![CollegeInvestor_1200x628_Smaller_Tax_Refunds_Hurting_Families_Nationwide Tiny Tax Refunds Hurt Families Nationwide](https://cdn.thecollegeinvestor.com/wp-content/uploads/2023/02/CollegeInvestor_1200x628_Smaller_Tax_Refunds_Hurting_Families_Nationwide.jpg)
When the COVID-19 pandemic started, many of us panicked. No one knew anything about the virus, so they stocked up on food and stockpiled supplies, just like they would wage war. With the officially mandated shutdown, we had to grab everything we could from the office in preparation for unprecedented hours of working from home. Entire industries have shut down and many in the hospitality industry have lost their jobs.
To help those facing financial hardship, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) provides economic stimulus payments and extended unemployment benefits, including higher-than-usual amounts. Did.American families feel safe american rescue planexpanded the amounts provided for the Children’s Tax Credit benefit and the Child and Dependent’s Care deduction to help with COVID-related expenses.
Now these same families are working hard to find out what happened to these tax credits and why their returns were lower than originally expected.
What is the Child Tax Credit and the Child and Dependent Care Credit?
” child tax credit is a tax incentive to help families with children under the age of 18 who have a valid Social Security number, while the Child and Dependent Care Credit helps working families pay for childcare and dependents with disabilities. Tax breaks to pay for the expenses,” explains Sonia Castelan. She is a first generation Latino tax professional, Castellan Tax Service.
Each, child tax credit Up to $2,000 per qualifying child, which will appear on your tax return without any additional steps.
ever since child support credit is tax deductible, but the amount you receive depends on how much you spend on caregiving services while on the job, not whether you have children. Credits are up to 35% of eligible expenses (up to $3,000) with a maximum credit of $1,050 per child or dependent. If you have two or more children or dependents, you can submit up to $6,000 in eligible expenses and receive up to $2,100 in credit.
The numbers above are consistent, but America’s Rescue Plan passed in 2021 has changed that. For the 2021 tax year, American Rescue Plan Expanded Volume Considerable amounts are paid for both of these tax credits. The child tax credit jumped to $3,600 per child under age 6 and $3,000 per child from age 6 to her 17. This credit has been fully refunded.
in order to child support credit, could increase eligible expenses up to $8,000 for one dependent and $16,000 for two or more dependents. That’s not all. Credit percentage changed from 35-50% of eligible spend. This means some families received tax breaks of up to $8,000 instead of her usual $2,100 that they originally used.
what happened?
January 23, 2023, The IRS said in a news release: Those filing taxes for 2022 should be aware that their refunds will be significantly lower this year, especially as the expanded child tax credit expires. This is because Congress voted he will not retain the extended credit beyond December 31, 2021.
“When taxpayers filed their 2021 tax returns, some qualified for both stimulus payments and CTC/DCC, which allowed them to receive more refunds.” explains Castelan. She then goes on to add that the same taxpayers are expected to accrue the same amount on their 2022 tax returns, but this is no longer the case. We haven’t even noticed that deductions have returned to pre-pandemic amounts.”
one family story
With the news, families across the country are wondering why this hasn’t been explained to them. However, no one was completely sure what the change was.
“I’ve seen news articles saying that the child tax credit will be significantly reduced this year, but it could be expanded again.”
That’s true. Atlantic news seemed to give us a glimpse of the end of these credits and wrote an article about how it went on to something else. shared Some, mainly Capital Hill, were still fighting to extend the credits, but did not share the results.
“I was thinking the refund would be less, maybe a few thousand dollars.”
Sarah’s family received a $14,693 refund for 2021 federal income taxes they filed early last year.
When Sarah filed her 2022 taxes, she learned that she owed $500 to the federal government and had $400 back from the state. This is her over $15,000 variation because of the low tax deduction.
“The biggest disappointment is that my daycare tax credit, which was $8,000 in 2021, will be $1,200 in 2022 after having to pay an additional $17,000 in childcare costs this past year. I just found out.”
In 2021, her family paid $20,260 for day care. In 2022, they paid her $37,510.
Sarah wanted to pay off her $5,000 credit card debt for the car and home repairs her family needed. But instead, unfortunately, her family has to find another way to cover them.
“I am keenly aware that many other families are struggling much more than us. But filing taxes to pay off debt was a shock. However, I noticed that I have not been paid this year.
Many families are in the same situation.
Can my family receive relief?
Castelan wants families to know that a few tips can lead to potential remedies. First, know that most tax credits are non-refundable. “This means that the family cannot claim more credit than they owe,” he explains Castelan.
She recommends making updates and tracking tax withholdings to ensure families are paying their taxes properly. We have the tools,” she says. Previously, Withholding tax estimatethis tool allows you to enter information to determine whether your taxes are on track or behind for the year.
Another way families can feel safe is a refund. income tax deduction This is up to $6,935. This credit depends on a number of things, including your application status, income received, and the number of children and other dependents currently living in your household. Congress is discussing expanding her CTC again, but no one knows the outcome. “Families are encouraged to plan accordingly by keeping track of finances and tax payments to avoid surprises on tax bills.”
Castelan’s final tip is for families with complex tax situations to consult a tax professional with experience in tax planning. “They perform tax analyzes based on taxpayer information and provide tax strategies to minimize taxpayer tax liability and maximize eligible tax credits and deductions.” Complex Even if it’s not your situation, it may be worthwhile to consult a tax expert to ensure you get the maximum possible refund.
*Sarah’s name has been changed to protect her privacy.