THE next child tax credit payment will start hitting bank accounts this week on October 15.
Families who do not meet eligibility requirements may want to unenroll from advance payments, to avoid having to pay back the IRS.
Child tax credit advance payments are optional, and the deadline to opt-out of them for next month is November 1, at 11:59pm ET.
Opting out of advance payments is a smart move for families who know that their financial situation is changing this year.
If you are expecting a payment, you can track it by visiting the non-filer tool, which will remain open until next Friday, October 15.
Families that do sign up for the payments could receive hundreds of dollars every month for each qualifying child.
The IRS is using 2020 tax returns to determine eligibility for the monthly payments, so those who have not 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.
Read our child tax credit live blog for the latest news and updates…
EXPERT ON CTC EASY ACCESS PORTAL
“This new tool will help more people easily gain access to this important credit as well as help people who don’t normally file a tax return obtain an economic impact payment,” Rettig added.
“We encourage people to review the details about this important new effort.”
EASY ACCESS PORTAL
Those who are eligible can use the new tool to update relevant information, including names, addresses, and Social Security numbers.
IRS Commissioner Chuck Rettig said previously: “We have been working hard to begin delivering the monthly advance child tax credit to millions of families with children in July.”
THE IRS WILL SEND CTC RECIPIENTS LETTER NEXT YEAR
The IRS said on its website that it will send each CTC recipient a letter in January 2022, which details the total amount of advance CTC payments provided in 2021.
It is to be used for filing 2021 tax returns.
A statement on the IRS website reads: “In January 2022, the IRS will send you Letter 6419 to provide the total amount of advance Child Tax Credit payments that were disbursed to you during 2021. Please keep this letter regarding your advance Child Tax Credit payments with your tax records. You may need to refer to this letter when you file your 2021 tax return during the 2022 tax filing season.”
DO PARENTS NEED A SOCIAL SECURITY NUMBER TO QUALIFY FOR CTC?
Parents must have either a social security number or individual taxpayer identification number to qualify for the child tax credit.
Although a social security number isn’t necessarily required for the parent, it is for the child.
The IRS states on its website: “For your child to qualify you for the Child Tax Credit, your child must have a Social Security Number (SSN) that is valid for employment.”
REP COLIN ALLRED URGES PARENTS TO SIGN UP
Texas representative Colin Allred reminds parents they can still sign up for expanded Child Tax Credits until Friday, October 15.
DO I HAVE TO FILE TAXES?
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.
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 registered before October 4 may even get their first child tax payment that same month.
WHERE IS MY MONEY?
There have already been three payments issued this year and there are three payments left until the last one arrives in December.
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.
HOW MUCH LONGER ARE CHILD TAX CREDITS GOING OUT?
The payments are automatically set to arrive monthly until December 2021.
So far, most qualifying parents should have gotten payments for July, August, and September – worth up to $900 per child.
There is a chance the payments will be extended to 2025.
WHAT NEEDS TO HAPPEN FOR THE BILL TO BECOME LAW?
The non-profit organisation supports the legislation, alongside the National Educational Association, the National School Boards Association and the Michigan Education Association.
The legislation would have to pass the Senate and the House of Representatives before being signed into law by President Biden.
In January, the National Financial Educators Council found that the average amount of cash lost due to poor knowledge was $1,634 per person in 2020.
Overall, it estimated that financial illiteracy cost US citizens more than $415billion during last year.
WHO INTRODUCED THE BILL?
The bill was introduced by senators Gary Peters and Cynthia Lummis.
Mr Peters said in a statement: “This bipartisan bill will provide students with an innovative experience and the tools they need to plan for the future, create stability for them and their loved ones, and lead to long-term financial security and success.”
Meanwhile, Gary Cunningham, chief executive of Prosperity Now, added: “Matched savings programs can incentivize working families to boost their savings and get on a wealth-building path through opportunities for higher education, work and homeownership.”
HIGH SCHOOL SAVINGS PROGRAM, PART TWO
If passed, which isn’t guaranteed, the bill would create a pilot program where high school students would receive $300 in an initial deposit.
They’d then have up to $25 per month of any extra savings put in the account matched.
A year after graduating high school, the funds could then be withdrawn for certain things, such as paying for education or starting a business.
You could also use the funds to buy a house or to offset medical hardship.
The program would also require the students to take a financial literacy class, with parents encouraged to take part too.
HIGH SCHOOL SAVINGS PROGRAM
High school students could get $300 each to start saving under new proposals.
