IRS Publication 972

Definition

IRS Publication 972 is a document produced by the Internal Revenue Service in the United States. It provides guidelines and information related to the Child Tax Credit and the Credit for Other Dependents. Its purpose is to help taxpayers determine their eligibility for these credits and how to calculate them.

Phonetic

The phonetics of IRS Publication 972 would be: “Aye Arr Ess Pub-li-kay-shun Nine Seven Two”

Key Takeaways

1.

Child Tax Credit and Credit for Other Dependents: IRS Publication 972 provides guidelines for understanding child tax credit and credit for other dependants. This post includes details about who is eligible for these credits, how much they are, and how to claim them.

2.

Income limitations : The publication also explains income limitations that apply to these credits. For instance, the child tax credit begins to phase out when a taxpayer’s adjusted gross income exceeds $400,000 for joint filers or $200,000 for all other tax filers.

3.

Additional Child Tax Credit (ACTC): IRS Publication 972 contains information about the refundable portion of the child tax credit known as the Additional Child Tax Credit. This mechanism allows eligible individuals to receive a refund even if they owe no tax.

Importance

IRS Publication 972, also known as the Child Tax Credit and Credit for Other Dependents, is critical because it provides necessary guidelines for taxpayers who have children or other qualified dependents. This publication is designed to assist taxpayers in determining their eligibility for and the amount of their child tax credit. With clear definitions of specific terms, stipulations, and processes, it helps ensure that taxpayers correctly comprehend and apply the U.S. tax code pertaining to these credits. Hence, IRS Publication 972 plays an integral role in helping taxpayers potentially lower their tax liability, making it a key resource in personal financial management.

Explanation

The purpose of IRS Publication 972 is primarily to guide taxpayers on how to calculate and claim the Child Tax Credit and the Credit for Other Dependents. The document offers insightful guidelines about understanding, qualifying and determining the exact amount you can claim under these tax credits. This is notably applicable to taxpayers who are responsible for children under the age of 17, those caring for individuals who cannot care for themselves, and those supporting older dependents.IRS Publication 972 is not meant to be an improvement in one’s financial obligations, but rather aims to reduce the burden on specified groups of taxpayers by providing them with significant financial relief. It is essentially a detailed guide, with all the specifications and requirements clearly outlined to prevent misunderstandings and ensure correct usage. The IRS uses it to ensure that the right people take advantage of tax credits, and it is up to taxpayers to familiarize themselves with the document to fully comprehend and appropriately use these available credits.

Examples

IRS Publication 972 is the U.S. government document that provides guidelines for child tax credit. Here are three examples:1. Single Filing Example: Let’s assume Jane, a single mother, earns $40,000 annually and has two children under the age of 17. Jane would refer to IRS Publication 972 to determine her potential child tax credits for that income year. Based on the guidelines in Publication 972, she might be eligible to claim up to $2,000 for each child, reducing her overall tax liability.2. Joint Filing Example: Tom and Jen are a married couple with three young children, jointly earning $120,000 per year. They would consult IRS Publication 972 to verify their eligibility for claiming child tax credit and how much. Depending on their income, they could receive a credit up to $6,000, which is $2,000 per child.3. High Income Example: Chris and Sarah, a married couple jointly earning $450,000 annually with two children. As high-income earners, IRS Publication 972 would help them understand that their child tax credit would be reduced or potentially eliminated due to their high income level as the tax credit phases out at specific income thresholds.

Frequently Asked Questions(FAQ)

Related Finance Terms

• Child Tax Credit
• Additional Child Tax Credit
• Earned Income Credit
• Qualifying Child
• Taxable Year

Sources for More Information

• Internal Revenue Service
• Investopedia
• TaxSlayer
• The CPA Journal