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CREDITS_ EIC_ CTC_ Education _ dependent care

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					CREDITS:
DEPENDENT CARE, CTC, ETC
NON-REFUNDABLE CREDITS
§   Non-refundable credits reduce the amount of tax
    owed.

§   If no tax is owed, or if the credit is greater than the
    tax owed, the excess credit is not refunded to the
    taxpayer.

§   Non-refundable credits appear on lines 47 through
    53 of Form 1040.
REFUNDABLE CREDITS
   Refundable credits also reduce the amount of tax
    owed.

   But if the credits are greater than the tax, the
    excess is refunded to the taxpayer.

   Refundable credits appear in the payment section
    of the 1040 along with tax withheld (lines 63-71).
    FOREIGN TAX CREDIT
   A taxpayer can often take a nonrefundable credit on
    US taxes for taxes paid to a foreign country on
    income from that country.

   This credit is usually out of scope for us, except for
    preparers with international certification.

   However, if foreign taxes appear on a 1099-INT or
    1099-DIV, we can take care of them. Enter the
    amount on line 46 of the 1040.
CREDIT FOR CHILD AND
   DEPENDENT CARE EXPENSES
   This is a nonrefundable credit that allows taxpayers
    to reduce their taxes by a percentage of their
    expenses for child and dependent care.

   It may be claimed by taxpayers who, in order to
    work, look for work, or attend school full-time, pay
    someone to care for their qualifying:
     Dependent child under the age of 13;
     Spouse or dependent who is unable to care for
      him/herself.
CHILD AND
    DEPENDENT CARE EXPENSES cont’d.
   The taxpayer (both, if filing jointly) must have earned
    income or be full-time student(s).

q   The credit is a max. 35% of up to $3,000 of a taxpayer's
    work-related expenses for one child ($6,000 for two or
    more).

   Any dependent-care benefits received from an employer
    (see W-2, box 10) must be subtracted from the $3,000.

   Only the custodial parent may claim this credit .
CHILD AND
    DEPENDENT CARE EXPENSES cont’d.
   A married person filing separately may not take this
    credit.
q   Credit cannot be taken for amounts paid to a
    dependent, the other parent of the child, or a child of
    the taxpayer who is under 19.
q   The taxpayer must provide the name, address and SSN
    or EIN of the care provider.
q   Information for this credit is entered on form 2441.
   A taxpayer who received dependent care benefits from
    an employer must complete Form 2441even if no
    payments were made for such care.
RETIREMENT SAVINGS
    CONTRIBUTION CREDIT
q   A nonrefundable credit for contributions to a
    retirement plan.
q   For an employer-sponsored plan, the information
    appears on the W-2.
q   For an IRA noted on the intake form, enter the
    taxpayer’s information on the IRA worksheet.
q   Either form will prompt you to complete Form 8880.
    The calculations are done by TaxWise.
CHILD TAX CREDIT
   The child tax credit is a nonrefundable credit of up
    to $1,000 per qualifying child.

   Those whose tax liability is small (or zero) will not
    receive all (or any) of the child tax credit because
    there is little (or no) tax to reduce.

   However, such taxpayers may be able to take the
    additional child tax credit (which is refundable).
    ELIGIBILITY
   To claim the child tax credit, the taxpayer must have at
    least one qualifying child, who:
     Can be claimed as a dependent;
     Is under 17 at the end of the tax year;

     Did not provide over half of his/her own support;

     Lived with the taxpayer for more than 6 months of the tax
      year;
     Is a US citizen, US national, or US resident.

     (Note: for divorced, etc. parents, the CTC can be claimed
      by the non-custodial parent if the custodial parent has
      released the dependency exemption to the other parent.)
FIGURING CHILD TAX CREDIT
   It is based on the taxpayer’s tax liability, modified
    adjusted gross income (MAGI), and filing status.
   The amount of the credit may be reduced if the
    taxpayer's:
     Tax  liability minus the other nonrefundable credits is
      less than the maximum child tax credit, or
     MAGI is above the limits for the taxpayer’s filing
      status.
ADDITIONAL CHILD TAX CREDIT
   Some taxpayers who do not get the full $1,000 of
    the child tax credit may qualify for the additional
    child tax credit, which is refundable.

   The credit is generally based on the lesser of:
     15% of the taxpayer's taxable earned income that is
      more than $3,000, or
     The amount of unused child tax credit (caused when tax
      liability is less than allowed credit)
Entering the information
   TaxWise will generate the necessary forms when
    data about dependent children shows they qualify.

   If more information is needed to complete the
    forms, the system will prompt the preparer to do
    this.

   TaxWise calculates both credits.

				
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posted:7/10/2013
language:English
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