4 Child Tax Credit Mistakes That Can Delay Your Refund
Written by
Paige Cerulli
Edited by
Rebekah Evans
Commitment to Our Readers
GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.
20 Years
Helping You Live Richer
Reviewed
by Experts
Trusted by
Millions of Readers
By ensuring you claim any tax credits and deductions you qualify for, you can lower your tax liability and save some money. Parents can save on taxes by claiming the child tax credit, but making mistakes when you claim this credit can delay your refund.
If you think you’re eligible to claim this credit, understanding the most common mistakes taxpayers make can help ensure you claim it correctly.
Not Claiming the Child Tax Credit
Some taxpayers make the mistake of not being aware of or not claiming the child tax credit at all. Paul Hyun Park, certified public accountant (CPA) at The Park Books, explained that the child tax credit is a tax benefit designed to help families with qualifying children reduce their tax liability. The IRS website states that for the 2024 tax year, the tax credit is up to $2,000 per qualifying child. Up to $1,700 per child may be refundable.
But the child tax credit isn’t automatically applied and you will need to claim it on your taxes. “Taxpayers must file Form 1040 and complete Schedule 8812 to determine their credit amount,” Park said. Then, the IRS will calculate your eligibility for the credit based on your income limits. “This is generally a straightforward process, but if someone has unique tax situations, I would definitely reach out to a trusted CPA,” Park explained.
Some taxpayers aren’t even aware that the credit exists, meaning they miss out on the credit year after year. Nick Maynard, senior vice president for Commonwealth, explained that it’s important to continue to raise awareness around the child tax credit and that employers can play a vital role in helping expand that awareness. “Many hourly workers in the U.S. qualify for different child tax credits, both federal and state,” he said. “Yet, a fair amount of data exists that shows not all people who are eligible realize this.”
According to Maynard, Commonwealth’s research has shown that the credit can help alleviate financial challenges and that it’s particularly valuable for lower-income households with children. “But in order for this to happen, folks need to be aware that they are eligible,” he said.
Overlooking Qualifying Child Criteria
Park explained that some taxpayers overlook qualifying child criteria and may try to claim the child tax credit for a child who doesn’t qualify. The IRS outlines qualifying child criteria, including the fact that a child must be under 17 by the end of the tax year, have lived with you for more than half the tax year, be claimed as a depedent on your return and be a U.S. citizen, U.S. National or a U.S. resident alien.
For example, if you’re divorced and have less than half custody of your child, you won’t be able to claim them. If your child will be age 17 by the end of the tax year, you can no longer claim the credit for them. Carefully review the criteria to make sure that each child you claim the credit for qualifies.
Exceeding Income Criteria
Park said that many taxpayers don’t realize that the child tax credit starts to phase out when single earners earn $200,000. According to the IRS, taxpayers must meet all eligibility factors and meet income requirements to qualify for the full tax credit amount. Single filers must earn $200,000 or less, while couples filing a joint return may earn up to $400,000.
If you’re earning more than those income eligibility factors, you may still qualify for a partial credit, but don’t expect to get the full amount.
Not Including a Social Security Number
You need to include the Social Security number for each child you claim on your return. “A child must have a Social Security number issued before the due date of the return,” explained Park. That can get complicated when you have a new baby just before your tax return is due. According to the Social Security Administration, the average processing time for a Social Security card is two weeks, but actual processing times can range from one to six weeks. To speed up the process, it’s best to apply for your child’s Social Security number and birth certificate at the hospital.
Park recommended that if your child hasn’t yet been assigned a Social Security number when you file your taxes, that you should file an extension. Alternatively, you can amend your return later using Form 1040-X once your child’s Social Security number is issued.
More From GOBankingRates
