Child tax credit ‘advance payments’ are coming, but taxpayers need to be careful
Starting July 15, families earning less than $ 150,000 can receive payments of $ 300 per month for each child under 6 and up to $ 250 per month for children 6 to 17.
This equates to about half of what they’re entitled to in child tax credits, and they can get the remaining half when filing 2021 tax returns. So while taxpayers get more money overall. in tax credits, the 2021 return amount might be lower than what they used to see in previous years returns.
The IRS gives affected taxpayers an exit.
“Eligible taxpayers who do not wish to receive the early payment of the 2021 child tax credit will have the option of opting out of receiving advance payments,” according to theirs.
Perry Barnett, a partner at Rushton accounting firm in Gainesville, said another thorny point is “if you’re filing your 2021 return and you’re above the income limit, then technically you’re not eligible for the credit. for which you have received the advance payment. “
“I didn’t read deeply enough to see if you weren’t eligible (if the IRS) will want to get this money back,” he added. Taxpayers “should just be careful if they are around this level ($ 150,000).”
Advance payments “will be estimated based on information included in the 2020 tax returns of eligible taxpayers or in their 2019 returns if the 2020 returns are not yet filed and processed,” the IRS says.
The deadline for filing tax returns for 2020 was Monday, May 17, but the IRS “urges people with children to file their 2020 tax returns as soon as possible to ensure they are eligible.”
Politically, the fiscal expansion of children is not geared towards higher incomes, but rather as a means of fighting poverty.
President Joe Biden has proposed an extension of the child tax credit increase until 2025 as part of his Plan for $ 1.8 trillion families. Outside analysts have estimated the payments could cut child poverty in half.
“This tax cut sends a clear and powerful message to American workers, to working families with children: the help is here,” Biden said.
In some cases, Barnett said, people didn’t file a return for 2019 or 2020 “because they didn’t need to. They had no taxable income. They could have had four children and there was no tax with all the deductions, so there really was no need to file a return.
These people “have to file a tax-free return, so (the IRS) put you in the system,” he added.
While the IRS will determine eligibility based on the 2019 and 2020 tax years, people will also be able to update their status through an online portal. The administration is also setting up another online portal for non-filers who may be eligible for the child tax credit.
The IRS says it will provide more information on advance payments soon.
The Associated Press contributed.