ProSeries will automatically compute the Child Tax Credit (CTC) and additional child tax credit based on your entries throughout the return. See the Form 1040, line 19 instruction tip and IRS Pub. 972 for more information and who qualifies for the credit. If you are working on a 2020 or 2021 return see the special instructions below.
What's new for 2022 returns?
- The increased age allowance for qualifying children ended. A child must be under age 17 at the end of 2022 to be considered a qualifying child.
- Enhanced credits for children under age 6 and under age 18 expired. The maximum credit is $2,000 for each qualifying child.
- The maximum amount of Advanced Child Tax Credit for each child is $1,500.
- Bona fide residents of Puerto Rico are no longer required to have three or more qualifying children in order to claim the ACTC.
- See the IRS instructions for Form 8812 for phase-out and calculation information.
Why isn't the Child Tax Credit calculating?
If the Child Tax Credit isn't calculating, you may be missing required information on the return. Follow these steps to resolve:
- Open the Federal Information Worksheet.
- Scroll down to Part 1 - Personal Information.
- Make sure a Social Security number and Date of birth is entered for the taxpayer/spouse.
- Scroll down to Part III - Dependent/Earned Income Credit/Child and Dependent Care Credit Information.
- Make sure a Social Security number and Date of birth is entered for the dependent(s).
- ITIN and ATIN are no longer allowed for the Child Tax Credit.
- Make sure the checkboxes labeled Not qual for child tax credit OR non U.S. or Not qual credit other dep aren't marked.
- Review the Child Tax Credit and Credit for Other Dependents Worksheet to see whether they qualify for the credit.
For all returns except tax year 2021, the Child Tax Credit is nonrefundable. The return must have taxable income for the credit to be calculated.
For tax year 2021 only:
- The Child Tax Credit was expanded to apply to qualifying children who hadn't yet reached age 18 by the end of 2021.
- The initial amount of the Child Tax Credit was increased to $3,600 for each qualifying child under age 6 at the end of 2021 and $3,000 for each qualifying child under age 18 by the end of 2021.
- If you met certain residency requirements, the Child Tax Credit could be fully refundable, even if you received no income.
- See the IRS instructions for Form 8812 for phase-out and calculation information.
Advanced payments
From July 2021 to December 2021, taxpayers may have received an advance payment of the Child Tax Credit equal to 50% of the IRS estimate of the Child Tax Credit.
- If your client received advance Child Tax Credit payments during 2021 and the credits you figure using Schedule 8812 are less than what they received, your client may owe an additional tax.
- See Reconciling Your Advance Child Tax Credit Payments on Your 2021 Tax Return for details.
2021 returns: Entering advance child tax credit payments from Letter 6419
ProSeries will generate a final review error on the 8812 for all Individual tax returns, even if there are no current dependents. If the taxpayer/spouse received advance child tax credit payments for dependents not currently on the tax return and those payments are not entered this can cause a delay in receiving the tax refund for 2021.
- The taxpayer should receive letter 6419 showing how much advance child tax credit payments they received.
- Open the Schedule 8812.
- Press F6 to bring up Open Forms.
- Type in 8812 and press Enter.
- Scroll down to the Principal Place of Abode and Letter 6419 Information Smart Worksheet.
- Enter the information for the tax return.
- If the taxpayer/spouse did not receive any advance child tax credit payments complete question A1 and A2 and enter 0 for B1 and B2 to clear the Final Review errors.
2020 returns: Electing to use prior year earned income
For tax year 2020 returns, your client may elect to use their 2019 earned income to figure this credit if their earnings were greater in 2019 than in 2020. To make this election:
- Complete the return (wages, dependents etc) as you normally would.
- Open the 8812.
- Scroll down to the Prior Year Earned Income Election Smart Worksheet below line 5.
- Check the Yes box on line A.
Make sure to check the return with and without this election to compare which option is more advantageous to your client. Since the additional Child Tax Credit calculation is so complex, electing to use prior year earned income may have no effect on the credit amount, or could even lower the allowed credit.
