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| The Basics | How to tell if you'll get the child tax credit
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Parents across the country are waiting for tax-credit checks from the IRS. But the credit is complex, and plenty of people will be left out. Here's how to find out if you'll be included.
By Liz Pulliam Weston
Orlando, Fla., resident Lori Heidel says she qualifies for the $400 advanced payment that the Internal Revenue Service is sending to 25 million parents this summer. But she wont be getting the check. Her ex-husband will.
Like many divorced couples, Heidel and her former spouse agreed that they would take turns claiming the child tax credit each year for their son, Tanner. Even though 2003 is supposed to be Heidels year, and the IRS checks are meant to be an advance on this years credit, the government is sending the money to parents who claimed the tax break on last years return.
My ex will surely cash the check when he receives it in the mail, Heidel says. I am not as concerned about the money as I am on how to file for 2003.
Tussles over who gets the cash are just one of the problems parents may have with the checks the IRS will start distributing July 25. New parents, those with older children, those who owe the IRS and those who make too much or too little money may find themselves left out of this summers windfall.
The process
To recap for those of you who missed the story earlier this summer: Congress expanded the child tax credit for 2003 to a maximum of $1,000 from the previous limit of $600. Rather than make parents wait until next year to claim the extra money on their tax returns, lawmakers instructed the IRS to send the difference of up to $400 per qualifying child to those who claimed the credit in 2002.
The checks will be sent out in three waves, based on the last two digits of the parents Social Security numbers. (If both parents are on the return, its the number of the parents name that appears first that will determine the mailing date.)- If your number ends in 00 to 33, your check will be mailed July 25
- For those in the 34 to 66 group, checks will be sent out Aug. 1
- The last batch, those 67 to 99, will be mailed Aug. 8
The IRS will start mailing notices to taxpayers on July 22 telling them how much money they should expect. Most people wont be getting anything -- remember, this tax break is just for parents, and only for those parents who took the credit last year, at least so far. (Congress is wrangling over extending the break to low-income families who are left out.)
Who might not qualify
The following groups of parents also may be left out or have special issues:
New parents. If your only child was born after Dec. 31, 2002, then you couldnt claim him or her on your 2002 return, and you wont be receiving a check. That doesnt mean youll be left out entirely. When you file your 2003 return, you should be able to get the full $1,000 credit if you otherwise qualify (keep reading for details). In other words, you wont get the money now, but you may get it later.
Parents of older children. The child tax credit can only be taken by parents whose children are younger than 17 on Dec. 31. If you have a child born before 1987, youre out of luck, at least for that kid. (You could be getting up to $400 for any younger, qualifying children.)
One reader who asked to remain anonymous thinks thats unfair. Kids start getting expensive around age of 17, especially if youre sending them off to college, the reader said.
Divorced parents. Originally it looked like parents who alternate taking the
credit would have to fight about who got the money. But the IRS now says
that the parent who doesnt receive the check wont be penalized.
Technically, the money belongs to the person who will take the credit in
2003, even if the check is sent to the one who took it in 2002.
The IRS has decided, however, that, in this situation, the $400 wont have to
be deducted from any credit claimed on the 2003 tax return. The parent who
gets the check this summer can keep it, and the other parent can file for
the full credit of up to $1,000 on his or her 2003 tax return.
If you filed jointly last year but have since divorced, the check will be
issued in both your names and will technically require both your signatures
to cash. That may give you some leverage in deciding who gets what.
Parents who owe the IRS or other government agencies. If youre delinquent on federal or state income taxes, or owe other nontax federal debt such as overdue student loans, the IRS will use your advanced child-tax payment to help pay the bill. The notice you get from the IRS should tell you why your payment has been reduced and by how much.
Parents who make too much. If you made too much money last year to qualify for the credit, you wont get a check this summer. But you may be able to get money back from the government next year.
Heres how the income limitations work. The ability to claim the child tax credit begins to phase out when modified adjusted gross income exceeds $110,000 for married couples filing jointly, $55,000 for married couples filing separately and $75,000 for everybody else. The amount of the credit is reduced by $50 for every $1,000 (or portion thereof) that your income exceeds those limits.
So married parents with one child and modified adjusted gross incomes over $121,000 last year wouldnt have been able to claim the credit, says tax analyst Mark Luscombe, and wont get an advanced payment check.
The increase in the credit amount to $1,000 from $600, though, means that more higher-income parents will benefit. Now married parents with one child can earn up to $129,000 in 2003 and still get a partial credit when they file their 2003 taxes, says Luscombe, principal analyst for tax research firm CCH Inc.
Under the wire last year
Parents who make too much, Part II. Lets say you did get the credit last year. Since then, however, your fortunes have improved, and youll make too much money in 2003 to qualify. Guess what? Youll not only get a check this summer, but also youll get to keep it. Its just the governments way of saying, Thanks for being a taxpayer.
Mark Hensel of Dallas is in this fortunate situation. A four-month stretch of unemployment reduced his income last year to just over $100,000, so he was able to take the full credit for each of his two children, now aged 8 and 5.
Hensel wont disclose what hes making now, but says if he remains employed his ability to take the credit this year will be phased out almost entirely.
No matter. The IRS says he can keep his $800 check, even if he wouldnt have been entitled to take the full credit for each child when he filed his taxes next April.
Parents who make too little. The news is not nearly so rosy for millions of low-income parents. Many are being left out of the governments payments because they dont make enough money to claim the full credit.
Low-income parents are typically allowed to claim a child tax credit thats equal to 10% of the amount they make over $10,500, CCHs Luscombe says. Those who make $15,000, for example, could take a credit equal to 10% of $4,500, or $450.
That formula wasnt changed by the law that expanded the credit. So the parent making $15,000 will still be able to claim only a $450 credit on her 2003 taxes.
That disappoints Dorena Karlatiras, a single working mother in Cleveland. I understand that we are already getting money back in the end, she wrote, but if we are single parents and not receiving any child support, is this really fair to us?
A possible solution
Congress has a plan to increase the formula to 15% from 10%, which would benefit about 6.5 million families. But lawmakers are squabbling over details, including whether these families would get a check this summer or whether they would get to claim the larger credit when they file their taxes next year.
Now, a personal note. The day I wrote this column, the news was filled with horrific events that had happened or were happening to children. Some were domestic, like the two foster children who were left to die in an overheated SUV, or the baby, toddler and little boy who were slain along with their mother and grandmother in Bakersfield, Calif. Some were international, including the children dying of starvation in Ethiopia or those who are forced to be child soldiers in Uganda and other countries.
We can feel helpless in the face of this evil, or we can do something concrete to ease a childs suffering. My husband and I decided to donate $400 to a Los Angeles nonprofit that helps children on skid row.
The checks the government will send out are, after all, a windfall. Sharing some or all of this largesse, or any other money you can spare, could help a child. And it can help you be a wonderful role model for your own kids.
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