Child Tax Credit

[Jesse]

The IRS issued the new Form 8901, Information on Qualifying Children Who Are Not Dependents to be used if the qualifying child is NOT the taxpayer's dependent because the taxpayer or spouse, if filing jointly, can be claimed as a dependent on someone else's 2005 return.

If child is not a dependent because the taxpayer signed form 8332 releasing claim to exemption to the noncustodial parent who has the right to the Child Tax Credit?

[Brad Imsdahl]

One of the new features we have in the book this year is a chart with various situations that gives you a fast answer as to who gets what under the new uniform definition of a qualifying child rule. One of the situtations is described as follows:

- 5 year old child lives with mom.
- Mom pays over ½ cost of home.
- Dad provides over ½ child’s support.
- Mom signed over dependency to dad.

The chart answers the question as follows:

Mom gets HOH, EIC, and Dependent Care Credit.
Dad gets Dependent Exemption and Child Tax Credit.

The chart has 12 different single parent situations and tells you at a glance who gets what.

[Mark Goldberg]

Child tax credit

The child tax credit always goes to the person claiming the child as a dependent.

[Armando Beaujolais]

The child tax credit always goes to the person claiming the child as a dependent.

I don't believe that's true any more. See Form 8901, "Information on Qualifying Children Who Are Not Dependents (For Child Tax Credit Only)."

[S T]

Chart

Oh Thank Goodness you provided a chart in the new TB guide.

As with 2005 filing season for 2004 returns, there were many questions and comments posted regarding HOH, dependency exemption, EIC, etc.

I can just picture the questions in my mind now with the new forms and regulations.

Sandy

[Mark Goldberg]

Child Credit and exemption

Armando, I stick to my post. On page 11-9 of the NCPE 2005 Book it states "the same parent that claims the exemption will also be entitled to claim the child tax credit".

[Black Bart]

News from the front

Just got back from first day of slogging through the trenches of a two-day, "farm" tax seminar (what?--you were expecting maybe Harvard Law Review?--it's Arkansas, for Heaven's sake!) yesterday and I'm somewhat shell-shocked.

Anyhow, puff-puff (catching my breath), I was really looking forward to "simplification" by the new uniform definition of a qualifying child of all those "credits" (dependent, HH, EIC, CTC, CC, etc., etc.), buuutttt...........it looks like a big tax IED that only congressmen under fire could have "simplified." The support test has been done away with, but the age differences remain and there's something about the HH thing that, unlike the old law, kills off that designation and some of the credits for all relevant parties in certain situations. The instructor used the word "unfortunately" several times (always a bad sign). Things have changed--maybe that CTC thing Goldberg and Beau were talking about. I hope I'm wrong and just don't understand yet what's going on (that's always likely). Will try to absorb more today and report breaking developments later.

Regards, Geraldo Bart

[BOB W]

I too can't wait.........

...... until TTB is received in order to help me get a grip on some of the changes before tax season starts.

[Jesse]

Not tied to dependency exemption

The child tax credit is no longer tied to the dependency exemption. A child who is not a dependent may still be a qualifying child for the child tax credit by filling out Form 8901.

If form 8332 is signed is the child treated as meeting the residency test for the noncustodial parent for the child tax credit?

If not, would the child tax credit default to the custodial parent even though they are not claiming the dependency exemption because form 8332 was signed to release to the noncustodial parent?

[Bees Knees]

Armando, I stick to my post. On page 11-9 of the NCPE 2005 Book it states "the same parent that claims the exemption will also be entitled to claim the child tax credit".

In most cases, that will be true. However, the 1040 instructions

http://www.thetaxbook.com/updates/i1040gi--2005.pdf

clearly show on page 19 with a series of questions that a person who cannot claim the child as a dependent because they themselves are claimed as a dependent by another can still claim the child tax credit.

Where this would come up is in a Grandma, Mom, Child household where Mom is Grandma's dependent, but the Child qualifies Mom for the Child Tax Credit because under the tie breaker rules, Mom beats Grandma by being the parent.


This is going to be fun this year with all of these non-uniform rules we got going now.

[Gene V]

Tax credit

Click on this Web site for example of Child Tax Credit, go to page two and look under form 8901.

http://www.ace.uiuc.edu/Taxschool/PDF/2005%20Errata%20sheet.pdf

[Mark Goldberg]

Bees

Your example had a grandma, daughter and grandchild. The daughter lost the child tax credit because she was a dependent of the grandma. I bet if grandma qualified as the one eligible to claim the grandchild as a dependent she would get the child tax credit.

[Mark Goldberg]

Jesse

Here is your question
"If child is not a dependent because the taxpayer signed form 8332 releasing claim to exemption to the noncustodial parent who has the right to the Child Tax Credit?"
Form 8901 has nothing to do with this situation. In this situation dependency prevails. It is only in two rare instances that 8901 comes into play and then dependency does not rule.

[Bees Knees]

Your example had a grandma, daughter and grandchild. The daughter lost the child tax credit because she was a dependent of the grandma. I bet if grandma qualified as the one eligible to claim the grandchild as a dependent she would get the child tax credit.

No, the daughter did not lose the child tax credit for being a dependent of the grandma. It causes here to lose the dependency exemption, but not the child tax credit. Look at the 1040 instructions. It clearly allows a person to claim child tax credit even though they are not a dependent.

[Jesse]

Thanks

Here is your question
"If child is not a dependent because the taxpayer signed form 8332 releasing claim to exemption to the noncustodial parent who has the right to the Child Tax Credit?"
Form 8901 has nothing to do with this situation. In this situation dependency prevails. It is only in two rare instances that 8901 comes into play and then dependency does not rule.

I went through the instructions for the 2005 Form 1040 and it does lead to the conclusion, as you stated, the child tax credit will follow the dependency deduction.