Child Tax Credit

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goldstone
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Joined: Wed May 29, 2019 11:27 am

Child Tax Credit

Post by goldstone »

Scenario........a Canadian couple with two children move to the US in August. They don't meet the substantial presence test at the end of the year and file 1040NR returns. ( They are aware that they could use the tax treaty to file full year returns but choose not to do this.)

Since their children are non resident aliens, they normally would not be eligible dependents for the purposes of the child tax credit and submitting a W7 to apply for ITINs.

However, Publication 501 states that children who are Canadian residents do qualify for the child tax credit.

Would anyone know if , in this situation, the children can be claimed as dependents on one of the 1040NRs and submit W7s to apply for ITINs. And, if so, what additional form is required to explain to IRS why the children qualify.

Thanks very much for any insights on this.
nelsona
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Re: Child Tax Credit

Post by nelsona »

Form 8821.

Be aware though, that without an SSN, they may not qualify for the full amount. That is not discriminatory, since SSN is not strictly based on nationality. But they should get the $500 non-qualifying amount. This would be the case whether you file a 1040NR or a full year 1040.
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nelsona
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Re: Child Tax Credit

Post by nelsona »

Sorry, Form 8812.
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goldstone
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Re: Child Tax Credit

Post by goldstone »

Thanks Nelsona.

Just to clarify, though.

Form 8812 is the normal form for Child Tax Credits....is there no need for a form stating that the child qualifies because of Canadian residency ? ( Or does the W7 form meet this purpose ? , per item 2 below )

Also,
1. Line 4 says to count only children who have a qualifying SSN. Is it ok to ignore this if also submitting a W7 application for an ITIN ?
2. The W7 application would be under item 'g', dependent of NR alien holding a US visa. This form does ask about citizenship so will stating Canada on this form be sufficient for the child to qualify for child tax credit.
nelsona
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Re: Child Tax Credit

Post by nelsona »

1. No, an ITIN is not an SSN. they will only qualify for the $500. It is still the child tax credit, and it still takes 8812 to get it.

2. The W-7 has nothing to do with the child tax credit or proving citizenship. The child tax credit rules change almost yearly. It is no longer based on citizenship, and the treaty does not guarantee the credit. You will get the $500 for 2022.

Btw, Pub 501 never states that Canadian children are qualified for the credit. It merely states that they are dependents or qualifying dependents, which is for other purposes, not the CTC.
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goldstone
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Re: Child Tax Credit

Post by goldstone »

Thanks again Nelsona. I'm sorry to belabor this , but.......

Line 4 on the 8812 asks for the number of children who have SSNs, so none in our case.
Line 6 asks for the number of qualifying children who do not have SSNs but cautions not to include any child who is not a US citizen, US National, or US resident alien. Again, none of the children are any of those things.

There is no where on the form, or mentioned in the instructions, which alludes to Canadian children being an exception to the above, which is why I enquired if we need to file something additional to inform the IRS of the basis for our claim.

The instructions for form 8812 state that if you make an improper claim due to disregarding the rules then you are ineligible for the credit for the next 2 years as a punishment.....
nelsona
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Re: Child Tax Credit

Post by nelsona »

As I said, the rules change all the time for CCT. If you are not eligible, so be it. Sometimes they loosen restrictions, other times they tightened them.

But it is NOT a discrimination issue solved by the treaty, because the treaty only allows your Cdn children to be treated as dependents, and says nothing about the CCT.

Nor does getting an ITIN
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nelsona
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Re: Child Tax Credit

Post by nelsona »

Your original premise that Canadian children are entitled to the Child tax credit is simply no longer true.

Qualified dependent? Yes. But Trump removed most tax advantages for dependents long ago, by lumping it with the standard deduction.
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goldstone
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Re: Child Tax Credit

Post by goldstone »

Ahh......I get it now ! The children are qualifying dependents but simply not for the CTC or ODC.

If I might prolong the discussion, this raises a followup question.......

The children will be listed on the table of dependents even though neither the CTC or ODC will be claimed. Is the fact that they show on the 1040NR sufficient to also attach a W7 and apply for ITINs ?

Thanks so much for all your help.
nelsona
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Re: Child Tax Credit

Post by nelsona »

yes.
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goldstone
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Re: Child Tax Credit

Post by goldstone »

Great, thanks !
ND
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Re: Child Tax Credit

Post by ND »

RE:Is the fact that they show on the 1040NR sufficient to also attach a W7 and apply for ITINs ?
RE: yes

DISAGREE. If there is no tax benefit in adding your children to your 1040, IRS will absolutely reject their W-7 applications and solely for that reason.
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