Tax Advice

[newacct]

On 2/4/2021 at 9:33 AM, Barfus said:

 

Just curious - what are the benefits of claiming a child dependent if all the economic benefits (child tax credit, stimulus payments, etc.) require an SSN at the time of filing? We recently had to scramble to get an SSN for my stepdaughter to get her on our 2020 return  and eligible for the child tax credit. 

Note that dependents who do not qualify for the Child Tax Credit (including dependents who are 17 or over, as well as children who don't have SSNs) still qualify you for a $500 tax credit each. That's assuming your AGI is under $200k (or $400k if filing jointly); both the Child Tax Credit and dependent tax credit start phasing out after that.

[newacct]

13 hours ago, Randy W said:

What the laws say and what was actually implemented for the stimulus payments are not exactly consistent. For example, there were glitches in the first roll-out such that it was not sent to those with a spouse having an ITIN.

That was actually consistent with the law at the time though. The CARES Act in March 2020 only allowed stimulus money to people filing jointly if both people had SSNs. So those filing jointly with a spouse who didn't have an SSN didn't qualify for any stimulus money. This was retroactively amended by the stimulus bill in December 2020 so that people filing jointly where only one person had an SSN qualified for the stimulus money of one person, so they can now claim that in the credit.

[Martin B]

1 hour ago, newacct said:

Note that dependents who do not qualify for the Child Tax Credit (including dependents who are 17 or over, as well as children who don't have SSNs) still qualify you for a $500 tax credit each. That's assuming your AGI is under $200k (or $400k if filing jointly); both the Child Tax Credit and dependent tax credit start phasing out after that.

Interesting - I do see it now on the IRS page. The $500 dependent tax credit doesn't need an SSN (still requires an ITIN) and covers other dependents as well (like elderly parents). 

This seems like a really good summary from the IRS: https://apps.irs.gov/app/vita/content/globalmedia/4491_child_tax_credit.pdf

Glad we got my stepdaughter's SSN last month (after being in the US for a year). Really makes things easier...

[Randy W]

Just as an aside, my own parents never saw a reason to get an SS number for their children until around 1964 (they were able to claim exemptions and deductions without one, and I don't think that even bank accounts required one). So all four of us got SS numbers just a few digits apart.

[Martin B]

11 hours ago, Randy W said:

Just as an aside, my own parents never saw a reason to get an SS number for their children until around 1964 (they were able to claim exemptions and deductions without one, and I don't think that even bank accounts required one). So all four of us got SS numbers just a few digits apart.

I don't think they were required for claiming dependents until the 1980s. My stepdaughter was in the US for over a year without an SSN and we had absolutely no issues enrolling her in school, taking her to the doctor, buying airline tickets, or really anything. Until we went to the SSA to get her SSN, even her green card had been sitting in a drawer the entire time.

[SeanC]

I forgot to reply and say thank you for all the great advice. Some of these things I had already figured out, but y'all filled in some gaps in my understanding of this (kind of) complex issue. The only remaining issue for me is whether I can get stimulus checks for the two of them. Thank you again very much.

[Randy W]

2 hours ago, SeanC said:

I forgot to reply and say thank you for all the great advice. Some of these things I had already figured out, but y'all filled in some gaps in my understanding of this (kind of) complex issue. The only remaining issue for me is whether I can get stimulus checks for the two of them. Thank you again very much.

The first two "Stimulus checks" are still available as the Recovery Rebate Credit on your tax returns, if they are eligible.

from the IRS site

Recovery Rebate Credit

Quote

Economic Impact Payments were based on your 2018 or 2019 tax year information. The Recovery Rebate Credit is similar except that the eligibility and the amount are based on 2020 information you include on your 2020 tax return.

 . . .

File electronically and the tax software will help you figure your Recovery Rebate Credit. Visit IRS.gov/filing for details about IRS Free File, Free File Fillable Forms, free VITA or TCE  tax preparation sites in your community or finding a trusted tax professional. 

The Recovery Rebate Credit Worksheet in the Form 1040 and Form 1040-SR instructions can also help  determine if you are eligible for the credit.

 

[newacct]

Note that they need to have SSNs "valid for employment" issued before the due date of the tax return (including extensions) in order to qualify for the Recovery Rebate Credit. For the first two stimulus payments, that would be the due date of the 2020 tax returns (April 15, 2021, or October 15, 2021 if you get an extension).

[Randy W]

On 2/28/2021 at 2:13 AM, newacct said:

Note that they need to have SSNs "valid for employment" issued before the due date of the tax return (including extensions) in order to qualify for the Recovery Rebate Credit. For the first two stimulus payments, that would be the due date of the 2020 tax returns (April 15, 2021, or October 15, 2021 if you get an extension).

The advice to get an SSN is good advice , of course, but be sure to check your exact situation to determine eligibility for the Recovery Rebate Credit

From the 1040 instructions Recovery Rebate Credit Worksheet

Quote

 . . . qualifying children under age 17 at the end of 2020 listed in the Dependents section on page 1 of Form 1040 or 1040-SR for whom you either checked the “Child tax credit” box or entered an adoption taxpayer identification number