THE IRS October opt-out deadline is just days away as the US nears a potential debt ceiling shutdown.
The next chance to opt out for the October child tax credit is October 4 by 11:59pm Easter Time.
Meanwhie, the Biden administration is asking for the debt ceiling to be raised, but if Congress says no to raising it, the US will default on its debt for the first time in its history.
This would mean the loans people take out to pay for things like mortgages, credit cards, car loans, could cost a lot more and a possible government shutdown could occur.
Lending will get more expensive because banks will tighten their spending if more bonds are not released into the market, as banks usually buy the bonds which increases the money supply in the economy and thus makes loans cheap.
The tax credits were expanded from $2,000 to $3,600 earlier this year by President Joe Biden as part of the American Rescue Plan.
Read our child tax credit blog for the latest news and updates…
WHITE HOUSE TWEETS ABOUT EXPANDING CHILD TAX CREDITS
“President Biden’s Build Back Better Agenda will extend the expanded Child Tax Credit benefits, providing 39 million households and the parents of nearly 90% of American children a major tax cut,” the White House tweeted last week.
“The benefits of this historic plan will cut child poverty nearly in half.”
AGE CUT OFF, CONTINUED
“The IRS generally adjusts the age of each dependent based on the prior year’s return, either 2020 or 2019, so a taxpayer shouldn’t automatically receive the advance payment for their 18-year-old,” Mark Steber, chief tax information officer at Jackson Hewitt, told ABC10.
“But, if the IRS has made an error and sends payments to ineligible taxpayers, taxpayers should opt-out of collecting the monthly advance payments.
“If ineligible taxpayers don’t opt out and still receive these payments, they may be required to pay back the IRS.”
Families can update their information on the IRS website.
AGE CUT OFF
“Age is determined on December 31, 2021. If your child turns 18 this year, then they are not eligible for the monthly Child Tax Credit,” explained Congressman Steve Cohen.
“However, the American Rescue Plan did provide for a one-time credit of $500 for dependent children aged 18 and for dependent full-time college students aged between 19 and 24.”
Experts warned that families who are mistakenly receiving the advanced child tax payments for a dependent who turns 18 before the end of the year should opt out of future payments.
If they don’t, they may be required to pay back the money once they file taxes.
FILE A TAX RETURN
Because the IRS is using 2020 tax returns to determine eligibility for the monthly payments, those who haven’t filed their taxes yet could miss out on the benefits.
Additionally, parents who didn’t make enough income to file a tax return could also be left out as the IRS would have no way of knowing if they qualify for the payments, as reported by CNET.
While in previous year families with no income qualified for only a portion of this federal help, or for no help at all, the 2021 rules were expanded to include families with no income.
PUSH FOR PERMANENT CTC CONTINUED
In short, the credit will lift about 4.1 million children out of poverty, decreasing the poverty rate by about 40 percent.
In total, 65.6 million American children – 90percent of all kids in the U.S.- would benefit, according to the Center on Budget and Policy Priorities.
Four hundred and forty-eight economists signed off on the letter, stating the expansion of the tax credit would not only improve the lives of millions of children but would also help promote the country’s “long-term economic prosperity.”
PUSH FOR PERMANENT CTC
Economists this week sent a letter to Congress requesting they make permanent the 2021 expansion of the Child Tax Credit.
In the letter, economists write about the major disadvantages children growing up in poverty face.
“On average, they attain less education, face greater health challenges, and are more likely to have difficulty obtaining steady, well-paying employment in adulthood,” the letter states.
The letter also stated how prolific childhood poverty is in the US, affecting one in seven children and one in five children of color.
BIDEN WANTS TO EXPAND CTC UNTIL 2025
President Joe Biden said in April that he hopes to extend the monthly $300 payments until 2025.
“The American Families Plan puts money directly into the pockets of millions of families,” Biden said.
“Together, let’s extend the Child Tax Credit at least through the end of 2025.”
As of now, however, the credit is set to expire in 2022.
