Child tax credit: the head of the IRS warns that the beginning of the payment of the child tax credit may be delayed

Child tax credit: the head of the IRS warns that the beginning of the payment of the child tax credit may be delayed

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IRS commissioner Charles Rettig told a House subcommittee that the agency is struggling to reconcile the traditional tax season, $ 1,400 stimulus payments and other demands that the huge new Democratic aid package has imposed.
The one-month extension of the tax filing, announced this week, further reduced the time that the IRS can devote to creating a portal to allow the sending of child tax credits to families periodically this year, instead of one. lump sum at the time of tax.

“Now we have a month less to do the development,” said Rettig. “The same people who do our income tax processing, EIP [economic impact payment] processing are the people who need to develop this portal. Therefore, I do not have the resources to dedicate myself to this portal until the end of the archiving season, which is May 17th. “

He promised to “do our best” to start sending payments by July 1st.

One of the main measures of the aid package is a one-year increase in child tax credit, which is expected to cut child poverty by almost half.

“The success of this provision depends significantly on how the IRS implements it,” said Rep. Lloyd Doggett, a Texas Democrat, noting that it has been described as the most important effort to reduce child poverty in a generation.

What the stimulus offers parents

Families can receive a credit of $ 3,600 for each child under the age of 6 and $ 3,000 for each child under the age of 18, from the current credit of up to $ 2,000 per child under the age of 17. The extended portion of the credit will be available to single parents earning up to $ 75,000 and filers earning up to $ 150,000 a year.

The main change is that the tax credit will become fully refundable so that more low-income parents can take advantage of it. So far, it has only been partially reimbursable – leaving more than 20 million children unable to obtain full credit because their families’ incomes are very low.

Lawmakers also wanted to make it easier for parents to use the funds to cover their expenses during the year. Thus, the law provides for the sending of half of the credit to families, monthly or periodically, from July to December. The other half would be claimed in their 2021 tax returns.

“I think it can be a challenge to enter the monthly market as soon as it comes out of the box,” said Rettig. “That period of time can change in some way.”

President Joe Biden and the Democrats are already pushing to make changes to the child tax credit permanent, and not just for 2021.

Tax reduction for unemployed

Rettig also said that unemployed people who have already filed their tax returns should not file amended statements to claim the stimulus package to reduce taxes on unemployment insurance.

The law exempts income tax of up to $ 10,200 in unemployment benefits received in 2020 for families earning less than $ 150,000, helping laid-off workers who have faced surprising tax bills on their unemployment benefits.

“We believe that we will be able to automatically issue refunds associated with the $ 10,200,” said Rettig, noting that one complication is distinguishing whether one or two people in the household have received benefits.

The IRS recently provided instructions and a spreadsheet for those who have not yet completed their 2020 returns and who will report unemployment insurance. It guides the unemployed by filling in the correct values ​​in Appendix 1 of Form 1040.

Main accumulations

The agency must address these new relief provisions and others at a time when it is understaffed and struggling with an accumulation compounded by the coronavirus pandemic.

At the end of December, there were still millions of tax year 2019 statements to be processed. Many IRS employees were sent to work from home during the pandemic, leading to delays in handling paper returns. At one point last year, the pile of unopened mail had to be kept in trailers.

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