The Child Tax Credit is one of those, er, gifts that keep on giving. This is not a complete surprise as it was a novel idea distributed in a new way, so there were bound to be questions. There were also bound to be many who would just let the money enter their accounts every month without having thought about it, so I am sure we will have to discuss this again when tax filing begins next year. So maybe this is just part of the continuing questions.
In this month’s distributions, there was a snafu at the IRS that resulted in a number of people not getting their direct deposit of the credit this month. Look at one number – that less than 15% of families receiving this payment were affected – and it doesn’t seem too bad. Look at another number – that makes up more than 4 million families – and it feels like a lot of people are having to deal with this.
For more information on this mishap and more background about the credit, you can read this article from Forbes.
More and more of what is being written about this credit, though, seems to be on the warning end of things. I suppose this is inevitable in a way because this is not like the series of three stimulus payments that went out over the pandemic. That really was largely ‘free money’ that the government sent you. This prepayment of the credit – although a larger credit this year than it was in the past – will involve a reconciliation when it comes time to file your taxes for 2021.
And this could become an issue for some people. Let’s say you are making more money this year than you did in 2020 (a not unheard-of occurrence), you may be receiving a credit that you do not actually qualify for. Or maybe you are receiving credit money for a dependent who is going to cross the age-eligibility line before the end of the year.
You can read about some of these potential issues and more in this other article.
With this increased attention to the credit, I think it is important to restate here that you do not need to receive the prepayments of the credit. You must get an online account on the IRS’s website to start this process but doing so isn’t THAT difficult. And it can definitely be worth the time if it is going to keep you from paying hundreds (or potentially a couple thousand) dollars back to the government come tax filing time. Or if you need to update some information with the agency to ensure you are getting these payments because you need them now, you can do that there, too.
If after the first couple of months of payments, you still have questions, that’s okay! Feel free to set up an appointment with us and we can help you figure out where your personal situation sits.
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