Simple answer: Yes, you're wrong on that.
But, you simply haven't given us enough info to explain to you why you're wrong.
"So if my son is 2 and I'm his father". That's not enough info. Where does the child live? The fact that you mention his income indicates you've entered something wrong in TT. It doesn't usually ask about the income of 2 year olds. Where is the other parent?
"My 4 year old is a little different". How?
There are two types of dependents, "Qualifying Children"(QC) and standard ("Qualifying Relative" in IRS parlance even though they don't have to actually be related). Only a QC qualifies a taxpayer for the Earned Income Credit and the Child Tax Credit. The fact that you're only getting $500 (The "other dependent" credit amount) indicates that you have probably answered the questions in such a way that TT is only classifying them as qualifying relatives, and that's unusual.
A child of a taxpayer can still be a “Qualifying Child” (QC) dependent, regardless of his/her income, if:
- He is under age 19, or under 24 if a full time student for at least 5 months of the year, or is totally & permanently disabled (under 17 for the child tax credit)
- He did not provide more than 1/2 his own support.
- He lived with the parent for more than half the year
Then there is a special rule in the case of divorced & separated (including never married) parents. The non-custodial parent can only claim the Child Tax Credit (no EIC) or Other Dependent credit. You have to carefully answer the questions in the TT interview to indicate that the custodial parent has release the dependent to you.
