by Heidi Copeland | Aug 24, 2021
Yes, that’s right, the expanded, Advance Child Tax Credit is NOT stimulus money. The Child Tax Credit is an ADVANCE payment of next year’s Child Tax Credit. Taxpayers with qualifying children are entitled to claim qualifying children for an income tax credit.
With that said, there are two types of credit: refundable credit and nonrefundable credit. Although both kinds of credit can reduce your tax liability, only a refundable credit can give you a tax refund even when you do not owe taxes.
The expanded, Advance Child Tax Credit is a refundable credit for the 2021 income tax year. This refundable tax credit is being given in ADVANCE to taxpayers with qualifying children. The amount of the expanded, Advance Child Tax Credit payments that you receive during 2021 is based on the IRS’s estimate of the Child Tax Credit amount that you appropriately would be allowed for the 2021 tax year. The law requires this estimate to be based on two primary sources of information:
- Your 2020 tax year return or, if that return is not available, your 2019 tax year return
- Any updated information you provide to the IRS in 2021, including information provided through the Child Tax Credit Update Portal (CTC UP), which will allow you to update with the IRS your Child Tax Credit information throughout 2021, including any changes in the number of your qualifying children, changes in your income, and changes in your filing status.
In fact, the IRS began paying the Advance Child Tax Credit on July 15, 2021. The Internal Revenue Service will issue half the total credit amount, in advance, the middle of every month, from July 15 to December 15, 2021. You will claim the other half when you file your 2021 income tax return in 2022. As of now, these tax law changes apply to tax year 2021 only.
The maximum credit is available to taxpayers with a modified adjusted gross income of:
- $75,000 or less for single filers and married persons filing separate returns
- $112,500 or less for heads of household
- $150,000 or less for married couples filing a joint return and qualifying widows and widowers.
For tax year 2021, qualifying families claiming the Child Tax Credit will receive:
- Up to $3,000 per qualifying child between the ages of 6 and 17 at the end of 2021
- Up to $3,600 per qualifying child under age 6 at the end of 2021
The Child Tax Credit begins to be reduced to $2,000 per child if your modified AGI in 2021 exceeds the amounts listed above:
- Phase One: 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.
- Phase Two: The Child Tax Credit will not 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
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- $200,000 for all other filing statuses
The second phase 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 IRS has an eligibility assistance site to help you check if you might be eligible for advance payments of the Advanced Child Tax Credit https://www.irs.gov/credits-deductions/advance-child-tax-credit-eligibility-assistant
For the 2021 income tax filing season, a qualifying child is under age 18 at the end of 2021. This differs from the 2020 income tax filing season as a qualifying child was under age 17 at the end of 2020. Other general rules from income tax year 2020 in regards to the Child Tax Credit do not apply in 2021.
American Rescue Plan: Enhanced Child Tax Credit – While millions of American families view the expanded, Advance Child Tax Credit (money) as a lifeline needed to pay basic expenses, others view it as a windfall. Do you need to take the Advance Child Tax Credit? That is entirely up to you. However, it is important to think ahead. Do you have a plan for spending or not spending the money? (You have an opportunity every month through December to unenroll before the next payment lands. The deadline is three days before the first Thursday of every month)
If you feel certain you will not owe money come income tax time AND spend the Advanced Child Tax Credit (money) responsibly … why not? The premise of the expanded, Advance Child Tax Credit, as part of the American Rescue Plan Act of 2021, is to help families and to help stimulate the economy. But that does not mean the advanced credit (money) should be spent thoughtlessly. Being sensible and responsible can help set you up for future success for years to come.
Financial literacy is an understanding of the skills and knowledge that allows an individual to make informed and effective decisions with all their financial resources, including taxes! Make time to learn about the expanded, Advanced Child Tax Credit. Strong financial knowledge and decision-making skills help people weigh their options and make informed choices for their financial situations, such as deciding how and when to save and spend, comparing costs before a big purchase, and planning for retirement or other long-term savings. Be prepared, research your options, and have a plan. You will be glad you did!
