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married filing separately and each claiming one of children

Taxburnout
Level 2

I have  a married couple that has two children. If I file married separate for them and they each take one of their two children on their own tax return do they lose the child tax credit. they bought earn $90ish

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Camp1040
Level 8

To receive the full 2021 credit, your modified adjusted gross income needs to be equal to or below:

  • $150,000 for married filing jointly
  • $112,500 for head of household filers
  • $75,000 for single and married filing separately filers.

If your income exceeds these amounts, the increase ($1,000 or $1,600) is reduced by $50 for each additional $1,000 in income. 

Taxburnout
Level 2

The married filing couple I am referring to earned a total of $191,835 joint with no deductions coming off of that and they would get the $2000 per child tax credit per kid filing joint. ($4000) The phase out for 2020  based on modified AGI is $400,000 for filing joint and $200,000 for filing married separate. One parent makes $99,649 total income and the other $92,186 neither one of the two have any deductions student loan interest etc to deduct. That is their income, minus a $300 charitable deduction for married filing joint or a $150 deduction each for filing married separate. So first I am confused as to where you came up with the 2021 numbers, since this is for 2020. Filing separate and each taking one child as their dependent, should not affect the child tax credit of $2000 they would each get for each one of the two of their kids on their tax return correct? Please tell me if this is correct and then I will tell you why I am doing it this way.

 

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Camp1040
Level 8

Yes...2021

The numbers just came to me in a vision.

Taxburnout
Level 2

Also Step 2 phaseout for 2021:

The child tax credit won't begin to be reduced below $2000 per child until the taxpayers modified AGI exceeds:

$400,000 MFJ  and $200,000 for all other filing statues.

The second phaseout reduces the Child Tax credit by $50 for each $1000 by which the taxpayer's modified AGI exceeds the income amounts above.

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dkh
Level 12

Have you tried entering this information into MFS returns to see what the results are ?   Is this for a 2020 return or are you tax planning for 2021 ?  

Maybe if you tell us up front why you are doing this it will help to give you assistance.


@Taxburnout wrote:

 Please tell me if this is correct and then I will tell you why I am doing it this way.

 



Taxburnout
Level 2

Reason for filing married separate, because IRS sent out during the 2021 Recovery rebate: " EXPLORE WHETHER FILING SEPARATE RETURNS CAN BENFIT MARRIED TAXPAYERS"- married couples may have an additional lever to pull to help them get a larger 2021 Recovery Rebate Credit. More specifically, married couples may wish to explore whether filing separate tax returns may entitle them to (a larger) 2021 Recovery Rebate Credit. This is the reason why I am asking, because I see it as both the parents claim one child, getting the $2000 child tax credit each for their child since the phase out on modified AGI is $200000 and both are under that. My question is about the child tax credit that each will get one. When I use Pro Series software it shows they will each get the $2000, filing separately and each claim 1 of their 2 children.

dkh
Level 12

It is too late to amend 2020 to MFS.  An amended return would have needed to be filed by deadline May 17th or Oct 15th if extension on file.   However, you can use 2020 to determine if 2021 could/should be MFS.   I have married couple that files MFS - each claims a child and each receives the child tax credit. Your calculations are correct.   

Was there any change in the RRC when you created MFS returns for 2020 ?

Accountant-Man
Level 12

You cannot AMEND MFJ to MFS, no matter the date.

Another post I think said they were filing "superseding" return which is not the same as amending.

** I'm still a champion... of the world! Even without The Lounge.
Taxburnout
Level 2

I never mentioned I was amending  the 2020 tax return. I am preparing the original.

Taxburnout
Level 2

I never mentioned I was preparing and amended return for 2020, this is the original return

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Taxburnout
Level 2

The is for preparing a 2020 tax return.

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PATAX
Level 12

My experience with married filing separate is that it is almost always not to the benefit of the taxpayer.... just my opinion...

BobKamman
Level 15

My experience with following hundreds of "innocent spouse" cases through IRS horror stories and Tax Court opinions is that MFS sometimes can be a life-changing benefit for taxpayers -- and one that is often overlooked by practitioners of the knee-jerk MFJ method.  

Jim-from-Ohio
Level 7

In Ohio sometimes there is considerable savings with MFS with the savings on the Ohio side. 

Accountant-Man
Level 12

In NJ, if both persons in MFJ have at least $35,000 of income, filing MFS for NJ will save $210; however, NJ requires the same filing status as federal UNLESS the parties live in separate states.

(NJ MFS tax tables have a missing tax bracket).

So if the federal MFS saves money, you can also save $210 total if MFS in NJ.

** I'm still a champion... of the world! Even without The Lounge.