Taxing Lessons

Decisions — Crediting the children

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The Tax Cuts and Jobs Act of 2017 contained 119 tax provisions, many of which took effect for 2018 federal income tax returns. One of those provisions requires all taxpayers claiming the full child tax credit to provide qualifying children’s social security numbers on returns.

Before the change, a child tax credit of up to $1,000 was available per qualifying child. The credit included the “additional child tax credit,” a portion that was refundable to the extent that it exceeded tax liability. Each qualifying child’s “taxpayer identification number” was required to claim the child tax credit, but a social security number was not required.

Now, under the Tax Cuts and Jobs Act, the full child tax credit is $2,000 per qualifying child. Up to $1,400 of that amount is the refundable additional child tax credit portion. To claim the full credit, an “eligible” social security number must be provided for each qualifying child. The eligible social security number must be issued by the social security administration to a US citizen or an alien authorized for employment in the US.

The act also provided a new nonrefundable credit as part of the child tax credit. This partial child tax credit is known as the credit for other dependents, and provides up to $500 for any qualifying dependent who is not a qualifying child for purposes of claiming the child tax credit.

Here is the updated tax code (internal revenue code section 24(h))

(h) Special rules for taxable years 2018 through 2025

(1) In general. In the case of a taxable year beginning after December 31, 2017, and before January 1, 2026, this section shall be applied as provided in paragraphs (2) through (7).

(2) Credit amount. Subsection (a) shall be applied by substituting “$2,000” for “$1,000”.

(3) Limitation. In lieu of the amount determined under subsection (b)(2), the threshold amount shall be $400,000 in the case of a joint return ($200,000 in any other case).

(4) Partial credit allowed for certain other dependents

(A) In general. The credit determined under subsection (a) (after the application of paragraph (2)) shall be increased by $500 for each dependent of the taxpayer (as defined in section 152) other than a qualifying child described in subsection (c).

(B) Exception for certain noncitizens. Subparagraph (A) shall not apply with respect to any individual who would not be a dependent if subparagraph (A) of section 152(b)(3) were applied without regard to all that follows “resident of the United States”.

(C) Certain qualifying children. In the case of any qualifying child with respect to whom a credit is not allowed under this section by reason of paragraph (7), such child shall be treated as a dependent to whom subparagraph (A) applies.

(5) Maximum amount of refundable credit

(A) In general. The amount determined under subsection (d)(1)(A) with respect to any qualifying child shall not exceed $1,400, and such subsection shall be applied without regard to paragraph (4) of this subsection.

(B) Adjustment for inflation. In the case of a taxable year beginning after 2018, the $1,400 amount in subparagraph (A) shall be increased by an amount equal to—

(i) such dollar amount, multiplied by

(ii) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting “2017” for “2016” in subparagraph (A)(ii) thereof.

If any increase under this clause is not a multiple of $100, such increase shall be rounded to the next lowest multiple of $100.

(6) Earned income threshold for refundable credit. Subsection (d)(1)(B)(i) shall be applied by substituting “$2,500” for “$3,000”.

(7) Social security number required. No credit shall be allowed under this section to a taxpayer with respect to any qualifying child unless the taxpayer includes the social security number of such child on the return of tax for the taxable year. For purposes of the preceding sentence, the term “social security number” means a social security number issued to an individual by the Social Security Administration, but only if the social security number is issued—

(A) to a citizen of the United States or pursuant to subclause (I) (or that portion of subclause (III) that relates to subclause (I)) of section 205(c)(2)(B)(i) of the Social Security Act, and

(B) before the due date for such return.

The new rules for claiming the full child tax credit present a problem for taxpayers who object to obtaining social security numbers for themselves or for their children for religious or other conscience-based reasons.

In general, the tax code requires a taxpayer to provide the taxpayer identification number in order to claim a personal exemption for any individual. However, the IRS applies an “administrative exception” that allows taxpayers with religious or conscience-based objections to claim the personal exemption. Though the personal exemption is not available for tax years 2018-2025, the administrative exception is applied to other dependent tax benefits too (such as the child tax credit).

Editorial note: The administrative exception does not apply to the earned income credit, which by law is allowable based only on dependent children who are eligible for and do have social security numbers.

In program manager technical advice 2019-2, an IRS lawyer asked if the IRS was required to apply the administrative exception to the child tax credit.

The conclusion was that the IRS was not required to apply the administrative exception. Instead, the IRS can properly deny the full child tax credit to taxpayers who do not supply a social security number as the new law requires, even when the lack is due to religious or other conscience-based reasons.

TRUE OR FALSE?

Based on internal revenue code section 26(h)(7) (see above) as implemented by the Tax Cuts and Jobs Act of 2017, no portion of the child tax credit is available without providing a social security number.


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Sorry, wrong answer :(
✓ Right answer!

The Tax Cuts and Jobs Act of 2017 provides a new nonrefundable credit as part of the child tax credit.

Under section 24(h)(4), a taxpayer is allowed a partial child tax credit (known as the credit for other dependents) of up to $500 for any qualifying dependent who is not a qualifying child for child tax credit purposes.

Under section 24(h)(4)(C), the credit for other dependents is also allowable for any qualifying child ineligible to be claimed for the full $2,000 child tax credit solely because the child does not have an eligible SSN.

A taxpayer who has a qualifying child and satisfies all relevant requirements may receive either a full or a partial child tax credit.

However, to claim the full child tax credit, the child must have an eligible social security number.
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