The IRS doesn’t initiate contact with people by email, text messages or social media channels to request personal or financial information. People should watch out for websites and social media attempts that request money or personal information and for schemes tied to Advance Child Tax Credit payments, Economic Impact Payments, or other tax topics. Be careful of SCAMS. Report these scams to the IRS.
by Heidi Copeland | Jan 22, 2021
Taxes, without a
doubt, conjure up emotions from elation to dread! Do you owe? Are you getting a refund? Are you uncertain?
This is a significant statement because income tax returns cannot be filed electronically or by mail until the IRS has opened the season.
Please, do not be influenced to apply for a tax refund loan, typically known as a RAL (refund anticipation loan), if you are not in a crisis for the money. An RAL is a loan based on the anticipated amount of your federal income tax refund. Many tax filing services will offer you a RAL if… you file with their service. Your loan amount will be the value of your anticipated refund minus fees and/or interest charges.
Know, too, that your loan will go directly to the lender once the IRS processes your income tax return.
Be VERY careful with refund anticipation loans. An obvious positive attribute of the loan is you get money quickly – before the season even opens. Another, once the lender receives your refund, the loan is paid. But, what happens if your tax refund is smaller than the anticipated income tax return? You now will have an outstanding loan that will need to be paid back.
The Earned Income Tax Credit (EIC or EITC) is a refundable tax credit for low- and moderate-income workers. For 2020, the earned income tax credit ranges from $538 to $6,660. The amount depends on income and number of children; people without kids can qualify, too.
If you qualify for the EITC, you need to know, by law, the IRS cannot issue refunds for people claiming the EITC or the Additional Child Tax Credit (ACTC) before mid-February. The IRS cannot release these refunds before February 15, but the IRS is saying to expect your refund by the first week of March. Note, too, the law requires the IRS to hold the entire refund − even the portion not associated with the EITC or ACTC. This law change, which took effect in 2017, helps ensure that taxpayers receive the refund they are due by giving the IRS more time to detect and prevent fraud.
Now, while waiting for the tax filing season to open, is a great time to get income tax documents together. Once the filing season opens, being organized and prepared will help facilitate a seamless transition to filing your income tax return. The IRS recommends that taxpayers file their returns electronically to reduce errors and receive refunds more quickly.
Filing an average income tax form is also easy. There are many FREE income tax filing sites.
Income $72,000 and below: Contact your local UF/IFAS Extension office and they can help you by:
- Finding FREE federal tax filing on an IRS partner site
- Finding guided preparation – simply answer questions
- Providing a link to a FREE Facilitated Self-Assisted (FSA) service with electronic forms you fill out and file yourself
Income above $72,000: Contact your local UF/IFAS Extension office and they can help you by:
- Providing a link to a FREE Facilitated Self-Assisted (FSA) service with electronic forms you fill out and file yourself
- Helping you learn how to prepare papers for meeting with a tax professional
- Providing you with basic tax preparation information
Be careful in your decision making when it comes to filing income taxes. Choosing e-file and direct deposit for refunds remains the fastest and safest way to file an accurate income tax return and receive a timely refund. It is amazing to know the IRS issues more than 9 out of 10 refunds in less than 21 days.
Source: https://www.irs.gov/filing/free-file-do-your-federal-taxes-for-free#what
by Samantha Kennedy | Mar 19, 2020
The deadline for filing your federal income tax return is April 15, 2020. (Photo source: IRS.gov)
The IRS has identified a new version of a phishing email scam targeting tax professionals. The fake email states the preparer’s EFIN has been put on a temporarily hold and warns the EFIN will be suspended unless the preparers open an embedded document and confirm or deny that they submitted the Form 1040. The embedded “1040” document likely contains malware.
The IRS reminds all tax professionals that they are targets of cybercriminals seeking to steal client data or the practitioners’ identities. Thieves use many variations of phishing emails such as this. The fake emails are characterized by an urgent message (your EFIN will be suspended) and try to entice recipients to open a link or attachment. The IRS urges all tax professionals to be on alert and take security steps to protect their clients and their businesses. Review Publication 4557, Safeguarding Taxpayer Data, for how to be safer.
Some simple steps include:
- Using the multi-factor authentication option offered by tax software to protect accounts from unauthorized access.
- Use strong password protections on all devices.
- Never open suspicious emails, links and attachments may carry malware.
- Use strong security software and keep it updated.
