IRS Will Figure Your Credit for You

There are certain instructions you must follow before the IRS can figure the credit for you. See Publication 967, The IRS Will Figure Your Tax.

Advance Earned Income Credit

You must meet all the following rules to qualify for the advance earned income credit in 2003. You must:

• Work and expect that your earned income and AGI will each be less than a certain amount. The amount in 2002 was $29,201 ($30,201 for married filing jointly). The amount for 2003 will be higher. See Form W-5, Earned Income Credit Advance Payment Certificate, for the 2003 amount.
• Have a qualifying child.
• Meet all the rules explained in the instructions for Form W-5.

If you expect to qualify for the earned income credit for 2003, you can choose to get part of the credit in advance by giving a completed 2003 Form W-5 to your appropriate finance office. The credit will be included regularly in your pay.

If you received advance earned income credit payments in 2002, you must file either Form 1040 or Form 1040A for 2002 to report the payments.

Child Tax Credit

The child tax credit reduces your tax. If you have children, you may be able to take a child tax credit on your tax return for each of your qualifying children.

The child tax credit is not the same as the credit for child and dependent care expenses. See Publication 503 for more information on the credit for child and dependent care expenses.

Qualifying Child

A qualifying child for purposes of the child tax credit must be all of the following.

1. Under age 17 at the end of 2002.
2. A citizen or resident alien of the United States.
3. Claimed as your dependent.
4. Your:
   1. Son, daughter, stepson, stepdaughter, or adopted child (or a descendant of your son, daughter, stepson, stepdaughter, or adopted child - for example, your grandchild),
   2. Brother, sister, stepbrother, or stepsister (or the child or grandchild of your brother, sister, stepbrother, or stepsister) if you care for the individual as you would your own child, or
   3. Eligible foster child.

Adopted child.   A child placed with you by an authorized placement agency for legal adoption is an adopted child even if the adoption is not final.

Eligible foster child.   An eligible foster child is any child you cared for as your own and who is placed with you by an authorized placement agency.

Note.   A child who was born or died in 2002 is considered to have lived with you for all of 2002 if your home was the child's home for the entire time he or she was alive during 2002.

Amount of Credit

The maximum credit that you can claim is $600 for each qualifying child.

Limits on the credit.   You must reduce your child tax credit if either (1) or (2), below, applies.

1. The amount on line 44 (Form 1040) or line 28 (Form 1040A) is less than the credit. If the amount is zero, you cannot take this credit because there is no tax to reduce. However, you may be able to take the additional child tax credit. See Additional Child Tax Credit, later.
2. Your modified adjusted gross income (AGI) is more than the amount shown below for your filing status.

• Married filing jointly - $110,000
• Single, head of household,
  or qualifying widow(er) - $75,000
• Married filing separately - $55,000

Modified AGI.   For purposes of the child tax credit, your modified AGI is your AGI plus the following amounts that may apply to you.

• Any amount excluded from income because of the exclusion of income from Puerto Rico.
• Any amount on lines 43 and 48 of Form 2555, Foreign Earned Income.
• Any amount on line 18 of Form 2555-EZ, Foreign Earned Income Exclusion.
• Any amount on line 15 of Form 4563, Exclusion of Income for Bona Fide Residents of American Samoa.
• Any amount excluded from income because of the exclusion of income from Guam or the Northern Mariana Islands.

If you do not have any of the above, modified AGI is the AGI amount on line 35 (Form 1040) or line 21 (Form 1040A).

Claiming the Credit

To claim the child tax credit, you must file Form 1040 or Form 1040A. You must provide the name and identification number (usually a social security number) on your tax return for each qualifying child.

Answer the Questions in your form instructions for line 50 (Form 1040) or line 33 (Form 1040A) to find out which child tax credit worksheet you can use to compute the credit.

If you answer Yes to question 1, 2, or 3 in your Form 1040 instructions or question 1 or 2 in your Form 1040A instructions, you must complete the Child Tax Credit Worksheet in Publication 972, Child Tax Credit.

For more information on the child tax credit, see the instructions for Form 1040 or Form 1040A.

Additional Child Tax Credit

This credit is for certain individuals who get less than the full amount of the child tax credit. The additional child tax credit may give you a refund even if you do not owe any tax.

