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Tougher Rules For Claiming the Child Tax Credit

A number of changes went into effect this year as a result of the Protecting Americans from Tax Hikes (PATH) Act of 2015 and other recent legislation. One of the changes added tougher compliance rules for those claiming the Child Tax Credit.

General Rules

Taxpayers with one or more qualifying children may be able to claim a child tax credit up to $1,000 per qualifying child. This credit is generally nonrefundable, but like most tax law, there are exceptions.

The definition of a qualifying child is the same as that for claiming a dependency exemption, except

  • The child must be under age 17.
  • Child must be a US citizen, resident alien, or national.

The credit is phased-out when adjusted gross income exceeds certain limits. As the number of qualifying children increase, the phase-out threshold also rises. For example, a single taxpayer with one child forfeits the entire credit once modified adjusted gross income exceeds $94,000. However, if this taxpayer had four qualifying children, a portion of the credit would be available until income exceeded $154,000.

Toughened Compliance Rules

An individual can no longer claim the Child Tax Credit by amending a return or by filing a late return if the qualifying child did not have a Tax Identification Number.

For a period of two years after the child tax credit claim is determined to be reckless or an intentional disregard of the rules, a Taxpayer may not claim the credit. If the claim involved fraud, the “disallowance period” is 10 years!

If a claim for the child tax credit is made during the disallowance period, the IRS has the authority to essentially change the tax return without sending the Taxpayer a deficiency notice.