Bringing up kids is not an inexpensive endeavor. Costs for daycare, healthcare, clothing, and food are just a few of the significant expenses parents regularly face when having children.
Due to lawmakers’ awareness that raising children may be expensive, a tax credit was established to lessen this burden. Its name is the Child Tax Credit, and in 2021, when it underwent a significant improvement as part of the American Rescue Plan, it received a lot of media attention.
The maximum Kid Tax Credit amount increased that year from $2,000 per child to $3,000 for a child between the ages of 6 and 17, and $3,600 for children under the age of 6. Additionally, the credit was made entirely refundable, enabling those who owed the IRS nothing to take advantage of it.
Additionally, between July and December 2021, monthly installment payments of 50% of the Child Tax Credit were made accessible. These regular monthly contributions prevented many families from getting into debt and increased the size of their savings accounts at a time when inflation was already beginning to rise noticeably.
However, the Child Tax Credit’s beneficial expansion was never extended past 2021. As a result, many parents found it difficult to pay their living expenses in 2022.
But what surprises will parents face in 2023? A child tax credit will there be? What will it be worth, and how much?
The Child Tax Credit Never Went Away
The idea that the Child Tax Credit ended after the 2021 tax year is a common one. That is just untrue. In the absence of a prolonged boost, it simply reverted to its prior regulations and value.
As a result, the Kid Tax Credit will undoubtedly exist in 2023 and will be valued at up to $2,000 for each qualified child. Those who qualify for the credit can still receive their money when they submit their 2023 tax returns in 2024, even if there are no plans to make the credit accessible in the form of monthly payments.
Currently, the Child Tax Credit is no longer completely refundable, which is something to keep in mind. Only $1,540 per child is refundable this year. Therefore, if someone doesn’t owe the IRS anything
A boost isn’t off the table. There hasn’t been a Child Tax Credit expansion approved as of the beginning of 2023. Legislators, though, continue to fight for one, despite this.
Many people concur that credit has to be improved to provide families with additional help. Therefore, it’s probable that legislation will be passed this year that improves the credit, whether by raising its maximum amount or enabling the credit to once again be completely refundable.
The option of making regular installment payments is still available. Being paid monthly should make it much simpler for families, especially lower-income households, to pay their bills without turning to debt given that inflation is still relatively high.
In reality, the increase in the child tax credit for 2021 has assisted several families in escaping poverty and avoiding concerns about food insecurity. Since lawmakers are well aware of this, it would be premature to rule out the possibility of an expanded credit in 2023. Both the Child Tax Credit and Dependent Care Credit amounts have changed this year, as they do every year.
Several tax incentives were provided by the federal government last year to assist families that were struggling due to the coronavirus outbreak, but those benefits have already expired.
The child credits and child care credits, for example, have returned to their pre-pandemic levels, according to Judy Strauss, an enrolled agent and owner of Strauss Tax Services in downtown Chicago, who spoke to NBC 5.
Families filing these claims may receive a smaller refund than in other years, according to financial and tax experts.
According to Dan Rahill, managing director at Wintrust Wealth Management, “the child care tax credit” will be the most important tax break during the epidemic in 2021. “Children under the age of six now receive $3,600, and children aged 6 to 17 receive $3,000 instead. Now it returns to the pre-pandemic regulations, and this year it will only cost $2,000 for each child.” This tax season, the IRS anticipates that over 168 million individual returns will be filed.
The Illinois Certified Public Accountant Society, or CPA Society, has provided some advice for taxpayers to assist simplify and expedite the process even though tax season is frequently onerous for many.
These include 1099 forms from banks and other payors that detail earnings from investment income, dividends, pension, annuity, or retirement plan payouts, unemployment compensation, and other sources of income.
Utilize direct deposit and file online According to the Illinois CPA Society, using direct deposit and filing online are crucial actions to take to guarantee that your tax return and refund are handled as quickly as possible.
The fastest, simplest, and safest way to submit a tax return is online, according to the IRS, which has recommended people avoid doing so whenever feasible. If there are no problems with the return, taxpayers who file online and use direct deposit should get their refund money in less than 21 working days.
Due to the Protecting Americans From Tax Hikes Act of 2015, which gives the IRS more time to guarantee fraudulent refunds are not distributed, taxpayers who are receiving returns that contain the Earned Income Tax Credit or Additional Child Tax Credit cannot receive their money before mid-February. The IRS is making progress on the hundreds of thousands of unprocessed returns from the previous tax season thanks to the most recent addition of 5,000 new customer support professionals who were educated in taxpayer rights and technical account management difficulties.