How to claim the additional child tax credit.   To claim the additional child tax credit, follow the steps below.

1. Make sure you figured the amount, if any, of your child tax credit. See Claiming the Credit, earlier.
2. Use Form 8812, Additional Child Tax Credit, to see if you can take the additional child tax credit only if you answered Yes on line 4 or line 5 of the Child Tax Credit Worksheet.
3. If you have an additional child tax credit on line 13 of Form 8812, carry it to line 66 (Form 1040) or line 42 (Form 1040A).

Decedents

If a member of the Armed Forces dies, a surviving spouse or personal representative handles duties such as filing any tax returns and claims for refund of withheld or estimated tax. A personal representative can be an executor, administrator, or anyone who is in charge of the decedent's assets.

This section discusses the special tax provisions that apply to individuals who:

• Die while serving in a combat zone or from wounds, disease, or injury incurred while serving in a combat zone, or
• Die from wounds or injury incurred in a terrorist or military action while a U.S. employee.

For information on the tax relief provisions that apply to individuals who died as a result of the terrorist attacks on April 19, 1995 (Oklahoma City), or September 11, 2001, or the terrorist attacks involving anthrax, see Publication 3920. For other information concerning decedents, get Publication 559.

Combat Zone Forgiveness

If a member of the U.S. Armed Forces dies while in active service in a combat zone or from wounds, disease, or other injury received in a combat zone, the decedent's income tax liability is forgiven for the tax year in which death occurred and for any earlier tax year ending on or after the first day the member served in a combat zone in active service. (Forgiven tax is tax that does not have to be paid.) Any forgiven tax liability that has already been paid will be refunded, and any unpaid tax liability at the date of death will be forgiven.

In addition, any unpaid taxes for prior years will be forgiven and any prior year taxes paid after the date of death will be refunded.

This provision also applies to a member of the Armed Forces serving outside the combat zone if the service:

• Was in direct support of military operations in the zone, and
• Qualified the member for special military pay for duty subject to hostile fire or imminent danger.

For a description of combat zone, see Combat Zone, earlier.

Missing status.   The date of death for a member of the Armed Forces who was in a missing status (missing in action or prisoner of war) is the date his or her name is removed from missing status for military pay purposes. This is true even if death actually occurred earlier.

Terrorist or Military Action Forgiveness

Tax liability is forgiven for an individual who:

1. Is a military or civilian U.S. employee at death, and
2. Dies from wounds or injury incurred while a U.S. employee in a terrorist or military action.

Beginning September 11, 2001, tax liability is forgiven for an individual who dies from wounds or injury incurred while a U.S. employee in a terrorist or military action regardless of where the terrorist or military action occurred.

The forgiveness applies to the tax year death occurred and for any earlier tax year beginning with the year before the year in which the wounds or injury occurred. A terrorist or military action is any terrorist activity primarily directed against the United States or its allies or any military action involving the U.S. Armed Forces resulting from violence or aggression against the United States or its allies.

Any multinational force in which the United States participates is considered an ally of the United States.

Example.   Army Private John Kane died in 2002 of wounds incurred in a terrorist attack in 2001. His income tax liability is forgiven for all tax years from 2000 through 2002. Refunds are allowed for the tax years for which the period for filing a claim for refund has not ended.

Claims for Tax Forgiveness

If the tax-forgiveness provisions apply to a prior year's tax that has been paid and the period for filing a refund claim has not ended, the tax will be refunded. If any tax is still due, it will be canceled. Generally, the period for filing a claim for credit or refund of income tax is 3 years from the time the return was filed or 2 years from the time the tax was paid, whichever is later.

If death occurred in a combat zone or from wounds, disease, or injury incurred in a combat zone, the deadline for filing a claim for credit or refund is extended using the rules discussed later under Extension of Deadline.

If the death occurred as a result of wounds or injuries received in the Oklahoma City, September 11, or anthrax attacks, see Publication 3920 for procedures on how to claim tax forgiveness and for the time limits on those claims.

Procedures for claiming forgiveness.   If the individual died in a combat zone or as a result of a terrorist or military action, use the following procedures for filing a claim for income tax forgiveness.