A new bill introduced today aims to boost pupils’ financial literacy by giving them cash and then matching a portion of what they continue to save.
HighFirst reported by CNBC, it’s called the Program to Inspire Growth and Guarantee Youth Budgeting Advice and Necessary Knowledge, or the PIGGY BANK Act. school students could get $300 each to start saving under new proposals.
WHO IS THE MAXIMUM CTC AVAILABLE TO?
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.
HOW LONG DOES PRESIDENT BIDEN WANT TO EXTEND THE CHILD TAX CREDITS?
President Biden has called to extend the child tax credit payments until at least 2025.
But he would need help from Congress to make it happen.
Senate Democrats are reportedly considering a three-year extension of the maximum $3,600 per child credit, which could be included in a $3.5trillion spending package.
People should be wary about clicking on shortened links about the child tax credit or stimulus payments.
Those links could lead to fake websites.
Any taxpayer who thinks they have fallen victim to a phishing attack should forward the message to firstname.lastname@example.org.
If it relates to their stimulus payment, Americans should report the incident to the Treasury Inspector General for Tax Administration via the website TIPS.TIGTA.GOV.
CHILDCARE COSTS COVERED WITH CTC
If parents regularly use a babysitter in 2021, they will be able to claim that as a child care expense for this tax year when tax filing time comes around in 2022.
CNET previously reported that it will probably be easier to claim child care credits for people and groups working in an official capacity, such as a summer camp program or licensed daycare provider, rather than a local teen.
NEW PROPOSED CHILD TAX CREDIT PLAN, CONTINUED
The proposal, part of a massive package of tax and spending changes, could cause IRS enforcement complications.
Taxpayer confusion could arise as the definition used for benefits like the Earned Income Tax Credit would be different and lead to numerous tax definitions of “child.”
The new rules would mostly benefit low-income individuals, who are more likely to have non-traditional living situations, according to researchers.
NEW PLAN COULD EXTEND CHILD TAX CREDITS TO AMERICANS WHO AREN’T PARENTS
This flexibility would accommodate people in various living situations.
“Nobody can claim kids who are being raised by someone who is not a close relative — those kids just get cut off from the break entirely,” said Jacob Goldin, a former Treasury official who now teaches at Stanford University’s law school.
SOME FAMILIES COULD COLLECT UP TO $16K
For every family earning $125,000 or less, the CTC credit will cover 50 per cent of qualifying expenses up to $8,000 associated with the care of a child under 13 or a spouse, parent or other dependent who is unable to care for themselves.
If a family is caring for two or more eligible dependents, they can collect up to $16,000 in expenses.
For families earning between $125,000 and $183,000, it will cover up to 20 percent, according to iHeart.
GROUP SUGGESTS INCREASING CTC COVERAGE WOULD HELP REDUCE HARDSHIP
Finally, the NBER found, “increasing the CTC coverage rate would be required in order for material hardship to be reduced further.”
“Self-reports suggest the lowest-income households were less likely than higher-income families to receive the first CTC payments,” the paper added.
“As more children receive the benefit in future months, material hardship may decline further.”
“Even with imperfect coverage, however, our findings suggest that the first CTC payments were largely effective at reducing food insufficiency among low-income families with children.”
PAYMENTS REDUCED FOOD INSUFFICIENCY IN MARGINALIZED GROUPS
The Bureau also found that child tax credit payments helped certain specific groups more strongly.
“The effects on food insufficiency are concentrated among families with 2019 pre-tax incomes below $35,000, and the CTC strongly reduces food insufficiency among low-income Black, Latino, and White families alike,” the study found.
CTC PAYMENTS ‘STRONGLY REDUCED FOOD INSUFFICIENCY’
The National Bureau of Economic Research released a paper on the impacts of the child tax credit payments and revealed startling findings.
First, the child tax credit payments “strongly reduced food insufficiency: the initial payments led to a 7.5 percentage point (25 percent) decline in food insufficiency among low-income households with children,” according to the study.
INCOME THRESHOLDS FOR CHILD AND DEPENDENT CARE CREDIT
To get the child and dependent care tax credit, the filer’s adjusted gross income needs to be less than $125,000.
Any more than that and the credits will phase out at 50 percent.
Families earning $438,000 or more will be out of luck, since that’s when the credit phases out entirely.
REASONS FOR OPTING OUT, PART TWO
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 prior.
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.
REASONS FOR OPTING OUT
Opting out essentially means you are postponing when you receive the remaining portion of the child tax credit until next spring, CNET reported.
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.
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