FURY OVER DELAYS
But many are now slamming the IRS, as they have yet to receive their money amidst processing delays.
Shandi Masters told WSAZ that her August check came a week late, and her September check is nowhere to be seen.
“It’s nice for the government has done this, but it’s also frustrating when we depend on it, and it doesn’t show up,” she said.
“We were part of the 15% that got messed up last month, and for some reason and it completely emptied our bank account.
“We got a check mailed to us. Our first one was a direct deposit, no problem then.
“This time, who knows what happened.”
IRS UPDATE ON PAYMENT DELAYS
The IRS shared an update on the problem in a statement released September 17.
It read: “This week, the IRS successfully delivered a third monthly round of approximately 35 million Child Tax Credits with a total value of about $15 billion.
“We are aware of instances where some individuals have not yet received their September payments, although they received payments in July and August.
“These individuals may not yet be able to receive a current status on the IRS.gov Update Portal.
“The IRS is currently looking into this situation, and we will share more information as soon as possible.”
YOU MAY RECEIVE AN OVERPAYMENT
The IRS is using “repayment protection,” so that if an individual or family receive an overpayment but fall below a set income, they don’t need to pay the money back.
If a person is above that income level, however, they will need to pay the money back when their tax return is filed in 2022.
INACCURATE AMOUNT OF CHECKS
According to CNET, the main reason why parents are getting inaccurate payment amounts appears to be that their adjusted gross income or number of children has changed between the 2020 and 2021 tax seasons.
Families are encouraged to verify their eligibility through the Eligibility Assistant.
They may get less than they are eligible for if their income was significantly higher last year than it is in 2021, or if they didn’t claim a dependent on their tax return in 2020.
Those who didn’t get child tax payments in July or August but had their first monthly check in September are also likely to see higher amounts, as their total advance credit will be divided over four months instead of six.
ARE YOU ELIGIBLE?
If someone is absolutely positive that they should not have received a child tax credit but got a payment, they need to return the money to the IRS.
Firstly, they are encouraged to enter the Update Portal and unenroll from any future payments, as the next deadline is October 4.
Both parents will need to unenroll separately, as doing so will avoid both receiving half of the joint payment and having to pay back more money when their 2022 taxes are files.
CHECK YOUR PAYMENT STATUS
For those looking to check the status of their payment, the quickest way is to log in through the IRS’ Update Portal.
If the payment is coming by mail, the IRS encourages eligible Americans wait several business days before the check arrives.
For those hoping for such payments by direct deposit, if the payment history portal says a payment been sent, they should then check their bank account to see if an amount of up to $300 per child has cleared.
According to the White House website, transactions will show the company name “IRS TREAS 310” with a description of “CHILDCTC”.
YOUR PAYMENT MAY HAVE NOT BEEN PROCESSED
For those wondering why their child tax credit payments – which started in July – have not been processed at all, the website pointed to a number of factors, such as the IRS not having knowledge of one’s qualification, due to a family not filing a tax return in 2019 or 2020.
If a person lived in the U.S. for less than half of 2019 or 2020, the IRS might also not think they qualify, as well as a if someone’s financial status in 2021 is different that of 2020.
Payments via mail may also be held up, as a technical issues in August saw millions of families receive their checks by mail rather than direct debit.
REASONS FOR A DELAYED PAYMENT
Some families who did not file a return in 2019 or 2020 or whose financial status changed this year may be experiencing the delays.
Other reasons could include if the IRS does not have correct bank and address information.
The easiest way to check your payment status is to log in through the IRS’ Update Portal.
The portal allows Americans to check their payment history, as well as manage any advanced payments.
The IRS encourages eligible Americans wait several business days for checks arriving through the mail.
REASONS FOR OPTING OUT
Opting out essentially means you are postponing when you receive the remaining portion of the credit until next spring, reports CNET.
It is a good solution for divorced or single parents who have joint custody or claim dependents differently on their 2020 and 2021 tax returns.Others might prefer to opt-out to avoid potentially having to pay the IRS money back, or would just prefer a bigger tax refund next year.
