Special rules for families living in the US on a work visa, which do not have a green card but do meet the substantial presence test:
They do file a regular 1040 tax return, however with certain restrictions:
They are also required to file FBAR reports, if applicable to them. They should be eligible to obtain SSN numbers since they have a work visa.
But the child tax credit (both refundable and non refundable), and Earned income credit (EIC) can't be claimed with dependent ITIN holders, only SSN holders.
They can't get an SSN for the kids since most kids can't get a work authorization permit. (Kids can actually get work authorization from 16, so that leaves one year to claim the child tax credit, up to age 17, and 3-8 years to claim the EIC based on them, up to age 19 or 24 for full time students).
They will need to apply for an ITIN for the children if the parents want to be able to claim the non refundable tax credit for other dependents, of $500. If it won't make a difference, (for instance if they are very low income) it wouldn't be worth the trouble.
Though the parents can claim the EIC on their own account, but not putting the children into the calculation.
Interestingly, if the children have ITIN numbers, it will disqualify the parents from claiming the EIC for themselves. So you have to calculate if it's worth putting them on the return at all. The EIC of the parents may offset more tax than the credit for other dependents would.
But the EIC based only on parents would only be $2.00 - $600, with a maximum joint income of $24,210. In such a case they would not owe any income tax, in any case, due to being under the standard deduction of $27,700.
If they have children from 16-24, you may be able to claim the child tax credit or EIC based on the children.
It would be prudent to plan applying for work authorization for children or young adults of these ages, in order to be able to claim these credits after obtaining a social security number for them.
Make sure the SSN will be issued before the due date (or extended due date) of the return, in order to be able to claim these credits.
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