kiddie tax in that calculation. Run the numbers! Also, great planning opportunities AND able to work out education benefits after the year ends while preparing the family's returns. It takes a little time, but you can be a hero to your clients. Make sure you tell them/show then how much you saved them as a family!
IRS Pub. 970 is a wealth of information. Read the section on coordinating QTP distributions with the AOC and LLC for the greatest benefit to a family. It gives examples for this and throughout the pub.
Read TTB 12-1 to 12-9Last edited by Lion; 03-16-2025, 01:07 PM.Comment
-
Thanks everyone, I guess I am wrong. I will file the returns as is.Comment
Comment