Clearing Up Confusion Surrounding Changes to Child Tax Credit

This tax season, it is important to know what the IRS requires you to do. In particular, the child tax credit that you received, you must now look into your regular tax routine and make a few changes that are now necessary.

Child Tax Credit was the money you and your family received by the federal government for fulfilling your kid’s needs. However, the sum was an advance credit that was sent out of half the amount that was usually given as credit at the end of the tax year.

Therefore, the rest of this credit will be received as a result of filing your taxes properly, yet there is a chance that you could end up owing money to the IRS instead. How is that possible? Read on to find out.

Do I Owe Money to IRS for the Child Tax Credit I Received? How to File Properly?

The checks that were sent out from by the IRS from July to December as credit for supporting your children during the pandemic, may cause you to end up owing more money to the IRS than what you usually do.

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The reason for this lies in the fact that the Child Tax Credit Checks that were sent out, had been calculated on the basis of your tax returns of previous years i.e. 2019 or 2020. IRS was unable to find how much you owed them this year because the tax year had not finished at the time the checks were being sent out.

Therefore, considering the hardships of most of the American people, they decided to send the money based on your previous filings.

Although, everything has been simple so far, the catch is when you end up owing more than you usually do. This will happen only in the case when your earnings have increased from the previous year.

To learn whether you are among those who owe more to the government, wait for the mail IRS will send out to you. It will consist of an IRS Form 6419, which outlines exactly how much money you received from the government as child tax credit. 

child tax credit
child tax credit

If you received the Child Tax Credit, make sure that you fill up your Form 8812 carefully. Copy down the numbers from IRS Form 6419 onto the Form 8812, then calculate your filings as per the instructions given on Form 8812.

At then end of this procedure, you will find out whether you owe more to the IRS or will receive the remaining part of the child tax credits as adjustment to your existing taxes owed.

The key to this, is to file your taxes properly. Another way to avoid this could have been to opt out of the child tax credit checks. However, now that you have already received the amounts, take care to file your taxes more carefully than before.

Some FAQs Related to the Child Tax Credit

Some confusions still exist in the mind if the parents regarding their payments and the taxes owed. Here, we will discuss a few:

Having Children Who Turned 6 or 18 This Year

For such cases, the IRS will calculate and send out money according to the ages of your children this year, although the payments were done on the basis of the taxes filed in the previous years. There were $300/child to be sent out for ages 5 and under, or $250 each for those aged between 6 and 17.

Therefore, if you have a child who just turned 6, you will now receive $250 on his behalf. And if another child of yours crossed the line of 17 years, you won’t receive any amount for supporting him, even though you are still earning below $150,000 per year.

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Not Cashing Out the Money Sent Out by Irs in Fear of Having to Repay

If you are not cashing out the money which IRS sent, due to concerns over having to owe more to the IRS or at least having to pay back the amount given to you, then this is of no use. You should consider opting out of the payments on the Child Tax Credit Update Portal, created by the IRS.

If you fear that you have been overpaid by the IRS, the way forward is to take heed of the advice put forth by Ken Corbin, IRS’s wage and investment commissioner and chief taxpayer experience officer.

He stated in an online discussion recently, “You may avoid owing tax to the IRS if you adjust your withholding or unenroll and claim the entire credit when you file your 2021 tax return”.

Will All Low-income Parents Have to Pay More Taxes if Their Financial Condition Changes This Year?

The cutoff values for parents having modified adjusted gross income (AGI) is: less than $40,000, if they are single or file separately; below $50,000 if they file as the heads of household; or below $60,000 for jointly filing parents or widow/widower.

All these parents are eligible to get protection against repayment. However, be sure to check out your Forms 6419 and 8812.

Both Parents Opting Out of Child Tax Credit

If you have a joint filing account, make sure that you and your spouse both opt out. If the spouse didn’t opt out before Aug. 2, then your family will continue to receive half of the amount that was otherwise to be paid according to the number of children claimed.

Will the Child Tax Credit Payments Impact Negatively for Receiving SSI?

For Supplemental Security Income (SSI), these child tax payments won’t count as additional source of income when you are claiming benefits offered by the federal government. Same applies if the benefits you receive are part of your state government’s scheme but are being funded wholly or in part, by the federal government.

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Will I Be Able to Add My Child Using the Online Portal?

The online portal currently can’t be used to add a child to IRS records for this tax credit. However, IRS says that, later this year, an option will be provided. Moreover, the IRS is hosting some events in specific states to help the parents learn how to add their children to the IRS records. 

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