 Income tax 2021-2022 tax software example, child tax credit and other dependent credit. Get ready to get refunds to the max diving into income tax 2021-2022. Lesser tax software, you don't need tax software to follow along, but you might want to have the forms and schedules which you can find on the IRS website irs.gov irs.gov starting point single filer Adam Smith living in Beverly Hills 90210. We've got the sun on the books as a dependent child tax credit then checked off 60,000 for the wages. We've got the standard deduction 12,550 that gets us to the 47,450 for the taxable income mirroring that over here on the equation, 60,000 income, 12,550,47,450 and then we've got the tax calculated on page number two, relying on the software for that 6,193. Notice that nothing's really being impacted with regards to the dependent at this point because it's being taken place mainly in the form of a credit which is showing up down below here with the line 28, the refundable tax credit because we have the qualifying child. So we're going to we're going to run a few scenarios with that focusing in on form 88 or schedule 8812 credits for qualifying children and other dependents will run a couple different scenarios. So first we got we've got two parts of this that you need to think about one is calculating the credit and then two taking it and that's going to be in part part one a usually and then for most people part two B takes into consideration the the amount of the prepayment that we should have received and gotten a letter about that's letter 6419. So once we have the credit calculated, we subtract the prepayment which for most people would be half of the credit if they got the calculation correct although we can think of many different areas where there could be an issue with that but that would be the general rule. So up top right now we've got our income 60,000 that's our AGI line for we've got the one the one qualifying child and that child is a under six. So that's why we have the one here this is our worksheet which I won't go into detail we actually put this together in a prior presentation but you can see the phase outs. So these are the phase outs for the married filing joint qualified widow head of household and others and so we're single right now. So for income goes above that 75,000 that's when you can see this phase out taking place. So we don't have that at this point so we got the full 3600 of the credit and then if I go down below we then have the other dependent that we're taking to consideration we have another phase out if the income was pretty high 200,000 here that could take place and then finally we get basically the credit of the 3600 which we would then have to subtract out the prepayment and if everything went properly you would think it would be half of that amount which would then be reported on down below here. So let's say on the letter 6419 we got 1800 and there was one child on it and so if I go back on over you would expect 1800 that leaves us the other half that we would get to then report that then flows into the form 1040 page number two and so that's going to be the benefit we get down here if we're going to mirror that on our tax equation you might not actually do a whole schedule like we did to kind of calculate this you might just kind of rely on the software but we put a schedule in so we're going to say that we had one we had one qualifying child under six and and then this whole calculations taking place we've got our our phase out or our limit here's for all other filers there's our phase out here at the 75 and so we're picking that up and so if we follow this all the way down we've got the 1800 that's pulling in to page one of the form 1040 so there's there's the amount of the one eight for the amount that still owed 4393 so that would be the 4472 because I got a $79 penalty 7944724472 so that would be the general scenario there let's go back to the 8 8 1 2 now let's say our income goes above the 60,000 or above the 75,000 which is the phase out so if I go back on over here and I say okay what if my income was let's say let's say 90,000 so it's well within the phase out area and I go back on over now I can see the top half I've got the I've got the 90,000 and so this calculation is the same but now I've got this phase out problem because I went over the 75,000 so it phased it down to 2008 50 so now I got the 2008 50 now if my income was lower last year then you would expect that the IRS wouldn't wouldn't have properly calculated the the phase out for the current year and so that I might still have the 1800 that that was the prepayment reported on letter 6419 so it wouldn't exactly be half then and I get the 1050 that would be pulling in to the 1040 and so it pulls into the 1040 here page number two I can mirror that over here in our worksheet because we did a fancy worksheet calculation if I change this to 90,000 it should then pick up I believe everything over here so now we're at the 1050 that would be pulling in to page one of the form 1040 so there's there's the general kind of scenario and the phase out we have similar kind of phase outs that would take place if of course if married for example and so you've got to make sure that you you're reporting properly the information from the letter 6419 when you're filing married which can be a little bit difficult because you're probably both going to get the form 6419 so if I add a married here and we say that they got married single to married filing joint so now I'm going to go back on over and we're going to take a look at the 8812 so now we've got the 90,000 we still got the 3600 here for the one child for both of them now so now the phase out isn't taking place because now we're we're at the phase out line item of 150,000 so we're back to taking the 3600 if we got on our letter 6419 which two of us would have gotten the letter then that the amount we got was 1,800 back to half and there would be our calculation if we mirrored that on our little worksheet over here we'd have to change these numbers I'd have to say this one is now equal to the married filing joint number and this is now equal to the married filing joint number and that should get us back to the 1008 which should be flowing into the page one here now of course if our income goes over the threshold for married filing joint which we saw was was the threshold here for married filing joint was 150 so let's say we went up to 160,000 on the income let's say it's 165,000 once that's way too much 165,000 not a million that's way over we wouldn't get anything so then we're gonna say it's 165 now it's been phased out because we went over the threshold 165 and if I go down back down here we would expect maybe if my income was lower last year that on the letter 6419 they didn't actually take half because they didn't know about the phase out the phase out's gonna mess them up and that's why we get to the 1050 again and it starts to phase out so you get a general idea the phase out if I mirrored that on our payment down below we're gonna say that they said 165 I said well let's just keep it at that I won't do it every time here so that's the general idea there then let's add a level of complication let's go back to the first tab let's bring it back then to the single filer single filer let's bring the wages back to 60,000 but let's add another dependent so now we're gonna say two dependents the first one is under six and then the second one we're gonna say is between six and 18 so if I go back to the forms now I'm gonna say okay the now I've got these two people two dependents two children both child tax credits but