married filing separately and each claiming one of children

[Taxburnout]

I have  a married couple that has two children. If I file married separate for them and they each take one of their two children on their own tax return do they lose the child tax credit. they bought earn $90ish

[Camp1040]

To receive the full 2021 credit, your modified adjusted gross income needs to be equal to or below:

• $150,000 for married filing jointly
• $112,500 for head of household filers
• $75,000 for single and married filing separately filers.

If your income exceeds these amounts, the increase ($1,000 or $1,600) is reduced by $50 for each additional $1,000 in income. 

[PATAX]

My experience with married filing separate is that it is almost always not to the benefit of the taxpayer.... just my opinion...

[Taxburnout]

The married filing couple I am referring to earned a total of $191,835 joint with no deductions coming off of that and they would get the $2000 per child tax credit per kid filing joint. ($4000) The phase out for 2020  based on modified AGI is $400,000 for filing joint and $200,000 for filing married separate. One parent makes $99,649 total income and the other $92,186 neither one of the two have any deductions student loan interest etc to deduct. That is their income, minus a $300 charitable deduction for married filing joint or a $150 deduction each for filing married separate. So first I am confused as to where you came up with the 2021 numbers, since this is for 2020. Filing separate and each taking one child as their dependent, should not affect the child tax credit of $2000 they would each get for each one of the two of their kids on their tax return correct? Please tell me if this is correct and then I will tell you why I am doing it this way.

[Camp1040]

Yes...2021

The numbers just came to me in a vision.

[BobKamman]

My experience with following hundreds of "innocent spouse" cases through IRS horror stories and Tax Court opinions is that MFS sometimes can be a life-changing benefit for taxpayers -- and one that is often overlooked by practitioners of the knee-jerk MFJ method.  

[dkh]

Have you tried entering this information into MFS returns to see what the results are ?   Is this for a 2020 return or are you tax planning for 2021 ?  

Maybe if you tell us up front why you are doing this it will help to give you assistance.

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@Taxburnout wrote:

 Please tell me if this is correct and then I will tell you why I am doing it this way.

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[Taxburnout]

Reason for filing married separate, because IRS sent out during the 2021 Recovery rebate: " EXPLORE WHETHER FILING SEPARATE RETURNS CAN BENFIT MARRIED TAXPAYERS"- married couples may have an additional lever to pull to help them get a larger 2021 Recovery Rebate Credit. More specifically, married couples may wish to explore whether filing separate tax returns may entitle them to (a larger) 2021 Recovery Rebate Credit. This is the reason why I am asking, because I see it as both the parents claim one child, getting the $2000 child tax credit each for their child since the phase out on modified AGI is $200000 and both are under that. My question is about the child tax credit that each will get one. When I use Pro Series software it shows they will each get the $2000, filing separately and each claim 1 of their 2 children.

[Taxburnout]

The is for preparing a 2020 tax return.

[Taxburnout]

Also Step 2 phaseout for 2021:

The child tax credit won't begin to be reduced below $2000 per child until the taxpayers modified AGI exceeds:

$400,000 MFJ  and $200,000 for all other filing statues.

The second phaseout reduces the Child Tax credit by $50 for each $1000 by which the taxpayer's modified AGI exceeds the income amounts above.

[Jim-from-Ohio]

In Ohio sometimes there is considerable savings with MFS with the savings on the Ohio side. 

[dkh]

It is too late to amend 2020 to MFS.  An amended return would have needed to be filed by deadline May 17th or Oct 15th if extension on file.   However, you can use 2020 to determine if 2021 could/should be MFS.   I have married couple that files MFS - each claims a child and each receives the child tax credit. Your calculations are correct.   

Was there any change in the RRC when you created MFS returns for 2020 ?

[Accountant-Man]

You cannot AMEND MFJ to MFS, no matter the date.

Another post I think said they were filing "superseding" return which is not the same as amending.

[Accountant-Man]

In NJ, if both persons in MFJ have at least $35,000 of income, filing MFS for NJ will save $210; however, NJ requires the same filing status as federal UNLESS the parties live in separate states.

(NJ MFS tax tables have a missing tax bracket).

So if the federal MFS saves money, you can also save $210 total if MFS in NJ.

[Taxburnout]

I never mentioned I was amending  the 2020 tax return. I am preparing the original.

[Taxburnout]

I never mentioned I was preparing and amended return for 2020, this is the original return

[Taxburnout]

I was not filing an amended return for 2020. It was an original return with that scenario

[Taxburnout]

I was not filing an amended return for the 2020 scenario that you are referring to. It is the original return I was speaking of

[qbteachmt]

You don't need to keep posting that this is not Amended, when this is already your topic that everyone has been following along with you. Perhaps no one had anything more to add, since you first mentioned "not amended."

Are you using IRS resources? For example, I have this an IRS link, with topics and bookmark links for 2021:

https://www.irs.gov/newsroom/get-ready-for-taxes-bookmark-irsgov-resources-and-online-tools-to-use-b...

You will find the similar info, with the Interactive Tax Wizards, for the tax year you are working on. This is where you can check on Filing Status, Dependent rules, and various applicable credits.

No one here can work through your clients' data for you.

[huckabarry]

You must not know about income-based repayment plans on federal loans when the lower earning spouse is seeking public service loan forgiveness. Sometimes it's not about the tax, it's about the bottom line. 

[PATAX]

@huckabarry are you talking to me? If so, no I do not know about that, and I do not want to know about that.

[BobKamman]

Of course you wouldn't want to know about it.  Who cares about people who work low-paying jobs in poor neighborhoods because -- well, probably some moral failing.  

[dkh]

@PATAX  - don't let Bob pull you into that conversation.   I think he's all caught up on work and looking for some fun.  🤔😁

[qbteachmt]

@huckabarry 

Perhaps you posted in the wrong topic? This has to do with filing 2020, the EIP recovery and Child credit, for MFJ vs MFS. There was nothing in here about (topics removed to avoid increasing search results). Heck, the entire topic ended last November, until the original posted returned over 2 months later. I would have thought that return got filed by now.

[PATAX]

@dkh 👍thanks dkh. I'm swamped here with returns about a week or two behind already, and the big returns haven't even come in yet.