The best thing to happen to low and moderate-income Americans by way of financial support was the Child Tax Credit, or to be more precise its expanded version. But instead of it being turned into an annual stimulus check as envisaged by President Biden, the Child Tax Credit proved to be a one-off payment that supported Americans in 2021.
President Bidenhad passed the Child Tax Credit stimulus check under the American Rescue Plan Act of March 2021. This was within weeks of coming to power and he realized that this payment would prove to be a game-changer as far as child poverty, or its alleviation, was concerned.
For the first time in decades, a federal government policy achieved so much success. Despite the short time that it stayed afloat, the Child Tax Credit payment succeeded in reducing child poverty across America by over 50%.
The Child Tax Credit And Its Effect On Child Poverty
The child tax credit payments have been around for over two decades and were granted as a tax rebate to American taxpayers with children under the age of seventeen at the end of the calculating year. While it was gradually revised to $2,000 for each child per year, it received a major boost for 2021 under the Rescue Plan and parents received up to $3,600 for each child for that year.
In a further concession, the administration did away with the need for filers to have paid tax in that year to qualify for the payments. For the first time, even filers with zero income tax for the 2021 financial year received a stimulus check.
There was a further concession made by the administration. For the first time, the Child Tax Credit stimulus check was partially (50%) given as an advance through monthly checks in the financial year itself. The payment was sent out in the third and fourth quarters of the year (2021). Parents received either $250 or $300 per child depending on their age. The rest 50% was given as a stimulus check against the tax returns filed in the first quarter of 2022.
The Child Tax Credit Reverted To The Earlier Amount Of $2,000 Per Child
Despite efforts by President Biden and the Democrats, the Child Tax Credit payments reverted to the original amount of $2,000 for the 2022 tax year for each qualifying child.
Parents qualified for the full amount of each child if their earnings are $200,000 or less. For married couples filing jointly, the maximum earning should be $400,000 or less. The benefits get phased out for parents earning higher that the above figures.
The present benefit has reverted to pre-2021 figures after the 2021 expanded version through emergency legislation linked to the COVID-19 pandemic boosted the CTC stimulus checks to as mums as $3,600 for children below the age of six and $3,000 for children aged between six and seventeen.
The credit amount is also no longer refundable. That means that taxpayers whose credit exceeds their tax liability will not receive the stimulus check for the unused portion of the credit. But there is an exception for certain very low-income taxpayers.
How The CTC Payments Work
The Child Tax Credit lowers the total taxes of a filer on a dollar-for-dollar basis. That works out to be a better deal than merely tax deductions. Tax deductions reduce the total tax liability and generally lead to lesser savings.
To receive the credit amount, the potential beneficiary must have a Social Security number for the dependent child and also for themself. It can be claimed through filing Schedule 8812, Credits for Qualifying Child and Other Dependents along with Form number 1040.
The credits are only available if the potential beneficiary child meets several qualifying criteria. The child should be under the age of seventeen. The child can be a stepchild, foster child, sister, stepsister or brother, half-sister or brother, or even a descendant of any of those family members.
The child must also have lived with the parent or guardian for more than half the year in which the assessment is being made. He must be claimed as a dependent in your tax file. The child must not have filed a joint return with any spouse. But they are allowed to fill a joint income tax return if they are claiming a tax refund of estimated income tax paid.
The claimant child must also be a US national, a citizen, or a resident alien. The Internal Revenue Service has put up a useful website to help taxpayers figure out if their child or the dependent child qualifies for payment under the Child Tax Credit.
Filing Income Tax Returns Vital To Claim The Child Tax Credit
Experts have pointed out that the section of the population that is most affected by economic tumults are unable to access many of the stimulus check put out by the federal and state governments. This is because many of the filers with low incomes do not bother to file taxes. After all, they are under the assumption that people will have nil returns and do not need to file their returns.
But such an assumption proves expensive as millions missed out on the first two rounds of the stimulus check because the IRS did not have any data about them.
For instance, under normal circumstances, people do not need to file if they are single, under the age of sixty-five, and their Adjusted Gross Income was less than $12,950 for the 2022 tax year, to be filed in the first quarter of 2023.
People also do not need to file their income tax returns if they are married and filing jointly with both spouses below the age of sixty-five and their joint income is less than $25,900.
Filers also do not need to file if they are the head of the household, below sixty-five, and with an AGI of less than $19,400 for 2022.
But it is vital to note that non-filer may miss out on many tax refunds if they do not file. For instance, the Child Tax Credit was linked to the filing of income tax by the claimant. Only then will they get the tax refund.