2022 Refundable Child Tax Credit Wrong in Intuit Tax Calculator??

[Viking99]

"For 2022 Tax year, the Child Tax Credit can be worth as much as $2,000 per child; the refundable maximum is $1,500."

When I use  Intuit Tax Calculator estimator, with an income of $20,000 (married filing jointly and two dependent children), I get a full refund of $4,000.  Shouldn't it be $3,000? If I owe $1,000 (or more in taxes), I has expected an additional  tax credit of $1,000 for the full $4,000 amount in refund & credit

In contrast, when I use the efile Tax Calculator on their website, I get no refund at all!?

Very confusing.. Should it be $0, $3,000 or $4,000 in refund at an income of $20,000 (married filing jointly and two dependent children)?

[Anonymous_]

@Critter-3 

[xmasbaby0]

Not sure what you are plugging in to the taxcaster.   If you are filing married filing jointly with an income of $20,000 then you have no tax liability at all.  The standard deduction for MFJ for 2022 is $25,900.   Although the child tax credit is up to $2000, the refundable portion is $1500 per child so the maximum you could get per child is $1500.   (Assuming your children meet the criteria for CTC---do they have Social Security numbers?  Are they under the age of 17?)     You do not get a refund of $4000 based on the CTC.  You will also be eligible for earned income credit but the forms are not yet ready for EIC, so wait to re-visit EIC.  

And, of course, you need your W-2's or 1099's to enter into the software to get accurate results, and those will not be ready until late January.   Employers have until January 31 to issue W-2's.   The IRS will not issue refunds with the child tax credit or earned income credit until late February, due to the PATH act so you do not have to be in a hurry to file.

[NCperson · Accepted solution]

@Viking99 - can you please confirm the EXACT income you plugged in? 

Here is now the Child Tax Credit works as it is complicated: 

•Child Tax Credit  – $2,000 per child, limited by tax liability

•Additional Child Tax Credit - lower of

1. $1,500 per child
2. 15% of earned income over $2,500
3. $2,000 per child less Child Tax Credit 

let's do the math:

Child Tax Credit - at $20,000 of income, filing joint, your tax liability is zero, so this tax credit is zero. 

Additional Child Tax Credit

1) $3,000

2) ($20,000-$2500) = $17,500*.15 or = $2,625. 

3) $4,000

so the lowest of the three is $2625 and since the child tax credit is zero, the credit assuming EXACTLY $20,000 of earned income is $2,625

[NCperson]

And I just played with the taxcaster calculator - it is applying $2000 per child even at extemely low levels of income.  that is not accurate.

[Viking99]

@NCperson,

Yes that was what I was trying to convey; the Tax Calculator shows the full refund of $4,000 (for two kids)  even at very low income (regardless if earned or not). How can we report this to Intuit?

Referring back to your other post, we do not have any earned income, so with "very low" non-earned income (investments) we would get $0 for the refundable part?

Since Intuit Tax Calculator is obviously incorrect, I went back to try the efile calculator and put in $20,000 as earned income (salary) just to check. However, efile still showed $0 refund for the Tax Credit, so the efile Tax calculator is also incorrect (it did show earned income tax credit of $6,164 though).

p.s. I am trying to figure this out now so that I know how much to convert from regular IRA to Roth-IRA to take advantage of the full $4,000 Tax Credit.

[VolvoGirl]

That won't give you any Child Tax Credit.  You need to have at least 2,500 of earned income from W2 or 1099NEC self employment.  

The child tax credit rules for 2021 tax returns were unique to tax year 2021; you could receive the CTC even if you did not have any income earned from working.

That will not be the case for tax year 2022.   For tax year 2022, the rules revert back to the requirement to have income earned from working in order to receive the refundable part of the CTC.   If you do not have at least $2500 of income from working you will not get the CTC or the additional child tax credit. 

[VolvoGirl]

Oh my post above might be only for the Additional Child Tax Credit.  Here's 2 links that might help you understand it.  

