Monthly prepayments under a new child tax credit program will hit the bank accounts of qualified parents with children under the age of 18 in less than a month, and Marion County’s families have different views on whether to take the money now or choose later.
Under the $ 1.9 trillion coronavirus aid package passed by Congress in March known as the American Rescue Plan, approximately 39 million low and middle-income households in the United States are eligible for monthly payments of the annual Tax credit. Payments include $ 250 for each child ages 6-17 and $ 300 for each child under 6.
Roseann Fricks is CEO of the Early Learning Coalition of Marion County (ELC), which helps families access quality spring programs.
“Every family is different,” she wrote in an email. “It will definitely help the families. The extent of the help depends on the needs of the family. ”
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Payments are automatically deposited into bank accounts for families who have set up direct deposit. Others may receive paper checks or debit cards. The IRS is creating a portal that will be available by July 1 to those who wish to opt out and receive the lump sum at tax time next year.
Monthly payments or flat rates?
Fricks has heard both parents stick with the monthly payments or move the total to next year, though many conceded that doing so could help either way, depending on the situation.
“I’ll probably only be doing the month, so they set it up as it is by default,” said mother Amber Matchett. “I figured that since it’s coming in the summer, I’ll probably just use it to sign up my daughter for camp or swimming lessons or something else.”
Those who fail to make the monthly payments will receive them on the 15th of each month (or the next working day) July through December, with the remainder being claimed upon filing income tax in 2022.
Some parents had interesting thoughts about taking the money now.
“Personally, I would prefer the money because I would rather not give the federal government a free loan,” said Vernon Babich, father of one child.
Federal funding was significantly significant during the pandemic
Another parent expressed concern to Fricks that the financial aid people are getting during the pandemic will make it harder for employers, despite federal funding helping the Early Learning Coalition meet families’ needs for the past 15 months.
“Families are affected,” Fricks wrote, also pointing out the loss of income for the small businesses that provide childcare, “but I also believe that our government has certainly taken effective steps during this difficult time to meet the needs of families in this difficult time Time to fulfill – from childcare payments to financial support for rent / mortgage assistance, etc. ”
The ELC had spent $ 3.9 million through February to support early intervention in Marion County for children under 5, as well as $ 46,000 in childcare facilities to support mental health services, and over $ 1.6 million in pre-kindergarten volunteer providers based on enrollment rather than attendance.
Other tax credit changes
The IRS uses the 2020 tax returns to calculate taxpayer payments or the 2019 tax returns if last year’s tax returns have not yet been filed or processed.
The total loan amount will gradually expire from a certain income, but the thresholds are lower than in previous years. They are set at $ 75,000 for individuals, $ 112,500 for heads of household, and $ 150,000 for joint returns. For every $ 1,000 above the threshold, the total balance is reduced by $ 50.
The inclusion of the 17-year-olds and the increased total amount are also different from previous years. So far it has been up to $ 2,000 for children under the age of 17. The new totals are $ 3,000 for younger children and $ 3,600 for older children.
What will parents use it for?
Many native parents, like Matchett, not only use the extra money for everyday expenses like food, but also plan to spend it on childcare or camps with their children outside of school.
“I use it for daycare and in the future for summer programs because I work full-time, so I have to have something for day care,” said Babich.
A parent who prefers the annual loan told Fricks they had concerns about cash distribution. They were skeptical of the American bailout plan, which it claims is cutting child poverty in half, and would prefer a card that allows parents to buy basic necessities such as groceries and clothes.
However, because all families are different, their individual needs and purchases will vary with the additional income, Fricks says.
“Fundamentals for children can be in many ways,” she wrote. “A child’s needs are only part of the budget. If a parent needs petrol money to take the child to school / etc, spending money on petrol is a good idea. ”
Tax Credit Concerns
Steven Willis, a law professor at the University of Florida, says the payments may seem big for families but tiny for the IRS.
He has concerns that the child tax credit is being used fraudulently and is being distributed by the IRS, not state welfare agencies. He also fears inflation in July and the money that will encourage people not to work.
“I have long argued that we should remove the care allowance, child loan, child care loan and earned income loan,” he wrote in an email. “We could replace them with a single program that is much less complex and operated by a competent agency designed to run such a program.”
However, with the 2021 program, Willis helped answer some of the questions local families had about the new monthly payments.
frequently asked Questions
Are there any concerns about taking the monthly payments over and above the lump sum?
“Paying monthly payments may result in one parent receiving more (than is entitled to) due to“ repayment protection ”. “Said Willis.
If someone received too much because they weren’t eligible, or their income or other circumstances change, they’ll have to repay it, but there are some restrictions on it that protect them from paying it back, he said.
How does it work for parents who are divorced and have children every two years?
Willis says that divorce parenting credit is generally subject to “agreement between the spouses”. Once parents have submitted Form 8332, “It will be sent to whoever is assigned the 2021 deduction and credit”.
The form allows custodial parents not to take advantage of the tax exemption for a child, i. The form can also be used to revoke an exemption, but it’s too late to revoke it by 2021.
How will parents be affected if they divorce during the year?
“This will be a problem both for whoever gets it and for the repayment,” Willis wrote.
He recommends that you submit Form 8332 if you agree. Otherwise, the crediting generally applies to the parent with whom the child spends most of the nights or the parent with the higher income for the same nights.
What if the parent is a dependent and someone else is claiming them?
“Such parents cannot get the loan,” Willis said.
Could one parent owe money back or get more if their income changes in 2021?
“It’s going to be a problem. Some people are actually going to owe something back,” he said. “Since the advance is only valid for six months, I hope it doesn’t affect many people.”
However, he fears that parents could be affected, but is not confident that the state will get back any overpayments.
How does it work when children turn 6 to 7 or 17 to 18 years old or a new baby is born?
“Age tests are traditionally a function of age on the last day of the year. The proposed regulations suggest that credit will follow that tradition, although they are ambiguous, ”Willis said. “A newborn baby counts for counting as long as it is born in 2021.”
Is there a chance this will be a permanent change?
President Joe Biden has proposed keeping the higher credit until 2025, and some Democrats want it to be a permanent change. Willis doesn’t hope to simplify tax law or use the IRS as a welfare agency.
– Contact Danielle Johnson at [email protected].