For more information, please visit https://www.irs.gov/.
by Heidi Copeland | Jan 9, 2020
The deadline for filing your federal income tax return is April 15, 2020. (Photo source: IRS.gov)
The Internal Revenue Service has announced that they will begin accepting paper and electronic tax returns beginning January 27, 2020. The IRS encourages everyone to consider filing electronically and choosing direct deposit, as it is fast, accurate, and the best way to get your refund as quickly as possible.
Nonetheless, many software companies and tax professionals are accepting income tax return information now and promising instant refunds. KNOW that money being promised comes with a charge. As they say, there is NO free lunch, especially around tax time.
By law, the IRS cannot issue refunds for people claiming the Earned Income Tax Credit (EITC) or Additional Child Tax Credit (ACTC) before mid-February. The law requires the IRS to hold the entire refund − even the portion not associated with EITC or ACTC. This law change, which took effect in 2017, helps ensure that taxpayers receive the refund they are due by giving the IRS more time to detect and prevent fraud
The IRS also wants taxpayers to be aware it will take several days for these refunds to be released and processed through financial institutions. Factoring in weekends and the President’s Day holiday, the IRS cautions that many affected taxpayers may not have actual access to their income tax refunds until the end of February 2020.
The filing deadline to submit 2019 tax returns is Wednesday, April 15, 2020. Procrastinators can request a six-month extension to submit their returns (Form 4868), but you only have until midnight April 15, 2020 to pay taxes owed without penalty.
It is amazing to know that the IRS issues more than 9 out of 10 refunds in less than 21 days. Choosing e-file and direct deposit for refunds remains the fastest and safest way to file an accurate income tax return and receive a refund. However, it is possible your tax return may require additional review and take longer. Where’s My Refund? has the most up to date information available about your refund.
Your refund should only be deposited directly into accounts that are in your own name, your spouse’s name, or both if it is a joint account. No more than three electronic refunds can be deposited into a single financial account or pre-paid debit card. Taxpayers who exceed the limit will receive an IRS notice and a paper refund.
Whether you file electronically or on paper, direct deposit gives you safe access to your refund faster than a paper check.
Additional Resources:
Free Tax Return Prep for Qualifying Tax Payers (IRS)
What to Bring to Your Local VITA or TCE Site (IRS)
by Heidi Copeland | Jan 26, 2018
The Internal Revenue Service (IRS) announced recently the nation’s tax season begins Monday, January 29, 2018. The IRS also reminds taxpayers claiming certain tax credits to expect a longer wait for refunds.
Nevertheless, many software companies and tax professionals accept tax returns before January 29, 2017. Be aware! These prepared returns cannot be submitted until the IRS system opens. Any money received prior to the opening of the Income Tax season may cost you! Early refunds are often charged processing fees as well as interest.
In 2017, under the change required by Congress in the Protecting Americans from Tax Hikes (PATH) Act, the IRS is to hold refunds claiming the Earned Income Tax Credit (EITC) and the Additional Child Tax Credit (ACTC). The IRS expects the earliest EITC/ACTC-related refunds to be available in taxpayer bank accounts or on debit cards starting February 27, 2018, if these taxpayers choose direct deposit and there are no other issues with their tax return.
For taxpayers not claiming the EITC/ACTC-related refunds, three weeks is the normal time it takes for a tax return to be processed, factoring in weekends and holidays. In fact, calling the IRS will not expedite your return/refund; typically, an IRS representative can only research the status of your refund 21 days after you file electronically and 6 weeks after you mail your paper return.
Nevertheless, it is your inherent right to both pay taxes and communicate with the IRS about the status of your taxes. You can start checking on your refund status electronically 24 hours after filing your taxes electronically or three weeks after mailing a paper return.
Note: The filing deadline to submit 2017 tax returns is Tuesday, April 17, 2018, rather than the traditional April 15 due date. This year, April 15 falls on a Sunday, and this usually would move the filing deadline to the following Monday – April 16. However, Emancipation Day – a legal holiday in the District of Columbia (DC) – will be observed on that Monday, which pushes the nation’s filing deadline to Tuesday, April 17. Under the tax law, legal holidays in the District of Columbia affect the filing deadline across the nation.
Choosing to both e-file and provide a means for directly depositing refunds remains the fastest and safest way to file an accurate income tax return and receive a refund.
Adapted from the IRS Website.