once qualifying for the larger child tax credit than the other so if I go then to the 8812 there's the 60,000 we're getting the full amount here because well the maximum of the one child at the 3600 the other child at the 3000 due to the different ages even though they're both qualifying children you would think then through 3600 plus the 3000 that on form the letter 6419 I would have gotten half of that if they got it correct which would be the 3300 so if I go back down we're gonna say okay there is that you would think that down here on the letter I would have gotten not 1800 but I would have gotten you would think 3300 half of that for the two children that are involved already which would leave us then with the 3900 that we would still be able to be picking up and if I go back on over to the 1040 then on page two that would be the benefit that we would be getting recorded down here kind of similar to where the payment kind of calculations are at so there's that scenario let's go ahead and add another one let's say that we had a dependent on the books that was not a qualifying child but an other dependent item so I'm gonna go back on over and say dependents and let's say that we had a third one here that wasn't a qualifying child forms now I've got my form 1040 we've got two children one under six one between six and 18 and then another dependent the other dependent for the other credit not the child tax credit going to the 8812 now we've got these two calculating at the 7005 and then we've got the 500 that's calculated on the other credit down below you would expect then that the form the form 6419 has not changed because they didn't send out a prepayment for the other dependent it's not like we got another 250 $250 because they estimated that $500 credit no but you still could have a phase out kind of thing here so now we've got the 3900 after we put in the these the letter 6419 that flows over to the form 1040 in a little bit more confusing way because the 500 is up here and the non-refundable component because the whole thing is basically non-refundable for that credit meaning it can't take you below zero that's why you got to put it up here and then down here all of the child tax credit is basically refundable unless you got some unusual circumstances which we might take a look at in a second so that's the next scenario now you could have a situation where they got the estimate completely wrong so let's just think about that we could say okay well what if what if for example I don't have any people any dependence in the current time period we're gonna say that they're not here but the government sent me a letter 6419 because they gave me prepayments incorrectly okay so now we're gonna say okay well if that happened then we're gonna say we don't have any dependence on page one of the 1040 but last year let's say we had a dependent on the form 1040 and therefore the government tried to send out prepayments based on that dependent they messed up on it you would think that we would have to pay it back unless they give you some kind of exception so then if I go to to the 889 I still got this schedule here because I got the prepayment so I didn't actually get any credit calculation there is no actual credit because I don't have anybody on the form but then down here I'm saying that they gave us let's say that they gave us half of what the credit would be let's say they gave us let's say they gave us let's say 1800 and for one child that's what was reported on the letters 6419 so if I go back on over now I've got the 1800 that they already gave us when I don't qualify for the credit so if I jump back to page number three then this is gonna this is gonna be a calculation of the possible ability to have what they're calling repayment protection so they kind of made an error on it when they didn't really make an error they estimated it on the numbers that are different or changed so you could see that they calculated 2000 of it here that you might be able to get to get back so they're only charging the 800 after you do the calculation here so in other words you would think that the full amount of the 1800 you kind of have to increase your liability by that but after this after this it's 800 which is flowing in to the line to or schedule to where we see it on page two of schedule to and this is the additional tax that's gonna have to be added because they gave you that payment we go to the 1040 and then I go to page two and now we've got the added tax this is increasing the tax now if I lowered my income a bit if I go back on over and I said that this was like let's say 40,000 and then I go back on over and we go back down to the 8812 and say page number three so now the whole thing's basically wiped out because it's up to basically that 2000 so we've got that threshold and you knew this was gonna happen basically from the start right they said well if they give you the prepayment incorrectly then they were telling you well you should tell the IRS so that you don't have to pay it back at the tax time but you knew that they were gonna but they basically now have this thing if you're under the threshold then you might not have to pay it back would be the the item here which again was fairly predictable that that was gonna happen but it kind of incentivizes people to you know not say don't give me the money when you're not gonna but in any case those are the general scenarios that that you can have and so then the more unusual scenario let's go back on over and let's add a dependent back so let's add this first dependent back in place going back to the forms so now we got more of the general scenario where we've got that three thousand six hundred on the credit and let's say then down here on box 13 that we don't check either of these items and so box 13 could change things a lot so that would say check all boxes that apply to you or your spouse if married filing jointly check here if you or your spouse if married filing jointly had a principal place of abode in the United States for more than half of 2021 that's most people generally the United States filing the tax return be check here if you or your spouse if married filing jointly were bona fide resident of Puerto Rico now if neither of those apply then you wouldn't check off that box so I'm gonna say don't check that box and then that you'd have a hold you wouldn't be going then to part B here you'd have to then go then to part C to continue on with the calculation and one of the main kind of things that that happens here is that is that the credit that you might be getting there's going to be a non refundable and refundable so it looks actually a little bit more like how the credit was calculated in prior years so in other words you've got the child tax credit and credit for the other dependents and then on page two you got part C filers who do not check the box here and then the additional child tax credit that you have to basically be dealing with if you see how this flows through then to the form 1040 you can see then up top online 19 we've got the non refundable child tax credit or credit for other dependents at the 1,800 as opposed to it being recorded down below in the non refundable kind of section down here that we saw so that could add to more limitations on the amount of the credit that you could get so again a little bit a little bit more unusual of a situation but that's kind of the difference on on that if that box number 13 is checked or box 13 is non-checked so that's going to be over here depending on on this one I won't go into that in as much detail because that's more of the unusual circumstance