January 23, 2022
IM体育免费比分高清
Found In:
December 15th, 2021 marked the last deposit date for the child tax credit payment expanded under the American Rescue Plan (ARP). Though many had hoped the program would be continued, political leaders are struggling to find a way forward that makes the majority of Congress happy, and as a result, many families have been left waiting and wondering what will come next.
Though a child tax credit has existed since 1997, it was significantly revised in the face of the global pandemic to offer parents financial relief. Where it had previously been provided to eligible families as a single, partially refundable amount at tax time, the ARP allowed checks to be sent out on a monthly basis and made the credit fully refundable. It also substantially expanded the credit from $2,000 to $3,000 annually per child, with a $600 bonus for children under the age of 6.
The impact of the revision was undeniable. According to a report issued by the Center on Poverty and Social Policy at Columbia University in late October, the payments of up to $300 per child being deposited in bank accounts (along with other COVID-19-related government support) contributed to a 4.6 percentage point (26 percent reduction) in child poverty in September of 2021 alone. Previous reports documented similar results, with an August report on its impact on material hardship reporting that the “more generous and inclusive monthly payment marks a historic, albeit temporary shift in the American welfare state’s treatment of low-income families.”
With the addition of the word “temporary” in the report’s main takeaway, the center shines a light on the question of what happens next, now that the payments will stop being sent. Both Democrats and Republicans had backed the credit through the Tax Cuts and Jobs Act under the Trump administration, and there is bipartisan support for some type of continuation, but the devil is in the details and consensus has been hard to find.
Much of the disagreement about how to move forward has revolved around whether the tax credit should be tied to a work requirement, and there are other issues surrounding what agency should be responsible for its administration and to whom and how it should be distributed. Where Senator Mitt Romney has proposed that monthly cash should be sent to all families regardless of income, with those above eligible income thresholds reconciling the difference on their income tax return, others object that it doesn’t limit the benefit to working families and those paying into the tax system. Still, others insist that there must be oversight from social service agencies to ensure that children are getting the benefit of the payments – Senator Joe Manchin called attention to the many grandparents who have assumed responsibility for raising their grandchildren and insists that a mechanism be put in place to ensure that the money follows the child rather than their parent.
To that last point, the Census Bureau conducted a survey of American households to see how they spent their child tax credit checks. The majority used the cash for household expenses including rent or mortgage payments, groceries, and utilities, with four in ten using the first few payments to pay down their debt and many using it to pay for child-care and school supplies. Others used it to provide extras that they might otherwise not have been able to afford, including music lessons, entertainment, or occasional take-out food during the pandemic.
While Congress works its way through the challenges of finding a replacement, many families for whom the extra money made a real difference are dreading the coming months, particularly with inflation rising. There are also some who received the money and believe they may owe some of it back when tax filing season arises.
However, the monthly payments were “advance” credit payments and any credit amount you are entitled to and didn’t receive in advance will be credited to your 2021 tax return. So you did not lose out on anything, you just did not get it in advance.
The IRS will be sending Letter 6419 which will show the total amount you received in advance payments; you will need to reconcile the advance payments with the amount you are entitled to. Don’t discard that letter and keep it with your other tax records and documents.
If your family received advance child tax credit funds, you are not alone in wondering what will come next from Congress for 2022. You also may need help with your upcoming tax return. If so, don’t hesitate to contact us for assistance.
Though a child tax credit has existed since 1997, it was significantly revised in the face of the global pandemic to offer parents financial relief. Where it had previously been provided to eligible families as a single, partially refundable amount at tax time, the ARP allowed checks to be sent out on a monthly basis and made the credit fully refundable. It also substantially expanded the credit from $2,000 to $3,000 annually per child, with a $600 bonus for children under the age of 6.
The impact of the revision was undeniable. According to a report issued by the Center on Poverty and Social Policy at Columbia University in late October, the payments of up to $300 per child being deposited in bank accounts (along with other COVID-19-related government support) contributed to a 4.6 percentage point (26 percent reduction) in child poverty in September of 2021 alone. Previous reports documented similar results, with an August report on its impact on material hardship reporting that the “more generous and inclusive monthly payment marks a historic, albeit temporary shift in the American welfare state’s treatment of low-income families.”
With the addition of the word “temporary” in the report’s main takeaway, the center shines a light on the question of what happens next, now that the payments will stop being sent. Both Democrats and Republicans had backed the credit through the Tax Cuts and Jobs Act under the Trump administration, and there is bipartisan support for some type of continuation, but the devil is in the details and consensus has been hard to find.
Much of the disagreement about how to move forward has revolved around whether the tax credit should be tied to a work requirement, and there are other issues surrounding what agency should be responsible for its administration and to whom and how it should be distributed. Where Senator Mitt Romney has proposed that monthly cash should be sent to all families regardless of income, with those above eligible income thresholds reconciling the difference on their income tax return, others object that it doesn’t limit the benefit to working families and those paying into the tax system. Still, others insist that there must be oversight from social service agencies to ensure that children are getting the benefit of the payments – Senator Joe Manchin called attention to the many grandparents who have assumed responsibility for raising their grandchildren and insists that a mechanism be put in place to ensure that the money follows the child rather than their parent.
To that last point, the Census Bureau conducted a survey of American households to see how they spent their child tax credit checks. The majority used the cash for household expenses including rent or mortgage payments, groceries, and utilities, with four in ten using the first few payments to pay down their debt and many using it to pay for child-care and school supplies. Others used it to provide extras that they might otherwise not have been able to afford, including music lessons, entertainment, or occasional take-out food during the pandemic.
While Congress works its way through the challenges of finding a replacement, many families for whom the extra money made a real difference are dreading the coming months, particularly with inflation rising. There are also some who received the money and believe they may owe some of it back when tax filing season arises.
However, the monthly payments were “advance” credit payments and any credit amount you are entitled to and didn’t receive in advance will be credited to your 2021 tax return. So you did not lose out on anything, you just did not get it in advance.
The IRS will be sending Letter 6419 which will show the total amount you received in advance payments; you will need to reconcile the advance payments with the amount you are entitled to. Don’t discard that letter and keep it with your other tax records and documents.
If your family received advance child tax credit funds, you are not alone in wondering what will come next from Congress for 2022. You also may need help with your upcoming tax return. If so, don’t hesitate to contact us for assistance.
Have a Question About This Topic?
Share this article...
Printable PDF
