Leafing through the pages of American economic reform comes the news of a financial revival for families nationwide. The United States Internal Revenue Service (IRS) has announced the potential reinstatement of the Child Tax Credit (CTC). Earmarked at $300 monthly, the allowance aims to uplift the economy, bolster the income of working families, and curb the rate of child poverty. An additional benefit, aiming for comprehensive societal reform, involves the enhancement of child well-being across the American multitude.
Households with dependents aged under seventeen stand eligible for this IRS credit. The credit quantum is contingent upon the number of children in the family and the prevailing household income. A unique facet of this tax is the absence of an income limit, paving the path for widespread eligibility. However, a ceiling does exist beyond which the credit begins to be pruned. For the year ahead, i.e., 2023, this phase-out commences at an income level of $200,000 for couples choosing joint tax filing and $100,000 for all others.
(Photo : Getty Images/Spencer Platt)
How Is the IRS Aiding American Families?
Aligning with his commitment to easing the burden of childcare costs, President Joe Biden unveiled an economic rescue plan earlier this month. Central to this strategy is the provision allowing households to receive up to $300 per child monthly. President Biden's proposed budget of $7.3 trillion comprises this largesse. It also envisions significant augmentation of IRS credit amounts.
What Does Biden's Budget Statement Entail?
In a recent budget statement, President Biden articulated his intent behind expanding the IRS credit. The initiative envisages reviving the Child Tax Credit and seeks to extract nearly three million children from poverty. Simultaneously, it benefits around 39 million low-to-middle-income families by saving an average of $2,600 in taxation, thus influencing the lives of approximately 66 million children. Additionally, the credit aims to aid two million children residing with a caregiver aged 60 or over, and an estimated 18 million children from low-income households are now covered under the IRS credit due to this expansion.
The CTC under Biden's plan increases from $2,000 per child. Registered as $3,000 for children older than six and $3,600 for those younger, the credit extends an option for parents. They are now entitled to choose to receive their credits as upfront monthly payments of up to $300 per child. These credits are entirely refundable. Therefore, even taxpayers whose tax liability is lower than their credit can claim the excess as a refund.
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Can Projections Verify the Anticipated Benefits?
Augmenting the optimism surrounding the expanded IRS credit are projections from the Center on Budget and Policy Priorities. These paint an encouraging picture of the maiden year following the planned expansion. Nearly 16 million children stand to benefit, with approximately 400,000 anticipated to escape poverty. Seconding this perspective, the U.S. Department of the Treasury championed the idea of advanced monthly payments as a more practical approach for families to receive assistance when in need, avoiding a year-end lump sum.
Who Qualifies and How Do They Apply?
The eligibility for the IRS credit extends to those with children or other qualifying dependents. As a mandatory condition to ensure this support, citizens must remember to mention all their dependents in their IRS Form 1040, which is presently the standard form for individual income tax filings.
The correct procedure suggests the completion and submission of the Schedule 8812 Form. This step ascertains if candidates owe any money due to the 2021 Advanced Child Tax Credit installments. Rightful candidates must possess a child who fulfills specific criteria defined for tax purposes:
- Must not be older than 16 at the end of last year.
- Must be a sibling, half-sibling, step-sibling, eligible foster child, child, or descendant of any of these.
- The dependent should not provide over half of their financial support.
- They must live with the claimant for at least six months of the year.
- Joint returns with spouses are not allowed.
- They must be a United States citizen, national, or resident alien.
One crucial final note for taxpayers-individuals with an annual income exceeding $200,000 and couples filing jointly with an income beyond $400,000 are not eligible for the full Child Tax Credit. However, a portion of the credit may still be within their reach.
RELATED TOPIC: 5 Essential IRS Tips to Accelerate Your Tax Refund Process Before the April Deadline
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