Why are we not getting the child tax credit?

[dc285875]

My spouse and I are self employee. He is an Uber driver and I am a braider. We have 4 children ( 2, 6, 10, and 18 years old). When we entered our income and expenses , we owe $500 to Federal but are getting a refund from our State. What I don't understand , is why we owe if taxable income is zero?

Also why are we only getting $1249 in Child and other dependent tax credits?

How can we get the full credit for our children?

Thank you for you help

[NCperson]

@dc285875 the child tax credit is dependent on your income.

The child tax credit is the LESSER of $2000 per child or Line 18 of your tax return.  (look at Line 19 for the result)

The additional child tax credit is the LESSER of these three statements:

1) $1700 per child

2) 15% of the EARNED income that exceeds $2500

3) $2000 per child less the child tax credit calculated above.

Further, you are also paying self-employment tax, which is really Medicare and Social Security Tax.  That is on Line 23.  

does that help? 

[Vanessa A]

There could be a few reasons.  

1.  What you owe is probably self-employment taxes not income tax.  So if you have self employment income of $20,000 and you are married filing jointly, you have SE taxes of $3,060, but you would not have any tax liability for ordinary income taxes because your taxable income after your standard deduction would be $0.  

2. If your tax on line 16 of your 1040 is $0, then you would not be eligible for the child tax credit as that is a non-refundable credit which means it will reduce your taxes to $0 but not below.

If you are not eligible for the Child Tax Credit, it is possible to get the Additional Child Tax Credit which is limited to 15% of your earned income over $2,500.  So if your earned income is $12,500, the credit would be limited to $1,500.

Basically, Your credit is likely limited due to your income, but since self-employment taxes are calculated separately, you will still have to pay them. 

[dc285875]

Thank you for your answer. 

All this terms are confusing for me.

Taxable income 0 but we end up with Tax liability?

But as you said it is due to our self employment income.

[KrisD15]

Yes.

When you are a W-2 employee, your employer withholds FICA Tax (Social Security tax) from your pay. The employer also pays a portion and sends it all in quarterly for the employee. 

When you are self-employed, you are responsible to make that payment yourself, and that is done on your federal tax return. 

This is called "Self-Employment Tax" but it is the same as FICA Tax. 

This is charged after credits on your tax return, because credits can't offset this tax like they can your income tax liability. 

This tax is to fund your Social Security Account, so it is handled differently, but still included in your final tax due on your federal return. 

[dc285875]

All of you guys are very helpful. 

However, I am still not understanding why we are not getting the full credit for our children.

I am sorry I don't really understand all the tax terminologies. 

If I heard you correctly , we are not getting the credit because of our income since we are self employee.

If we were W2 workers then the credit will apply to us. Also the credit in non refundable but used to offset tax due for normal income?

Also that credit can not be used to offset the FICA due because it is handle differently. 

So now we end up with a bill and nothing after all the struggle we went through last year.

What can we do differently this year?

[KrisD15]

To give you a better idea of what is happening, can you tell us what is on your Form 1040 lines 15 through 31 ?

They shouldn't all be populated, so only the lines that do have numbers. 

HERE is how to view your 1040 using TurboTax Online 

[dc285875]

Sure. 

L15: 0
L16: 0
L17 : blank
L18:0
19 to 21: blank
L22: 0
L23 to 24 : 1646
L25 to 27 : blank
L28: 1249
L29: 120
L30 to 31 : blank 
L32 to 33 : 1369
L34 to 35 : blank

Thank you

[Vanessa A]

What is on line 37 and 38.  Also, what is on line 8 & 9?  Did you answer ALL of the questions on the return?

L15: 0-  This means you do not have income that the IRS wants to tax.  If this number was $0 and you were an employee, you would not owe anything at all.

L16: 0-  This means if you were not self-employed, you would not owe any tax at all.  Even if you had no kids, you would not have to pay anything.  If you were an employee and your employer withheld taxes from your wages, you would get it all back

L17 : blank
L18:0
19 to 21: blank- You did not get the child tax credit or any other credits that do not result in a payment.
L22: 0
L23 to 24 : 1646- this is your Medicare and social security taxes that you have to pay due to not having an employer and working for yourself.  These should be paid quarterly when you are self-employed. 

L25 to 27 : blank- Did you answer questions about the earned income credit?  It seems like you have earned income, so if you did not answer this question, go back to the deductions and credits section. Were you previously told you can no longer claim the earned income tax credit? Also, go back to the personal info section and make sure all of your children have SSN's, and their date of birth entered.  

L28: 1249- this number would be 15% of your earned income minus $2,500.  This is the additional child tax credit.

L29: 120- You must have a child in school or one of you are in school so you received an education credit.

L30 to 31 : blank 

L32 to 33 : 1369- this is the total of your American Opportunity Tax Credit for someone being a student and the Additional Child Tax Credit

L34 to 35 : blank

[dc285875]

Yes I did , 
I was surprised that the EIC was not given to us as well.

TurboTax is not given us that deduction.

L9 and 8: 11,874

L37 : 500

L38: blank

[DianeW777]

If you would like to send us a “diagnostic” file that has your “numbers” but not your personal information it would help.  If you would like to do this, here are the instructions:  (Don't forget to give us the state)

TurboTax Online:

Open your return -Go to the menu panel on the left side of your return and select Tax Tools. 

1. Then select Tools below Tax Tools. 
2. A window will pop up which says Tools Center.  
3. On this screen, select Share my file with Agent. 
4. You will see a message explaining what the diagnostic copy is.  Click okay through this screen and then you will get a Token number. 
5. Reply to this thread with your Token number and your state. This will allow us to open a copy of your return without seeing any personal information.  

TurboTax Desktop:

If you like, you can send a copy of your return that will be scrubbed to eliminate your personal data by using these steps:

1. Click on Online in the top left menu of TurboTax CD/Download for Windows
2. Select 'Send Tax File to Agent'
3. Write down or send an image of your token number and state then place in this issue.
4. We can then review your exact scenario for a solution.
5. Please also tell us any states included in the return. This is necessary for us to view the return.

We will then be able to see exactly what you are seeing and we can determine what exactly is going on in your return and provide you with a resolution.