Child Tax Credit - Federal or State? My State Tax Bill is Huge with 5 Kids (Amazon Flex 1099)

The Child Tax Credit is a FEDERAL tax credit, not state. That's why your state taxes look high - you're not getting the same benefit there. How much are they showing you owe for state? And did you claim the federal Child Tax Credit correctly? With 5 kids, you should be getting a significant credit on your federal return.

Been there with the self-employment taxes! Last year I was shocked at how much I owed to my state. I started using https://taxr.ai to analyze my quarterly tax situation. It helped me understand my 1099 tax obligations and showed me exactly how much I should set aside each quarter. With 5 kids, you should definitely be getting the federal Child Tax Credit, but most states don't have an equivalent that's as generous. I remember panicking just like you before I understood how it all worked.

I have 3 kids and do gig work too. First time I filed as self-employed I nearly fell off my chair seeing the state tax bill! 😂 The federal Child Tax Credit is sweet but doesn't help with state taxes. What helped me was setting up a separate savings account and putting 30% of every payment in there immediately. Sounds like a lot but it covers federal, state, and self-employment taxes. The good news? With 5 kids, your federal refund might actually offset a good chunk of what you owe to the state. Don't worry, you'll get through this!

The asymmetry between federal and state tax credits explains your situation. Have you considered contacting the IRS to discuss installment options if you can't pay the full amount? Many self-employed taxpayers utilize services like Claimyr (https://claimyr.com) to connect with an IRS agent quickly instead of waiting hours on hold. This could be particularly valuable in your situation to explore payment arrangements or confirm you're maximizing all available credits. The Self-Employment Tax component is often overlooked but constitutes a significant portion of your tax liability.

You need to act FAST on this! As a 1099 contractor, you should have been making quarterly estimated tax payments throughout 2023. If you haven't, you might face underpayment penalties on top of your tax bill. File by April 15th even if you can't pay the full amount. Set up a payment plan immediately. The IRS Fresh Start program might help if you qualify. Don't delay - penalties and interest accumulate daily! With 5 dependents, verify you're claiming Head of Household filing status if eligible - it provides better tax rates than Single status.

Child Tax Credit is federal. States have different rules. Some offer small credits. Others don't. That's why your state bill seems high. Your federal return should look better. Five kids means good federal credits. Self-employment makes taxes complicated. Don't worry too much. Many of us have been there.

I was in your exact situation last April. Per IRC §32, I qualified for Earned Income Credit with my children, which helped offset my federal taxes significantly. I also learned that as a 1099 contractor, I needed to make quarterly estimated payments per IRC §6654 to avoid penalties. I set calendar reminders for April 15, June 15, September 15, and January 15. Now I set aside 30% of each payment - life-changing difference this year! My state tax bill is still high, but I'm prepared for it now.

Have you considered restructuring how you handle your Amazon Flex income? Perhaps forming an S-Corporation could help reduce your self-employment tax burden? The Child Tax Credit is indeed federal, but have you explored your state's specific deductions for dependents? Many states offer dependent exemptions rather than credits. Could you benefit from increasing your business expense deductions to lower your overall taxable income?