• File Form 1040 if a tax return has not been filed for the tax year. Form W-2 must accompany the return.
• File Form 1040X if a tax return has been filed. A separate Form 1040X must be filed for each year in question.

All returns and claims must be identified by writing Enduring Freedom - KIA, Kosovo Operation - KIA, Desert Storm - KIA, or Former Yugoslavia - KIA in bold letters on the top of page 1 of the return or claim. On Forms 1040 and 1040X, the phrase Enduring Freedom - KIA, Kosovo Operation - KIA, Desert Storm - KIA, or Former Yugoslavia - KIA must be written on the line for total tax. If the individual was killed in a terrorist action, write KITA on the front of the return and on the line for total tax. For example, write KITA - Oklahoma City, KITA - 9/11, or KITA - Anthrax, on the front of the return and on the line for total tax when referring to one of these attacks.

An attachment that includes a computation of the decedent's tax liability before any amount is forgiven and the amount that is to be forgiven should accompany any return or claim. For joint returns, see Joint returns, later.

Necessary documents.   The following documents must accompany all returns and claims for refund (other than returns and claims relating to individuals who died as a result of the Oklahoma City, September 11, 2001, or anthrax terrorist attacks, that are discussed in Publication 3920).

• Form 1310, Statement of Person Claiming Refund Due a Deceased Taxpayer, and
• A certification from the Department of Defense or the Department of State.

For military and civilian employees of the Department of Defense, certification must be made by the Department on Form DoD 1300, REPORT OF CASUALTY. For civilian employees of all other agencies, certification must be a letter signed by the Director General of the Foreign Service, Department of State, or his or her delegate. The certification must include the deceased individual's name and social security number, the date of injury, the date of death, and a statement that the individual died in a combat zone or from a terrorist or military action. If the individual died as a result of a terrorist or military action, the statement also must include the fact that the individual was a U.S. employee at the date of injury and at the date of death.

If the certification has been received but there is not enough tax information to file a timely claim for refund, file Form 1040X with Form 1310. Include a statement saying that an amended claim will be filed as soon as the necessary tax information is available.

Where to file.   These returns and claims must be filed at one of the following addresses.

U.S. Postal Service.   If you use the U.S. Postal Service, file these returns and claims at the following address.

Internal Revenue Service
P.O. Box 4053
Woburn, MA 01888

Designated private delivery service.   Private delivery services cannot deliver items to P.O. boxes. If you use a private delivery service, file these returns and claims at the following address.

Internal Revenue Service
310 Lowell St.
Stop 661
Andover, MA 01810

You can use the following private delivery services to file these returns and claims.

• Airborne Express (Airborne): Overnight Air Express Service, Next Afternoon Service, and Second Day Service.
• DHL Worldwide Express (DHL): DHL Same Day Service and DHL USA Overnight.
• Federal Express (FedEx): FedEx Priority Overnight, FedEx Standard Overnight, FedEx 2Day, FedEx International Priority, and FedEx International First.
• United Parcel Service (UPS): UPS Next Day Air, UPS Next Day Air Saver, UPS 2nd Day Air, UPS 2nd Day Air A.M., UPS Worldwide Express Plus, and UPS Worldwide Express.

The private delivery service can tell you how to get written proof of the mailing date.

Joint returns.   Only the decedent's part of the joint income tax liability is eligible for the refund or tax forgiveness. To determine the decedent's part, the person filing the claim must:

1. Figure the income tax for which the decedent would have been liable as if a separate return had been filed,
2. Figure the income tax for which the spouse would have been liable as if a separate return had been filed, and
3. Multiply the joint tax liability by a fraction. The top number of the fraction is the amount in (1), above. The bottom number of the fraction is the total of (1) and (2).

The amount in (3) is the decedent's tax liability that is eligible for the refund or tax forgiveness. If you are unable to complete this process, you should attach a statement of all income and deductions, indicating the part that belongs to each spouse. The IRS will make the proper allocation.

Residents of community property states.   If the member of the Armed Forces was domiciled in a community property state and the spouse reported half the military pay on a separate return, the spouse can get a refund of taxes paid on his or her share of the pay for the years involved. The forgiveness of unpaid tax on the military pay also would apply to the half owed by the spouse for the years involved.

Previous | First | Next

Publication Index | 2002 Tax Help Archives | Tax Help Archives | Home