Author Topic: Change withholding to maximize child tax credits  (Read 822 times)

Jumpingbean

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Change withholding to maximize child tax credits
« on: January 28, 2019, 10:10:02 PM »
After going over my taxes and realizing I dont get $2000 per kid or $4000 for 2 kids and instead get $1400 x2 for $2800 since I don't owe any taxes I was wondering something:
A) did I understand this rule right?
B) if so, would it make sense to withhold as much tax as possible so instead of paying $7k in federal taxes throughout the year, I pay a lump sum at end of year. This way I can maximize the $4k deduction for the 2 kids and maybe qualify for other credits too. Doesn't this save me money in the long run? What am I missing?

MDM

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Re: Change withholding to maximize child tax credits
« Reply #1 on: January 28, 2019, 11:11:48 PM »
... since I don't owe any taxes ....

... paying $7k in federal taxes ...
Those two statements are inconsistent.

What are the amounts on your 2018 for the items below?
- form 1040 line 11
- form 1040 line 12
- schedule 3 line 55

Jumpingbean

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Re: Change withholding to maximize child tax credits
« Reply #2 on: January 29, 2019, 09:29:56 PM »
When I say I don't owe any taxes,  I mean we are going to get a refund on our tax return instead of having to write the IRS a check this year. Maybe I'm confused abt this statement from IRS about the child tax credit:
"Credit refunds. The credit is refundable, now up to $1,400. If a taxpayer doesnít owe any tax before claiming the credit, they will receive up to $1,400 as part of their refund."

Since I am getting some refund this year whether I claim my kids as dependents or not, I don't qualify for the full $2000 per kid. So, if I withhold less tax throughout the year I could get the full $4k for my two kids instead of $2800, right? I still pay the same amt of tax but get more credits?
« Last Edit: January 29, 2019, 09:32:05 PM by Jumpingbean »

MDM

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Re: Change withholding to maximize child tax credits
« Reply #3 on: January 29, 2019, 10:33:09 PM »
When I say I don't owe any taxes,  I mean we are going to get a refund on our tax return instead of having to write the IRS a check this year. Maybe I'm confused abt this statement from IRS about the child tax credit:
"Credit refunds. The credit is refundable, now up to $1,400. If a taxpayer doesnít owe any tax before claiming the credit, they will receive up to $1,400 as part of their refund."
What the IRS means when it says "If a taxpayer doesnít owe any tax" is "any tax at all", regardless of whether anything was withheld during the year.

Have you looked at your return, particularly the lines indicated?

secondcor521

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Re: Change withholding to maximize child tax credits
« Reply #4 on: January 30, 2019, 12:05:49 AM »
Since I am getting some refund this year whether I claim my kids as dependents or not, I don't qualify for the full $2000 per kid. So, if I withhold less tax throughout the year I could get the full $4k for my two kids instead of $2800, right? I still pay the same amt of tax but get more credits?

Wrong and no.

The amount of federal taxes withheld from your paychecks has absolutely nothing to do with the amount of tax owed.

The amount of taxes owed - which determines how much of the non-refundable part of the child tax credit you get - is figured on line 11 of the new 1040.  The child tax credit is figured on line 12a.  The amount of withholding doesn't show up until line 16.  Since you generally do your tax return from top to bottom, there's no way that what you put on line 16 is going to affect the amount on line 12a.

Jumpingbean

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Re: Change withholding to maximize child tax credits
« Reply #5 on: January 30, 2019, 06:37:55 PM »
My taxes: MFJ with 2 kids
Line 1: 84929.5
Line 6 and 7: 84929.5
Line 8: 24000
Line 10: 60929.5
Line 11: 6930
Line 12: 4000 (2 kids)
Line 13: 2930
Line 15: 2930
Line 16: 7709.18
Line 18: 7709.18
Line 19: 4779.18 ( this is my refund, right??)

I am confused because I have run my numbers on TurboTax and they got 3k for my tax refund and I only got $2500 for child deductions after checking all my info over and over to make sure there where no typos. The info from above is when it was done by hand. They are too different. So something isnít adding up.

secondcor521

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Re: Change withholding to maximize child tax credits
« Reply #6 on: January 30, 2019, 07:07:12 PM »
If your taxes owed (line 11) is really $6,930, then you should get the full $4K in child tax credits as best I can tell with those numbers.  I'm not sure why Turbotax has something different.  It sounds like Turbotax doesn't think your tax liability is $6,930, so it may only be giving you the $1,400 per kid.

Turbotax doesn't want to show you the whole return unless you pay them (that's how the tax prep programs normally work), so you probably can't look at the return.  But it may have something where it will tell you what your child tax credit is and explain why it is what they calculated it to be.  Poke around.
« Last Edit: January 30, 2019, 07:10:09 PM by secondcor521 »

Jumpingbean

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Re: Change withholding to maximize child tax credits
« Reply #7 on: January 30, 2019, 07:29:37 PM »
Okay, here is another possible mistake. I made $4125.00 as a side gig (aka independent contractor) and got a 1099-misc. and no taxes were taken out of that. we just added this to line 1 and didnít fill out any other forms. Was this the wrong way to do this? That still would not make up for the huge difference between TurboTax and the hand done form.

blue221

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Re: Change withholding to maximize child tax credits
« Reply #8 on: January 30, 2019, 07:36:04 PM »
You are likely getting $2000 for one child and $500 for the other child who is over 17. Children over the age of 17 only qualify for the $500 dependent credit.

MDM

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Re: Change withholding to maximize child tax credits
« Reply #9 on: January 30, 2019, 07:40:08 PM »
My taxes: MFJ with 2 kids
Line 1: 84929.5
Line 6 and 7: 84929.5
Line 8: 24000
Line 10: 60929.5
Line 11: 6930
Line 12: 4000 (2 kids)
Line 13: 2930
Line 15: 2930
Line 16: 7709.18
Line 18: 7709.18
Line 19: 4779.18 ( this is my refund, right??)
Those numbers are consistent with what the case study spreadsheet calculates (assuming both children are eligible for the CTC).

