Hello, I had some of my money in an after-tax defined contribution plan (DCP) that I rolled over to a Roth IRA. They let me know any earnings would be taxable. My 1099-R shows $60 in Box 2A with a code G. However, when I add this information into TurboTax, my tax liability increased by $69 (more than the taxable amount in the 1099-R). I tried setting Box 2A to 0 just see what happens, and it reduced back by $69. The number doesn't seem to make sense (assumed taxes should be less than the taxable amount, not more), so I wanted to make sure it's not a glitch in the software.
Just an update. Looking into this more, it seems that increasing my taxable income by that $60 is bringing my child tax credit down by $50. So my total tax increased by $19 (tax on the $60) + $50 (loss in child tax credit). I guess that $60 put me just above the next $1000 interval on Schedule 8812 to reduce my child tax credit 😕 Does this make sense to others?
This is quite possible.
The child tax credit begins to phase out at modified AGIs of $400,000 on joint returns and $200,000 on single or head-of-household returns. The amount of the credit is reduced by $50 for each $1,000 (or fraction thereof) of modified AGI over the applicable threshold amount.
So if the $19 addition to your MAGI makes it go over the next tranche of $1,000 even by a dollar, your child tax credit is reduced by $50.