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Child Tax Credit: Parents Concerned About The Cessation Of Monthly Payments

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Child Tax Credit: Parents Concerned About The Cessation Of Monthly Payments

The child tax credit was a lifeline for many families during the pandemic. Since July, 61 million children’s families have received advance child tax credit payments, which increased to $3,000 from $2,000 this year, with an additional $600 for children under six.

CNBC reports that a recent study by ParentsTogetherAction shows that half of the child tax credit beneficiaries feel it will be more challenging to meet their family’s basic needs without the benefit.  And 36% indicated they would no longer be able to meet those needs.

CNBC quoted Natalie Foster, co-founder and co-chair of the Economic Security Project. She said, “Families will be very concerned about the future of these checks and the growing cost of living that is occurring around them this holiday season.”

The Low-Income Families Have A Tough Time Ahead.

The first half of the program issued monthly installments. The year’s final payment was sent out on Dec. 15, and it could be the last check. Democrats have inserted a one-year extension of the benefit in the House-passed Build Back Better bill, but the account must still clear the Senate to avoid a funding gap. Parents will struggle to meet each month if payments stop in January, as they are expected to if Build Back Better isn’t passed. Even more secure households are concerned about the loss of the benefit.

Some Groups Will Suffer Significantly

According to the Center on Budget and Policy Priorities, ten million children will fall into or become further entrenched in poverty if the credit is not provided. If the benefit is no longer completely refundable, as part of the increase this year, almost 27 million children – predominantly Black, Latino, or from rural regions – will lose it entirely.

The poorest households will be the hardest hurt. According to research by the Institute on Taxation and Economic Policy, if the credit had been extended until 2022, the poorest 20% of households would have seen a 35 percent increase in income. That’s important for working parents who haven’t been able to return to their pre-pandemic occupations and salaries. Some families may lose the stability they’ve achieved over the last six months if the benefit is terminated.

 

 

 

3 Comments

3 Comments

  1. Wendi whitmore

    December 20, 2021 at 4:05 AM

    You talk about this life line in many ppls lives but what about the ones that for some reason got 2 payments and then they just stop. I’m a nurse that has continued to work thru all this. Working covid halls, getting covid and they day I’m out of isolation I go right into the covid unit working 5/12hr shifts in a row having to lay down for my 15 and 30 min breaks. Thru all this lost my mom, my cousin, pops, my dog and my cat. I had mental breakdown, the medication they put me on I had adverse reactions to. Put me in psychosis and suicidal. I had to take time off work, lost my job. Got another one but don’t get paycheck til 23rd. I’ve been on the phone for hrs to be told what I can read on the internet. I’ve made in person appt to be told they can’t see anything and don’t know why. I’ve contacted the governor. With nothing. I’m getting evicted. Propane is on 10% so we have to have it down low cuz if it runs out they won’t deliver to me anymore and only other place leads fired m cuz I’m not worth the time I don’t get big enuf loads to make it worth there Time. They r 5 mile away from my house. Electric Co is privately owned so they don’t have to go by the cold weather rules and yes even ith my kids they shut us off we slept in 49 degree house that weekend. I know it sounds like I’m on a pitty pot maybe I am but my kids are cold. Hungry… stay home by self when I work nights they needs lights. Saddest part is they know we are not able to have xmas this year and they r okay with it. Asked me not to stress that it is gonna be okay. I hope so… still hurts my heart. My life line didn’t come thru.

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Child Tax Credit

Experts Predict Long Payment Delays From IRS This Season, Provide Few Tips To Speed Up The Process

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The IRS faces an enormous backlog due to staff shortages amidst the pandemic, it has recruited new officials, but the challenge remains tough. IRS is yet to process millions of tax returns of last season. The IRS officials are crushed under a ton of paperwork; millions of taxpayers will file their returns this year. The authorities will need to devise a compact strategy to overcome the backlog. CNBC reports that IRS had 6 million unprocessed returns by December 31, this is large numbers, and 2021’s tax returns might take some time.

Experts Predict Long Payment Delays From IRS This Season, Provide Few Tips To Speed Up The Process

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IRS Workers Are Sparse

Experts suggest various ways to slim the time lag between filing the returns and receiving the payments. CNBC reports that the IRS only had 15,000 workers to answer around 24 million customer calls during the first six months of 2021, one person for 16,000 customers. Experts suggest taxpayers avoid the paperwork to the maximum extent; filers can switch electronic modes to fast forward the documentation. Taxpayers need to use advanced features to process tax refunds and other pending payments quickly. The electronic method will ease the burden on IRS officials during data verification.

Taxpayers Should File Electronic Tax Returns

IRS quoted Erin Collins, the National Taxpayer Advocate; she said, “Paper is the IRS’s kryptonite, and the agency is buried in it. The IRS still transcribes paper returns line by line, number by number, they received around 17 million original paper returns last year, and the processing delays have run as long as 10 months.” The taxpayers need to recheck their tax returns thoroughly; the wrong information might lead to payment abortion and several lengthy delays. The officials, too, will have to go through the same twice or thrice, which makes the process more complicated.

