Latest Jackson Hewitt News
Jul 14, 2021
How will I receive the payments? Jackson Hewitt’s Steber said many clients of the tax preparation business ask how they will receive their payments, such as direct deposit or paper check. “If you are a taxpayer and your refund is electronically deposited into your bank account, this is how you will get the CTC,” Steber said. In other words, if you have provided the IRS with your bank account information in order to receive a tax refund, the tax agency will directly deposit the CTC payment into that account. If you don’t have a bank account or haven’t provided your banking information to the IRS, the agency will mail you a check. However, if you want to make sure you’re getting direct deposit, you can check out the IRS Child Tax Credit Update Portal. The online tool will also allow you to update your banking information. What if I had a child in 2021, how will the IRS know? The IRS bases the payments on the most recent income tax return for families. In other words, a family’s 2020 income tax return is the most recent data the agency has, which would not include children born or adopted in 2021. However, the IRS says it will add the ability to update your information to include a child born or adopted in 2021 through its Child Tax Credit Update Portal. While this feature is not yet available, it could be added in the coming weeks, Steber says. Families who added a child in 2021 should keep an eye on this and update their information as soon as possible if they want to receive the monthly checks, he said. I’d rather get a big refund next year – can I opt out? As noted above, the Extended CTC offers a credit of $ 3,600 for each child under 6 and $ 3,000 for each child of age. 6 to 17. Monthly payments represent half of total credit, with cash deposits running from July to December. For example, a family with a child under 6 will receive half of the $ 3,600 cash credit, or $ 1,800, which will be divided into six monthly checks of $ 300 each. The rest of the CTC is claimed when you file your 2021 taxes early next year. Some taxpayers who want a bigger tax refund in 2022 have asked if they can opt out of the monthly payments and just claim the full $ 3,600 or $ 3,000 tax credit on their 1040s. The answer is yes, said Steber. To opt out, taxpayers must go to the Child Tax Credit Update Portal. Other people can wish to unsubscribe from payments if they are not eligible – for example if their income is higher in 2021, preventing them from receiving payment, or if they are divorced and their ex-spouse claims their child as a dependent, instead of claiming themselves this child. (You can find more information about CTC age and eligibility here.) If you receive money through the CTC that you are not eligible to receive, you may have to repay it to the IRS next year during the 2021 tax season – another reason why some people may want to opt out, Steber mentioned. Do I have to pay taxes on CTC payments? No, because CTC payments are not considered income, Steber said. “Just like the stimulus payments, these are tax credits,” he noted. But beneficiaries should keep track of how much they receive from the IRS because they will have to reconcile those payments on their 1040s in early 2022. This is because half of the CTC will be claimed on your tax return, you will have to. so know how much you have received to accurately report this information. Do I have to report CTC payments on my taxes? Yes, because parents will be claiming the other half of the expanded CTC payments when they file their tax returns for 2021. The IRS will send a letter to each household in early 2022 indicating the amount of CTC received. You should keep this letter for your records, Steber said. Misreporting CTC payments on your 1040 could delay your tax refund into 2022. Some taxpayers have been caught in limbo this year because they did not accurately report their stimulus payments on their 1040, which triggers a review by IRS employees, adding more time to process refunds. The IRS currently has a backlog of around 35 million tax returns, many of which have been blocked due to errors on these tax returns. Will the expanded CTC continue beyond 2021? Right now, the Biden administration is pushing for the expanded tax credit to be renewed beyond 2021, but it’s unclear if that will happen, Pavetti of CBPP said. Under Biden’s plan, the monthly payments would be extended for another five years, the White House press secretary told “CBS This Morning” last month. “He thinks this is a critical benefit that will help families, help put women back to work,” Psaki said, noting that more than a million women have left the job market during the pandemic to care for their children and families. The expanded CTC is expected to help parents pay for basic expenses such as childcare, groceries, school supplies and a family’s education costs, experts say. “It will help them meet the additional needs of having children,” Pavetti said. “The CLC will just be of a huge benefit to struggling families.” .