MILLIONS of families may be eligible for thousands in Child Tax Credits, despite Congress failing to extend the boosted payments.
The child tax credit has returned to pre-Covid levels, meaning that the maximum federal child tax credit will go back to $2,000 per child under age 17.
During the pandemic, the credits had been increased to $3,000 per child under the American Rescue Act.
As Congress did not extend the boosted payments, families will now only be able to claim the credit on their tax returns.
Married couples who earn up to $400,000 will qualify.
For singles and those who file as head of household, the income threshold is $200,000.
Many states have created their own child tax credit programs to fill in the gaps left by the boosted payments.
Read our child tax credit live blog for the very latest news and updates…
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New Mexico tax credits explained, part four
The second payment from New Mexico’s two-part rebate will go out in August, KRQE Alberquerque reported.
Individuals can expect another $250 payment, and joint filers will receive $500 in addition to the check they’ll get in the next two months.
There are no income limits on these payments, so almost all New Mexico residents will qualify.
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New Mexico tax credits explained, part three
Lawmakers in the Land of Enchantment approved the payments in February and April to help consumers combat rising costs, including gas.
Couples filing jointly will receive $500 in this round of payment, and individuals will get $250.
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New Mexico tax credits explained, part two
In addition to the state child tax credit, New Mexico families can expect more immediate relief.
The first installment of a two-part payment to New Mexico residents is set to go out no later than June 30, according to KRQE Alberquerque.
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New Mexico tax credits and rebates explained
Governor Michelle Lujan Grisham signed House Bill 163 on March 8, 2022, which will provide qualifying New Mexicans with a child tax credit of up to $175 per child.
The credit is refundable and will save New Mexico families a total of $74million a year, according to estimates.
Representative Micaela Lara Cadena said: “New Mexico’s Child Income Tax Credit will provide much-needed relief to hardworking parents doing their best to raise their children in these trying times.”
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Democratic Senator Michael Bennet on CTC
As a consequence of the enlarged Child Tax Credit payments, childhood poverty rates fell by a stunning 40 percent, so it’s no wonder that some in the Democratic party, like Senator Michael Bennet, have spoken out about how critical it is to reinstate the program.
Bennet tweeted on May 8: “It should be easier for moms and mother figures to raise their kids, which is why I won’t stop fighting to make the expanded Child Tax Credit, which kept nearly 4 million kids out of poverty last year, permanent.”
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College students CTC eligibility revealed
Families with dependents between the ages of 18 and 24 who are enrolled in college full-time were able to receive $500 for each.
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Maryland’s CTC explained
Unlike many other broad state programs, Maryland introduced a child tax credit specifically for families with children who have disabilities.
Households with a federal adjusted gross income under $6,000 and a child 17 years old or younger with a disability can receive $500 per child.
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Child must have SSN for CTC payment too
In order for your child to make you eligible for the Child Tax Credit, they must have a valid Social Security number (SSN).
As a result, if your child doesn’t have a valid Social Security number, you were not able to get advance Child Tax Credit payments for that child.
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You must have an SSN for CTC payment
To be eligible for the Child Tax Credit, you — and your spouse if you’re married and filing jointly — must have a Social Security number (SSN) or an IRS Individual Taxpayer Identification Number (ITIN).
Only if you utilized your accurate SSN or ITIN while filing a 2020 or 2019 tax return were you eligible for advance Child Tax Credit payments.
Payments of the Advance Child Tax Credit were provided to qualified children who possessed a valid SSN for work in the United States.
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Increasing CTC coverage could reduce hardship
Finally, the NBER found in their previous report from before the payments concluded, “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.”
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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.
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CTC payments ‘strongly reduced food insufficiency’
The National Bureau of Economic Research released a paper on the impacts of 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.
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Families struggle with the cost of childcare
According to the 2021 Cost of Care Survey, most families are struggling to afford child care.
85 percent of families surveyed said they spend at least 10percent of their household income on childcare costs.
More than half (57 percent) of families surveyed spent more than $10,000 on child care in 2020.
59 percent of families are on track to spend more than $10,000 on child care in 2021.
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Who qualifies for the federal CTC explained
For 2022, families with children 17 or younger may claim up to $2,000 per child.
Married couples must earn less than $400,000 to qualify for the full credit.
For singles and those who file as head of household, the income cap is $200,000.
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Those allowed to file late without penalty
The following categories are automatically eligible for additional time to file and pay taxes without penalty, according to Fox59:
- Military personnel who have served or are currently serving in a conflict zone
- Support soldiers in war zones or a contingency operation to assist the Armed Forces Taxpayers from outside the US
- Some catastrophe survivors
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Penalty for late filing revealed
For each month that the tax isn’t paid, the late-payment penalty is 0.5 percent of the outstanding total, according to the IRS.
Ten days after the IRS sends a final notice of intent to levy or take the property, the rate rises to 1 percent.
For each month, or portion of a month, in which an IRS installment arrangement is in force, the penalty is just 0.25 percent.
In all, the penalty may be up to 25 percent of the underpaid tax.
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How long extensions allow
The extension allows six more months to file your taxes.
Those who filed for an extension have until October 17 to submit their 2021 returns.
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What form you need explained
To file for an extension, filers were responsible for filling out Form 4868.
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The purpose of a tax extension revealed
An extension offers you extra time to assemble your documents and submit your taxes later, but not to pay your taxes, according to NBC New York.
If you believe or know you owe money, figure out how much you owe and pay that amount when you complete Form 4868.
You don’t have to pay if you know you’ll be getting a refund when you file an extension.
The earlier you file your return, though, the sooner you’ll get your refund.
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IRS warned about tax returns being rejected
The IRS has issued a warning about tax returns possibly being rejected.
Electronic returns missing one form will be automatically rejected for certain taxpayers, the agency said in a news release on Tuesday, March 22.
For those who need to reconcile advance payments of the Premium Tax Credit, Form 8962 must be filed with your return.
The Premium Tax Credit, or PTC, helps individuals and families pay for their health insurance premiums, and the form does not involve the child tax credit payments that are also a part of taxes for many Americans.
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Indiana man stole CTC money
A local news outlet reported that a man from Mitchell, Indiana, allegedly stole more than $600 of a woman’s child tax credit money in November 2021.
The incident was captured on video surveillance, and the man, identified as 33-year-old Michael Jarvis, was arrested on theft charges.
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CTC income cap revealed
Single parents or parents who file their taxes as single qualified for the full checks if they make $75,000 or less.
If you make more than $75,000, the monthly check was reduced by $50 for every $1,000 over the cap and eventually phases out completely.
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Permanent CTC expansion recommended by experts
A group of economists previously argued that Child Tax Credits worth up to $3,600 should be made permanent.
In a letter signed by 448 experts to Congressional leaders, they said a permanent boost to the 2021 child tax credits would “dramatically reduce childhood poverty.”
It cited a study released by the National Academy of Sciences that found that a permanent program would cost 16 cents for every $1 in new economic benefits.
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Ways to spend child tax credits, part three
However, if you put your money into a high-yield savings account, you’ll earn more interest.
Specifically, a high-yield account can pay 20 to 25 times more in interest rates versus a traditional savings account.
Last but not least, if your financial situation is stable without the tax credit payments, then it might make sense to invest it for the future.
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Ways to spend child tax credits, continued
Some people who’ve accumulated thousands of dollars in debt could get significant relief from child tax credit payments.
If you don’t already have any savings or an emergency fund, the child tax credits could be a great time to build this up.
The downside of saving in a traditional saving account is that it won’t see much growth.
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