MDM

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Re: Change withholding to maximize child tax credits
« Reply #10 on: January 30, 2019, 07:45:47 PM »
Okay, here is another possible mistake. I made $4125.00 as a side gig (aka independent contractor) and got a 1099-misc. and no taxes were taken out of that. we just added this to line 1 and didnít fill out any other forms. Was this the wrong way to do this? That still would not make up for the huge difference between TurboTax and the hand done form.
Reducing line 1 by $4125, and using $4125 for Schedule C net income, total federal tax is ~$3,386.  With withholding of $7709, that's a $4323 refund.

How old are your children?

Jumpingbean

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Re: Change withholding to maximize child tax credits
« Reply #11 on: January 30, 2019, 07:46:13 PM »
Children are 2 and 4 months

MDM

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Re: Change withholding to maximize child tax credits
« Reply #12 on: January 30, 2019, 07:56:12 PM »
If you look in TurboTax "View>Forms" for the "Child Tax Cr" form, what do you see?  In other words, do you see why TT isn't giving you $4000 for the CTC?

Jumpingbean

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Re: Change withholding to maximize child tax credits
« Reply #13 on: January 30, 2019, 08:06:57 PM »
Okay, here is another possible mistake. I made $4125.00 as a side gig (aka independent contractor) and got a 1099-misc. and no taxes were taken out of that. we just added this to line 1 and didnít fill out any other forms. Was this the wrong way to do this? That still would not make up for the huge difference between TurboTax and the hand done form.
Reducing line 1 by $4125, and using $4125 for Schedule C net income, total federal tax is ~$3,386.  With withholding of $7709, that's a $4323 refund.

How old are your children?

Is there a cheat sheet as to how you figured the tax on schedule C so quickly? That is a large form.

Jumpingbean

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Re: Change withholding to maximize child tax credits
« Reply #14 on: January 30, 2019, 08:17:12 PM »
If you look in TurboTax "View>Forms" for the "Child Tax Cr" form, what do you see?  In other words, do you see why TT isn't giving you $4000 for the CTC?

It is not counting my 4 month old ď because he had another disqualifying situation, **** doesnít count for the child tax credit.Ē

WTF, is it because he hasnít lived with me for half the year? Thatís the only reason I can see.

Gronnie

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Re: Change withholding to maximize child tax credits
« Reply #15 on: January 30, 2019, 08:28:09 PM »
From HR Block: "A dependent child born during the year is treated as having lived with you for more than half of the year if your home was the childís residence for more than half of the time he or she was alive during the year."

https://www.hrblock.com/tax-center/around-block/offers/claiming-child-on-taxes/

Jumpingbean

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Re: Change withholding to maximize child tax credits
« Reply #16 on: January 30, 2019, 08:33:26 PM »
From HR Block: "A dependent child born during the year is treated as having lived with you for more than half of the year if your home was the childís residence for more than half of the time he or she was alive during the year."

https://www.hrblock.com/tax-center/around-block/offers/claiming-child-on-taxes/

TT said the same thing when I looked it up on heir page. And I triple checked that I entered DOB and SSN correctly just in case that matters. TT doesnít say what the disqualifying situation is. They did give me $500 for him as ďcredit for other dependents.Ē

Jumpingbean

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Re: Change withholding to maximize child tax credits
« Reply #17 on: January 30, 2019, 08:41:55 PM »
I think I have found the problem. Thank you everyone!!

secondcor521

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Re: Change withholding to maximize child tax credits
« Reply #18 on: January 30, 2019, 09:10:30 PM »
By the way, you shouldn't add the 1099-MISC to line 1.

It should either go on Schedule C (as someone else pointed out) if it's business income and on Schedule 1 Line 21 if it's hobby income.

MDM

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Re: Change withholding to maximize child tax credits
« Reply #19 on: January 30, 2019, 09:13:20 PM »
Okay, here is another possible mistake. I made $4125.00 as a side gig (aka independent contractor) and got a 1099-misc. and no taxes were taken out of that. we just added this to line 1 and didnít fill out any other forms. Was this the wrong way to do this? That still would not make up for the huge difference between TurboTax and the hand done form.
Reducing line 1 by $4125, and using $4125 for Schedule C net income, total federal tax is ~$3,386.  With withholding of $7709, that's a $4323 refund.

How old are your children?

Is there a cheat sheet as to how you figured the tax on schedule C so quickly? That is a large form.
The case study spreadsheet does tax estimates reasonably well and quickly.

N

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Re: Change withholding to maximize child tax credits
« Reply #20 on: February 06, 2019, 11:38:08 AM »
I think you need the schedule c. Which may help you becasue if you have receipts for qualified expenses, you can deduct those there.

phildonnia

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Re: Change withholding to maximize child tax credits
« Reply #21 on: February 06, 2019, 05:27:26 PM »
After going over my taxes and realizing I dont get $2000 per kid or $4000 for 2 kids and instead get $1400 x2 for $2800 since I don't owe any taxes I was wondering something:
A) did I understand this rule right?
B) if so, would it make sense to withhold as much tax as possible so instead of paying $7k in federal taxes throughout the year, I pay a lump sum at end of year. This way I can maximize the $4k deduction for the 2 kids and maybe qualify for other credits too. Doesn't this save me money in the long run? What am I missing?

You misunderstand.  The tax credit is limited by your total tax liability, not by the amount you withhold or the amount you owe with your return.  The amount of withholding will have no bearing on the eligibility for the tax credit, one way or the other.