CARL WATTS & ASSOCIATES

June 10, 2019

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Schedule 8812
Child Tax Credit
As stated in our previous newsletter, Schedule SE was the last alphabetical schedule for Form 1040, but the last schedule to Form 1040, and the only numbered one, is Schedule 8812.

If the irregular use of letters and numbers in the naming of IRS forms and schedules is somehow confusing to you, you are welcome to the club. There is a slight distinction though between the terms tax “form” and “schedule”.


Federal tax forms are issued by the IRS and used by businesses, organizations, and individuals to report various types of financial information to the federal government of the United States. A tax schedule is a form the IRS requires you to prepare in addition to your tax return when you have certain types of income or deductions.

No wonder then that Schedule 8812 is sometimes called Form 8812, Child Tax Credit.

The Child Tax Credit (CTC) has been available to taxpayers since 1998 and was created to help offset the cost of raising children. Originally, taxpayers could take a $400 credit for each qualifying child under the age of 17. The credit changed over time, however. By 2017, the credit was worth $1,000 per qualifying child and was gradually phased out for single tax filers with an adjusted gross income above $75,000 ($110,000 for joint filers).

The Tax Cuts and Jobs Act has brought changes to the Child Tax Credit, which affect most parents and guardians of children under 17 in the United States.

Beginning with Tax Year 2018, your child must have a Social Security Number issued by the Social Security Administration before the due date of your tax return (including extensions) to be claimed as a qualifying child for the Child Tax Credit or Additional Child Tax Credit. Each qualifying child must have the required social security number (SSN).

If you have a qualifying child who does not have the required SSN, you cannot use the child to claim the ACTC on either your original or an amended 2018 return. The required SSN is one that is valid for employment and that is issued before the due date of your 2018 return (including extensions).

You also cannot use a qualifying child without the required SSN to claim the child tax credit on either your original or an amended 2018 return. However, if your qualifying child does not have the required SSN but has another type of taxpayer identification number issued on or before the due date of your 2018 return (including extensions), you may be able to claim the credit for other dependents for that child. See your tax return instructions for more information about claiming the credit for other dependents.

You must have a taxpayer identification number by the due date of your return.

If you do not have an SSN or IRS individual taxpayer identification number (ITIN) issued on or before the due date of your 2018 return (including extensions), you cannot claim the ACTC on either your original or an amended 2018 return.



If you apply for an ITIN on or before the due date of your 2018 return (including extensions) and the IRS issues you an ITIN as a result of the application, the IRS will consider your ITIN as issued on or before the due date of your return.

The 2018 Child Tax Credit is now $2,000 per qualifying child. The child must be under 17 at the end of the tax year (12/31/18) to claim it. The credit applies if the taxpayer claims the child as a dependent and houses the child for at least half the year.

Another important change is that the new tax plan largely combined the Additional Child Care Tax Credit (ACTC) with the CTC. This is part of the reason why the CTC is now refundable and why its limits increased.

For tax years prior to 2018, the Child Tax Credit provided up to a $1,000 per child tax credit for a maximum of three children. The Additional Child Tax Credit allowed for a portion of the regular Child Tax Credit that you were not able to claim, to be refundable even if you do not owe any tax. The ACTC is now the refundable portion of the CTC.

If a taxpayer is owed a refund, the refundable portion of the credit increased to $1,400 in 2018. That means if you don’t owe any tax before claiming the credit, you will receive up to $1,400 as part of your refund. The refundable amount will be adjusted upward for inflation.

However, the new tax law also caps the refundable portion of the CTC to 15% of your earned income that exceeds $2,500. That means you need to have at least $11,830 of earned income to qualify for the full refund of $1,400.

The income threshold to claim the CTC lowered to $2,500 per family, which means that a family must only earn $2,500 or more to claim the credit.

The CTC has a phaseout component in 2018 also, but the AGI amounts are much higher:

Tax Filing Status
Maximum AGI for
Full Credit
No CTC for AGI

Married filing jointly
$400,000
Over $440,000

All others
$200,000
Over $240,000


A qualifying child for this credit is a child who meets the qualifying criteria of seven tests for age, relationship, support, dependent, joint return, citizenship and residence.

1. Age test:

  • the child must be under age 17 at the end of the year (that is, the child is 16 years old or younger);

  • the child is younger than the taxpayer.

2.

Relationship test: the child is related to the taxpayer as a son, daughter, stepchild, foster child, adopted child, brother or sister; or a descendant of any of these relations such as a grandchild, nephew, or niece.

3. Support test: the child did not provide more than half of his or her own financial support.


4. Dependent test:
  • the child meets the criteria to be claimed as a dependent of the taxpayer;

  • the child is claimed by his or her parents; if claimed by someone else, that person must have an adjusted gross income higher than the adjusted gross income of either parent.

5. Joint return test: the child does not file a joint tax return with his or her spouse (although some exceptions may apply).

6. Citizenship test: the child is a citizen or resident alien of the United States.

7. Residence test: the child lived with the taxpayer for more than half the year.

An eligible taxpayer for the CTC must, of course, have qualifying children and a certain income level, or, to be more exact, a certain modified adjusted gross income.

Dependents who do not qualify for the CTC may still qualify you for the Credit for Other Dependents. This new credit of up to $500 is available for each of your dependents who does not qualify for the child tax credit. There is no age limit for the $500 credit.

The potential dependent must still meet tax tests for dependency, however. This credit may apply to taxpayers who support a dependent who is a full-time student or disabled. In addition, the maximum income threshold at which the credit begins to phase out is increased to $200,000 ($400,000 if married filing jointly).

To find out if you are eligible for the credit, you should first complete the Child Tax Credit and Credit for Other Dependents Worksheet that applies to you in Form 1040 line 12a, or Form 1040NR, line 49. If you meet the condition given at the end of your Child Tax Credit and Credit for Other Dependents Worksheet, that you can find in the Instructions for Form 1040 .

If you have qualifying children, in addition to filling out the appropriate lines in your 1040 form, you will also want to submit IRS Schedule 8812.

Use Part I of Schedule 8812 to document that any child for whom you entered an ITIN and for whom you also checked the "if qualifying child for child tax credit" box, is a resident of the United States because the child meets the substantial presence test and is not otherwise treated as a nonresident alien.

Use Parts II–IV of Schedule 8812 to figure the Additional Child Tax Credit.The ACTC may give you a refund even if you do not owe any tax.


You can find more details on how to fill out this schedule in the Instructions for Schedule 8812.

The IRS also offers a tool on their website to determine if your child qualifies for the child tax credit.

It is important to realize that, while the Child Tax Credit has indeed gone up, taxpayers lost the personal exemption which before 2018 was available for every taxpayer and each of their dependents.

All changes to the new Child Tax Credit expire after December 31, 2025.

If in any doubt, or even better, in any case and all your dealings with the IRS, professional help in planning ahead and calculating which credit serves you better is certainly recommended.


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