Taxpayers have only a few days to file a 2021 tax return or file an extension until Oct. 15. For the fiscal year 2021, several tax credits have been expanded and significantly increased.
In this video, the IRS discusses three of the tax credits that Americans may be able to claim, which could result in thousands of dollars in tax savings or even be tacked onto your tax refund. They use the example of a taxpayer with three children under the age of six who is qualified for the Earned Income Tax Credit (EITC), the Child and Dependent Care Credit, and the Child Tax Credit, who could receive a tax benefit of $25,000.
This year, the child tax credit has been reduced to $2,000 per child and is phased in at 15% of earnings above $2,500. The maximum refund is $1,400 per child.
These terms, enacted as part of the Republican-led Tax Cuts and Jobs Act in 2017, increased the size of the child tax credit.
Furthermore, since its inception, the child tax credit has been enlarged with the help of every presidential administration, according to Carothers.
"The child tax credit has a really solid bipartisan legacy," Carothers said.
The credit, which was previously valued at up to $2,000 per eligible dependent, was increased to a peak of $3,600 for the 2021 tax year to aid families affected by the pandemic.
In addition, from July through December, families who received the refund on their 2020 taxes got advance payments of up to $300 per child each month.
Families who chose not to receive monthly payments will receive the credit in a sum on their 2021 taxes.
According to the IRS, to be eligible for the Child Tax Credit, you should have a Social Security number (SSN) or an IRS Individual Taxpayer Identification Number (ITIN), as well as your spouse if you are married and filing jointly.
You were only qualified for advance Child Tax Credit payments if you used your correct SSN or ITIN when filing your 2020 or 2019 tax return.
Payments under the Advance Child Tax Credit were made to qualified children who had a valid SSN and were working in the U.S.
For CTC payment, the child must also have an SSN. As a result, if your child lacks a valid Social Security number, you were unable to receive advance Child Tax Credit payments for that child.
Even though Tax Day is approaching, if a taxpayer does not owe taxes, there is no charge for filing late. Those who failed to file tax returns in prior years can file past due taxes up to three years after the due date. GetCTC, a service run by Code for America, will reopen in May to assist families without wages in filing for the enhanced Child Tax Credit.
