ACTC

[CRM2182]

Hopefully someone can enlighten me here. Client received stimulus payment of 2800 for her and child. Client received 1800 for ACTC payments. Client lives with boyfriend, father of child, and he qualifies for HOH. Can client not claim child and it shows no repayment of ACTC because of low income and Father chooses to claim child and receive the 1400 stimulus for child and the full 3600 CTC? 

[Camp1040]

Is mom eligible for EIC? and is she going to file to claim EIC?

[CRM2182]

Mom is eligible for EIC. Unsure depending on dads income. 

[rbynaker]

It depends on Dad's AGI but probably yes.

[CRM2182]

So why wouldn't most unmarried people with kids, who get along, have the other parent claim child who didn't receive the ACTC so they are getting more money back and not having to repay? It seems like the ACTC wasn't well thought out. 

[rbynaker]

It's situational for ACTC.  One spouse has to have pretty low income to avoid repayment.  If they're in a CP state, then MFS will basically average their incomes.  MFS can have other drawbacks (IRA deductibility limits, dependent care expenses, tax rates, etc.)  For RRC/EIP with larger families it ends up being a pretty remarkable difference.

[CRM2182]

Yeah I understand that. This was a boyfriend/girlfriend situation living together. Mom had under 40k income so under limit to repay. Just doesn't seem right that she can keep advanced payments based on who they thought was going to claim child. Now dad can claim and receive the entire amount as well as stimulus because of his income being under the limits as well. 

[dkh]

Like you said...ACTC wasn't well thought out (by government) but is working very well for taxpayers that find the loophole

[rbynaker]

Just think of it as a different flavor of free cheese for low-income folks.

I agree it doesn't make much sense and there's no way I would have written a law like that but they don't check with me beforehand.  So we're stuck with what the law says.  As much as Congress and the IRS want me to work for them for free (if the ever increasing laundry list of due diligence is any indication), I work for my clients and this is how the law was written.  They should rename it to the Married Filing Separately Act.