Basics on the CTC

The Child Tax Credit (CTC) is a federal tax credit that helps families with qualifying children reduce their federal income tax liability.

The child tax credit comprises two components:

  • Nonrefundable child tax credit (CTC); and
  • The refundable portion of the CTC, which is the Additional Child Tax Credit (ACTC).

For a parent or legal guardian to claim the CTC for their qualifying child, the child must meet the following seven requirements:

  • Age Test
  • Relationship Test
  • Support Test
  • Dependent Test
  • Citizenship Test
  • Residency Test
  • Valid SSN Requirement

Sample Video Tutorial and SSN Requirement

In this video discussion and blog post, we want to focus on the requirement for each qualifying child to have a valid SSN.

Under the federal tax rules, each qualifying child must have a valid SSN for a taxpayer to claim the child as a qualifying child for the child tax credit.

If you receive an SSN for your child and it is labeled “Not Valid for Employment” the child does not qualify for the CTC. An SSN issued for nonemployment reasons is issued to a person who is permitted to live in the U.S. without work authorization, but they have a valid non-work reason for living in the United States.

In addition, the child’s SSN must be assigned before the filing deadline of the parent’s Form 1040 (US Individual Income Tax Return). In other words, the parent claiming the child cannot wait several years to apply for the child’s SSN, then go back to file original or amended tax returns when the due date has passed.

Example SSN Timing Requirement

John Taxpayer and Jane Taxpayer have a son, Eric, who was born on November 1, 2022. John applied for Eric’s SSN, but the SSN did not arrive before the original due date of John and Jane’s income tax return (i.e., April 18, 2023).

If John and Jane want to claim their son as a dependent and a qualifying child for the child tax credit for 2022, they must file an extension request and wait until the SSN arrives.

John filed the Form 4868 extension request, which moves the Form 1040 filing deadline to September 15, 2023. This additional six months should give him enough time to receive Eric’s SSN.

Do Not Use “Applied For” as an SSN Placeholder

Many taxpayers make the mistake of using “Applied For” as an SSN placeholder for their dependent children. The IRS will not accept this as a substitute, and the IRS will reject the tax return and deny the CTC.

The recommended approach is to file an extension request granting the taxpayer an additional six months to file their income tax return. The extra six months should provide enough time for the SSN to be assigned.

Additional Pages Covering the CTC

More Information on the CTC

Taxpayers seeking more information on child tax credits can visit the IRS website and the IRS Form 8812 instructions for CTC and ACTC. The IRS Publication 501 (Dependents, Standard Deductions, and Filing Information) contains guidance on which persons can be claimed as dependents on Form 1040 (US Individual Income Tax Return).