Part Six -   Figuring Your Taxes and Credits

The eight chapters in this part explain how to figure your tax and how to
figure the tax of certain children who have more than $1,600 of investment
income. They also discuss tax credits that, unlike deductions are
subtracted directly from your tax and reduce your tax, dollar for dollar.
Chapter 36 discusses the earned income credit and how you may be able to
get part of the credit paid to you in advance throughout the year.

Table of Contents

    * 30.   How To Figure Your Tax
          o Introduction
          o Figuring Your Tax
          o Alternative Minimum Tax
          o Tax Figured by IRS
                + Filing the Return
    * 31.   Tax on Investment Income of Certain Minor Children
          o Introduction
          o Useful Items - You may want to see:
          o Which Parent's Return To Use
                + Parents Who Do Not File a Joint Return
          o Parent's Election To Report Child's Interest and Dividends
                + Effect of Making the Election
                + Figuring Child's Income
                + Figuring Additional Tax
                + Illustrated Example
          o Tax for Children Under Age 14 Who Have Investment Income of
More Than $1,600
                + Providing Parental Information (Form 8615, lines A-C)
                + Step 1. Figuring the Child's Net Investment Income (Form
8615, Part I)
                + Step 2. Figuring Tentative Tax at the Parent's Tax Rate
(Form 8615, Part II)
                + Step 3. Figuring the Child's Tax (Form 8615, Part III)
                + Illustrated Example
    * 32.   Child and Dependent Care Credit
          o What's New
          o Reminders
          o Introduction
          o Useful Items - You may want to see:
          o Tests To Claim the Credit
                + Qualifying Person Test
                + Earned Income Test
                + Work-Related Expense Test
                + Joint Return Test
                + Provider Identification Test
          o How To Figure the Credit
                + Figuring Total Work-Related Expenses
                + Earned Income Limit
                + Dollar Limit
                + Amount of Credit
          o How To Claim the Credit
                + Tax credit not refundable.
          o Employment Taxes for Household Employers
          o Example
    * 33.   Credit for the Elderly or the Disabled
          o Introduction
          o Useful Items - You may want to see:
          o Can You Take the Credit?
                + Qualified Individual
                + Income Limits
          o Figuring the Credit
                + Step 1. Determine Initial Amount
                + Step 2. Total Certain Nontaxable Pensions and Benefits
                + Step 3. Determine Excess Adjusted Gross Income
                + Step 4. Determine Your Credit
                + Credit Figured for You
                + Example
    * 34.   Child Tax Credit
          o What's New
          o Introduction
          o Useful Items - You may want to see:
          o Qualifying Child
          o Amount of Credit
                + Limits on the Credit
          o Claiming the Credit
          o Additional Child Tax Credit
          o Checking Your Withholding
          o Example
    * 35.   Education Credits
          o What's New
          o Introduction
          o Useful Items - You may want to see:
          o Information for Both the Hope and Lifetime Learning Credits
                + Can You Claim a Credit
                + What Expenses Qualify
                + Who Can Claim a Dependent's Expenses
                + Effect of the Amount of Your Income on the Amount of Your
Credit
                + When Must the Credit Be Repaid (Recaptured)
          o Information for Only the Hope Credit
                + Who Is an Eligible Student
                + Figuring the Credit
                + Claiming the Credit
          o Information for Only the Lifetime Learning Credit
                + Who Is an Eligible Student
                + Figuring the Credit
                + Claiming the Credit
          o Illustrated Example
    * 36.   Earned Income Credit
          o What's New
          o Reminders
          o Introduction
          o Useful Items - You may want to see:
          o Do You Qualify for the Credit?
                + If Improper Claim Made in Prior Year
          o Part A. Rules for Everyone
                + Rule 1. Your AGI Must Be Less Than:
                + Rule 2. You Must Have a Valid Social Security Number (SSN)
                + Rule 3. Your Filing Status Cannot Be Married Filing
Separately
                + Rule 4. You Must Be a U.S. Citizen or Resident Alien All Year
                + Rule 5. You Cannot File Form 2555 or Form 2555-EZ
                + Rule 6. Your Investment Income Must Be $2,700 or Less
                + Rule 7. You Must Have Earned Income
          o Part B. Rules If You Have a Qualifying Child
                + Rule 8. Your Child Must Meet the Relationship, Age, and
Residency Tests
                + Rule 9. Your Qualifying Child Cannot Be Used By More Than
One Person To Claim the EIC
                + Rule 10. You Cannot Be a Qualifying Child of Another Person
          o Part C. Rules If You Do Not Have a Qualifying Child
                + Rule 11. You Must Be at Least Age 25 but Under Age 65
                + Rule 12. You Cannot Be the Dependent of Another Person
                + Rule 13. You Cannot Be a Qualifying Child of Another Person
                + Rule 14. You Must Have Lived in the United States More
Than Half of the Year
          o Part D. Figuring and Claiming the EIC
                + Rule 15. Your Earned Income Must Be Less Than:
                + IRS Will Figure the EIC for You
                + How To Figure the EIC Yourself
          o Examples
                + Example 1. John and Janet Smith (Form 1040A)
                + Example 2. Kelly Green (Form 1040EZ)
          o Advance Earned Income Credit
                + How To Get Advance Payments for 2006
                + Advance Payments Received in 2005
    * 37.   Other Credits
          o What's New for 2005
          o What's New for 2006
          o Introduction
          o Useful Items - You may want to see:
          o Nonrefundable Credits
                + Adoption Credit
                + Foreign Tax Credit
                + Mortgage Interest Credit
                + Retirement Savings Contributions Credit
                + Credit for Prior Year Minimum Tax
                + Qualified Electric Vehicle Credit
          o Refundable Credits
                + Credit for Excess Social Security Tax or Railroad
Retirement Tax Withheld
                + Credit for Tax on Undistributed Capital Gain
                + Health Coverage Tax Credit