For example, you should opt-out if you prefer to receive one large payment next year instead of seven smaller ones.
This would be ideal for families saving up, those who have put that money towards paying an outstanding debt or those who are used to receiving a bigger refund.
The maximum credit is available to taxpayers with a modified adjusted gross income (AGI) of $75,000 or less for singles, $112,500 or less for heads of household, and $150,000 or less for married couples filing a joint return and qualified widows and widowers.
If your income is above this, the extra credit you receive per child is reduced by $50 for every $1,000 in modified AGI.
WILL CHILD TAX CREDITS CONTINUE THROUGH 2025?
There have already been three payments issued this year and there are three payments left until the last one arrives in December.
Recently members of the House Ways and Means Committee released a proposal part of the $3.5 trillion budget that would see credits extended until 2025, Fortune reports.
But, it’s possible that the aid will be scaled back as Senators try to convince moderate Democrats.
OLDER DEPENDENTS QUALIFY
Parents with 18-year-old dependents who are being cared for can qualify for a maximum of $500 each toward the child tax credit they’d receive.
Dependents aged between 19 and 24 years old must be attending college full-time to also qualify for $500.
The payment will come when families file taxes for 2021 at the start of next year, according to CNET.
It will also depend on how long the dependent lived with the family and their level of income.
The dependent cannot qualify for the other monthly $300 advanced child tax credit payments.
IRS URGES FAMILIES TO SIGN UP ASAP
If a family fails to sign up for the new child tax credit this year they will miss out on advance payments but can still get the money in a lump sum next year.
To get the credit, though, they will have to file a 2021 tax return.
Experts say everyone with an eligible child should sign up as soon as they can, unless they are part of a family that knows they want to opt out and receive the benefit in a lump sum next year.
“We would hate for money to be left on the table when people are hungry, when people have housing insecurities, food insecurities,” said Otis Rolley, senior vice president of the U.S. equity and economic opportunity initiative at the Rockefeller Foundation.
DEADLINE FOR NON FILER TOOL
Low-income earners just have to provide the IRS with their name, address, and social security number.
The deadline to use the IRS’ non-filer tool is October 15.
Parents who register before October 4 may even get their first child tax payment that same month.
NON FILER TOOL
While in previous years families with no income qualified for only a portion of this federal help, or for no help at all, the 2021 rules were expanded to include families with no income.
Families with no income can use the IRS’ Non-filer Sign-up Tool to submit a simplified return.
And when they do so, the IRS will automatically issue a payment for both the child tax credit and the third stimulus check pending on eligibility.
You don’t have to file a tax return if you earn less than $12,200 a year as a single taxpayer or $24,400 as a married couple filing jointly.
RENTAL AID IS AVAILABLE
A study conducted by the University of California, Berkeley estimated that around six million people owe approximately $20billion in back rent.
In order to qualify for the sum, applicants must meet some eligibility criteria.
According to BGR, a general rule would be not being able to afford your rent and/or your utility bills because of the pandemic.
Potential applicants might either speak to their landlord about how to apply for aid from the federal Emergency Rental Assistance Program or apply on their own for grants of up to $25,000.
IS A FOURTH STIMULUS COMING?
Michael Tubbs, former mayor of Stockton, California, told the aldermen in March that the basic income payments had greatly helped his community since they began in 2019.
It comes as many families push for a fourth stimulus check as monthly $300 child tax credit payments continue.
Some states are already sending out a fourth check to all or a portion of their residents including California, Florida, and Texas.
The Biden administration is not currently looking to pass another Covid relief package but has instead concentrated its efforts on its infrastructure bill.
REASONS THE IRS MIGHT SEND YOU A LETTER
There are several reasons the IRS might send you a letter, including the following:
- A smaller or larger refund is due
- You have a balance due
- You need to confirm your identity
- A tax return was changed by the IRS
- A mailing receipt for your stimulus check
- You need to provide more information
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