Tag: information

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CHILD TAX CREDIT/ ADVANCE CHILD TAX CREDIT

Here is a short update on what changed with the child tax credit & advance child tax credit.

  • One year expansion for 2021 tax year only, per the American Rescue Plan Act of 2021)
  • For tax year 2021, the Child Tax Credit is increased from $2,000 per qualifying child to:
    • $3,600 for children ages 5 and under at the end of 2021; and
    • $3,000 for children ages 6 through 17 at the end of 2021

Note: The $500 nonrefundable credit for other dependents amount has not changed.

  • The advance: 50% of it will be paid in advance with monthly payments. But those montly payments will only rund form July to Decemebr 2021. (The payments will be made on July 15, August 13, Spetember 15, October 15, November, 15 and December 15.) The remaining 50% will be calimed as a credit on your 2021 tax return.
  • Filers can OPT-OUT of the advance by going online and selecting to receive the full CTC on their 2021 tax return instead.
  • IF filers are paid too much (i.e., more than the child tax credit they’re entitled to claim for 2021), they might have to pay back some of the money.
    • Filers with 2021 modified AGI no greater than $40,000 (single filers), $50,000 (head-ofhousehold filers), or$60,000 (joint filers) won’t have to repay any child tax credit overpayments.
    • Filers with a modified AGI from $40,000 to $80,000 (single filers), $50,000 to $100,000 (head-of-household filers), or $60,000 to $120,000 (joint filers) will need to repay a portion of any overpayment.
    • Filers with modified AGIs above those amounts will have to pay back the entire overpayment.
  • The $2,500-of-earned-income required is dropped for 2021, too. Children who are 17 years old also qualify for the 2021 credit.

Phaseout-

  • The Child Tax Credit begins to be reduced to $2,000 per child if your modified AGI in 2021 exceeds:
    • $150,000 if married and filing a joint return or if filing as a qualifying widow or widower;
    • $112,500 if filing as head of household; or
    • $75,000 if you are a single filer or are married and filing a separate return.
  • The first phaseout reduces the Child Tax Credit by $50 for each $1,000 (or fraction thereof) by which your modified AGI exceeds the income threshold described above that is applicable to you.
  • The Child Tax Credit won’t begin to be reduced below $2,000 per child until your modified AGI in 2021 exceeds:
    • $400,000 if married and filing a joint return; or
    • $200,000 for all other filing statuses.

The second phaseout reduces the Child Tax Credit by $50 for each $1,000 (or fraction thereof) by which your modified AGI exceeds the income threshold described above that is applicable to you.

If you prefer, here is the link to FAQ – CLICK HERE

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IRS “GET MY PAYMENT” Tool

The IRS Get My Payment information tool is now LIVE on the IRS website. Taxpayers can use the Get My Payment site to:

Check on the status of their Economic Impact Payment.

Confirm their payment type (direct deposit or mailed check).

Add their direct deposit information if it has not already been provided to the IRS.

Taxpayers will not be able to update their mailing address using the Get My Payment site as the IRS had previously announced. Economic Stimulus Payments will be mailed to the address filed on the 2019 tax return. If a 2019 return has not been filed, the IRS will mail the payment to the taxpayer’s address as filed on their 2018 tax return.

The Get My Payment site will require the users SSN, DOB, Street Address and Zip Code. It’s our understanding the user will have three attempts to enter this info as it appears on their tax return. After three failed attempts, it locks the user out for 24 hours. Due to high traffic volume, we would not be surprised if the site crashes at some point today. 

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ECONOMIC STIMULUS BILL

Your phones are probably ringing with taxpayers wanting to know about their stimulus checks. The below article is not intended to address all potential scenarios but to hit on the stimulus check highlights regarding the questions we are being asked.

What is it?

In simple terms – The Stimulus check is a one-time nontaxable payment sent to all legal residents who are not claimed (or eligible to be claimed) as a dependent on someone else’s tax return and don’t make too much money based on your most recent filed tax return (2018 or 2019).

Who gets what? Things to know…

Stimulus payments will be phased out for certain income levels:

Individuals with a 2019 filing status of Single, MFS or Qualified Widower

  • Phase out begins if AGI over $75,000
  • MFJ, Phase out begins if AGI exceeds $150,000
  • HOH, Phase out begins if AGI is greater than $112,500

Based on the above criteria, how much can they expect?

  • $1,200 for individual.
  • $2,400 for MFJ

Additional $500 per qualifying child under the age of 17.

  • Click HERE for more info on qualifying child.

How does the phaseout work?

For every $100 of income above the threshold, the payment will drop by $5.

  • Example: A single filer with AGI of $75,100 = $1,195 ($1,200-$5).

Is the payment taxable as 2020 income?

No, the Payment is not income and you will not owe tax on your Payment. It will not reduce your refund or increase the amount you owe when you file your 2020 tax return next year. A Payment also will not affect your income for purposes of determining eligibility for federal government assistance or benefit programs.

For additional questions regarding the Economic Impact Payments CLICK HERE