Incorrect 2021 Child and Dependent Tax Credit calculations

[martinholmer]

The logic involved in calculating child and dependent tax credit amounts for 2021 is incorrect in the most recent version of Tax-Calculator (that is, the source code at the tip of the master branch, which was last updated on March 14, 2022).

The logic flaws can be easily seen in two ways: (1) the 2021 Form 1040 Schedule 8812, "Credits for Qualifying Children and Other Dependents", can be filled out for the simple case described below to see that the Tax-Calculator results are incorrect, or (2) TAXSIM35 can be used to analyze this simple case to see that the Tax-Calculator results are incorrect.

Here is the simple case (a taxpayer with two 20-year-old dependents and a small amount of wages) and the incorrect Tax-Calculator results.

(taxcalc-dev) odc21% cat case.csv 
RECID,MARS,age_head,XTOT,e00200,e00200p
1,4,45,3,1000,1000

(taxcalc-dev) odc21% tc case.csv 2021 --dump                  
Tax-Calculator startup did not extrapolate your data.

(taxcalc-dev) odc21% ls -l
total 24
-rw-r--r--  1 mrh  staff   309 Apr 13 07:08 case-21-#-#-#-doc.text
-rw-r--r--  1 mrh  staff  2785 Apr 13 07:08 case-21-#-#-#.csv
-rw-r--r--  1 mrh  staff    59 Apr 13 07:06 case.csv

(tafe) odc21% csvshow case-21-#-#-#.csv 1 --idvar RECID --zeros | grep -e payrolltax -e eitc -e recovery_rebate_credit -e ctc_new -e odc -e iitax
64 ctc_new 2000.0
138 eitc 153.0
151 iitax -6353.0
170 odc 0.0
176 payrolltax 153.0
186 recovery_rebate_credit 4200.0

The eitc, payrolltax, and recovery_rebate_credit amounts are correct, but the other amounts are incorrect. The two dependents are too old for the child tax credit, so the ctc_new amount should be zero. But the two dependents are eligible for the other dependent credit, so the odc amount of zero is incorrect; it should be 1000. These inaccuracies combine to make the Tax-Calculator iitax amount of -6353 incorrect; it should be -5353 (that is, the sum of the recovery_rebate_credit, the eitc, and the 1000 odc).

Here are the TAXSIM35 results for this tax filing unit. Note that TAXSIM35 lumps the odc amount into the CTC amount because they are calculated on the same IRS form.

NBER TAXSIM Model v35 (04/08/22) With TCJA
 State law coded through           0
 Later state laws extrapolated from           0
 Marginal tax rate wrt taxpayer earnings.

 Input Data:                   
      1. Record ID:                       1.
      2. Tax Year:                 2021.00
      3. State Code:                  0.00
      4. Marital Status:              1.00 HoH     
    5-6. Age (Txpyr/Spouse):         45.00       0.00
      7. Dependent Exemptions:        2.00
   8-10. #deps for CCC/EIC/CTC:       0.00       0.00       0.00
  11-12. Wages (Txpyr/Spouse):     1000.00       0.00
 11a12a Self-employment income:       0.00       0.00
     13. Dividend Income:             0.00
     14. Interest Received:           0.00
     15. Short Term Gains:            0.00
     16. Long Term Gains:             0.00
     17. Other Property:              0.00
     18. Other Non-Property:          0.00
     19. Taxable Pensions:            0.00
     20. Gross Social Security:       0.00
     21. Tot/Txpy/Spouse UI   :       0.00       0.00       0.00
     22. Non-taxable Transfers:       0.00
     23. Rent Paid:                   0.00
     24. Property Taxes Paid:         0.00
     25. Other Itemized Deds:         0.00
     26. Child Care Expenses:         0.00
     27. Mortgage Interest:           0.00
     28. S-Corp profits:              0.00
  29 31. Txpy/Spous QBI w/o PO:       0.00       0.00
  30 32. Txpy/Spouse SSTB w PO:       0.00       0.00
  
 Basic Output:               
      1. Record ID:                1.                            
      2. Year:                           2021
      3. State (SOI code):                  0                            
      4. Federal IIT Liability:      -5353.00
      5. State IIT Liability:            0.00
      6. SS Payroll Tax Liability:     153.00
 Marginal Rates wrt  Earner
      7. Federal Marginal Rate:        -15.30
      8. State Marginal Rate:            0.00
      9. Taxpayer SS Rate:              15.30
                                  
 Federal Tax Calculation:              Base        + $1
     10. Federal AGI                  1000.00     1001.00
     11. UI in AGI 1979+                 0.00        0.00
     12. Social Security in AGI 84       0.00        0.00
     13. Zero Bracket Amount         18800.00    18800.00
     14. Personal Exemptions             0.00        0.00
     15. Exemption Phaseout 1991+        0.00        0.00
     16. Deduction Phaseout 1991+        0.00        0.00
     17. Deductions allowed              0.00        0.00
         QBI deduction                   0.00        0.00
     18. Federal Taxable Income          0.00        0.00
     19. Federal Regular Tax             0.00        0.00
     20. Exemption Surtax 1988-96        0.00        0.00
     21. General Tax Credit 1975-8       0.00        0.00
     22. Child Tax Credit*17/22 98    1000.00     1000.00
     23  Refundable Part              1000.00     1000.00
     24. Child Care Credit 1076+         0.00        0.00
     25. Earned Income Credit 1975     153.00      153.15
     26. Alternative Min Income:      1000.00     1001.00
     27. AMT                             0.00        0.00
     28. Income Tax Before Credits       0.00        0.00
     29. FICA                          153.00      153.15
         Taxpayer share of FICA         76.50       76.58
 TCJA 2018+
  
     42. QBI Deduction                   0.00        0.00
 Additional Medicare Taxes 2013+
     43. Net Investment Income Tax       0.00        0.00
     44. Medicare Tax on Earnings        0.00        0.00