The families who receive enhanced Child Tax Credit or Stimulus payments or both need to exercise extra caution while filing their returns; the IRS issued letters to provide data for the amount allocated. The beneficiaries for the remaining half of the Child Tax Credit payments or extra credit should give complete information in their tax returns. IRS has announced April 18 as the deadline; individuals need to complete the filing process before the date.

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Child Tax Credit

The $8,000 Child Tax Credit Is Unknown To Many Parents

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stimulus check

The federal Child Tax Credit is well-known among American families with children, as parents of nearly 60 million youngsters received advance payments last year. However, there is another tax advantage for parents that is not so well-known than the CTC but can be even more generous, with up to $8,000 in tax credits available in 2022.

The Child and Dependent Care Credit isn’t completely new; it’s been around since the 1970s and was designed to help working parents offset the costs of daycare, after-school courses, and summer camps.

However, child care costs had not kept up with the credit, with the child advocacy group First Five Years Fund noting in 2018 that it only took into account around 10% of the average annual cost of caring for two children in the United States at the time.

Several tax benefits accrued for Americans as a result of the American Rescue Plan, including a large extension of the Child and Dependent Care Credit. Parents can now receive a tax credit of $8,000, nearly four times the previous limit of $2,100.

In comparison, the increased Child Tax Credit provides $3,600 for children under the age of six and $3,000 for children from 6 to 17.

Robbin Caruso is a partner in Prager Metis’ National Tax Controversy Practice. “They’re realising the rising expense of child care in our society,” she continued, “and it’s a huge opportunity for taxpayers that shouldn’t be passed up.”

The fact that it’s also fully refundable is critical since, according to experts, it might boost many parents’ tax refunds this year. Tax credits lower a person’s tax burden dollar for dollar, whereas deductions reduce a person’s overall taxable income.

As a result, tax credits like the Child and Dependent Care Credit are more useful to taxpayers than deductions, and they become even more attractive when they are fully refundable.

Claim $8000

The maximum tax credit available to Americans is $8,000, which applies to families with two or more children.

Families can now claim a credit worth half of their child care costs, up to $16,000 for two or more children, under the extended tax break. In other words, under the enhanced tax credit, families with two children who spent at least $16,000 on daycare in 2021 will receive $8,000 from the IRS.

Parents could only claim 35 percent of a maximum of $6,000 in child care costs for two children before the American Rescue Plan, or a maximum tax credit of $2,100.

Parents with only one child can claim up to $8,000 in child care expenses.

 

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Child Tax Credit

Muni Bonds Come With Higher Medicare Premiums During Retirement

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Municipal bonds are a primary choice among investors to evade taxes. The muni bonds can incur higher Medicare deductions from the post-retirement income. Individuals should be aware of the pros and cons of investing in muni bonds. CNBC reports that President Biden announced a probable increase in tax rates; this led to a higher demand for these bonds. The US muni mutual and ETFs are worth $96.8 billion at present. The government has not entertained the idea of a tax surge. However, the bonds still draw investors’ interests due to several unique attributes.

Muni Bonds Come With Higher Medicare Premiums During Retirement

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Several Individuals Opt For Muni Bonds

Due to unexpected Medicare costs, the muni bond investment can be a bane for many investors. CNBC quoted Matthew Chancey, certified financial planner at CostalOne, who said, “There are a lot of moving parts, and you need to have someone look at it holistically.” The retirees should consider the higher Social Security tax and Medicare deduction before being awestruck by their high returns and present tax stability. CNBC reports that retirees with the Social Security payments and modified adjusted gross income (MAGI) above $44,000 (for joint filers) and $34,000 (for individual filers) are taxable for more than 85% of their Social Security income.

Medicare Premium Will Increase For Retirees Above MAGI Threshold

CNBC states that the Medicare Part B premiums have witnessed a 14.5% increase, to $170.10 per month. The threshold MAGI for retirees is $182,000 and $91,000 for joint filers and individual filers, respectively. Retired couples with MAGI above $75,000 will have to pay $578.30 under Medicare premium. The reports suggest the retirees may suffer more due to the increase in Medicare Part D, including prescription medicines. In the higher income bracket, retirees will have to pay $77.90 per month in 2022. The retirees need to calculate the deductions before investing in the bonds.

CNBC quoted Mary Kay Foss, certified public accountant and CPA faculty at CalCPA Education Foundation in Walnut Creek, California, who said, “It’s something that taxpayers seem so aware of because if they get into this higher bracket, they have to pay higher premiums for a full year.” Experts suggest that retirees should not give up on muni bond investment; instead, they need to consider all sides of the coin before getting their hands into it.

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