What is the Child Tax Credit

https://ttlc.intuit.com/turbotax-support/en-us/help-article/taxation/child-tax-credit/L2lNhfGDl_US_e...

What is the Additional Child Tax Credit

https://ttlc.intuit.com/turbotax-support/en-us/help-article/taxation/additional-child-tax-credit/L6x...

[NCperson]

@VolvoGirl - The non-refundable portion of the child tax credit is $2000 per child limited by the tax liability.  Period.  So if all the income is unearned and that drives a tax liability, then there is a child tax credit, but there is NO credit for the 'additional tax credit' becuase it is THAT portion of the credit that requires earned income 

let's go through the rules again, assuming $40,000 of UNEARNED income (let's assume it's all ordinary income) for someone filing joint with 2 dependents.   The taxable income is $14,100.  The tax tables say the tax liability is $1408. (10% tax bracket).

Child Tax Credit  – $2,000 per child, limited by tax liability.. so the tax credit is $1408.

•Additional Child Tax Credit - lower of

1. $1,500 per child $3000 in this example
2. 15% of earned income over $2,500 $-0- in this example
3. $2,000 per child less Child Tax Credit  $2592 in this example

so even with NO earned income but $40,000 of unearned income. there is Child Tax Credif of $1408.

@Viking99 - assuming your $20,000 of income is UNEARNED, there is no Child Tax Credit (because the tax liaiblity is zero) and there is NO 'additonal child tax credit' because there is no earned income. EITC would also be zero because there is no "earned income" 

[NCperson]

@Viking99 - this same issue of calculators came up in another set of posts around THanksgiving.... this calcuator should work (it worked correctly at that time so no reason to believe it is not working now)

https://www.dinkytown.net/java/us-easy-tax-estimator.html

let us know what your results look like! 

[NCperson]

@Viking99 - sorry one more post.... to get the whole $4,000 tax credit, assuming you have no EARNED income, you need to have a tax liability of $4,000.  if you look at the tax tables in the 1040 instructions, page 67, you need $36,800 of taxable ordinary income to have $4,000 of tax liability.  Add in the standard deduction of $25,900 (assume both of you are under 65), then the GROSS INCOME needs to be $62,700.  I am assuming that all your unearned income is Roth conversions, pension and interest.  if some is dividends and capital gains that makes the answer more complex (and different) because those items are taxed at the capital gains rate and not the tables on page 67. 

https://www.irs.gov/pub/irs-dft/i1040gi--dft.pdf

[Viking99]

@NCperson,
The Dinkytown calculator doesn't include the Child Tax Credit, so it is a bit useless for me.  It is strange that both the Intuit and efile tax calculators gives wrong, and different, results.

I have always maxed out my IRA to Roth conversion to increase my (unearned) income to  take take full advantage of the $4,000 Tax Credit. The exception was in 2021when the Child Tax Credit was fully refundable, regardless of income and if it was earned or not. For that year, I preferred to take the refund.

I wasn't sure if the rules for 2022 vs years prior to 2021 had changed, so that part of it ($1,500/child) was still fully refundable. However, from your explanation, I now understand that it is only refundable if we have earned income (which we don't).

Thus, I will do the same thing as I have done every year (except for 2021): Optimize my IRA to Roth conversion to take full advantage of the $4,000 Tax credit (and not pay any tax). I just use a simple spreadsheet to calculate.

[NCperson]

@Viking99 - sorry, I gave you the link to the wrong calculator at DInkytown -

this one has the CTC

https://www.dinkytown.net/java/1040-tax-calculator.html

they have two calculators - "easy" and the one above...

[Viking99]

@NCperson,
OK, that calculator gives the correct answer. In either case, I know now that the Child Tax Credit behaves exactly like it did before 2021 (at least for us). I marked you original answer as "solved", even though the point was that Intuit's calculator is broken....
Thanks!

[NCperson]

@Viking99 -  watch the news reports; Congress may try a lame-duck session to make a few tax adjustments.  Dems are pushing for enhancements to the child tax credit rules that would impact 2022 if consensus is reached.