Child Tax Credit

In mid – July, millions of families across the country will start receiving monthly payments as part of the new, fully refundable child tax credit. The Treasury Department and IRS announced on Monday, the first payment will be made on July 15 and subsequent payment will continue to be made monthly through the end of the year.

About 39 million households will begin receiving the automatic payment. According to the Biden administration, that covers more than 65 million children, accounting for about 88% of all children in the U.S. Families that are eligible will receive up to $300 a month for every child under the age of 6 and up to $250 a month for every child ages 6 to 17.

The American Rescue Plan passed, in March, provide relief for Americans amid the coronavirus pandemic. The legislation is projected to lift more than five million children out of poverty this year, cutting child poverty by more than half, according to The Biden administration.

In 2021, the legislation increased the maximum child tax credit from $2,000 to $3,600 for children under 6 and $3,00 for children 6 and up. It also made the credit fully refundable and turned half of the credit into advanced payments.

The payment by the IRS will be made through direct deposit, paper check, and debit cards. The Treasury Department said the payment will be made on the 15th of each month unless that date falls on a weekend or holiday. Under the American Rescue Plan, individuals making up to $75,000, single-parent head of household filers making up to $112,500 and married couples who file jointly with a combined income up to $150,000 per year are eligible to receive the full amount.

“The American Rescue Plan is delivering critical tax relief to the middle class and hard-pressed working families with children,” President Biden said in a statement. “With today’s announcement, about 90% of families with children will get this new tax relief automatically, starting in July. While the American Rescue Plan provides for this vital tax relief to hard-working families for this year, Congress must pass the American Families Plan to ensure that working families will be able to count on this relief for years to come. For working families with children, this tax cut sends a clear message: help is here.”

Last month, Biden proposed American Families Plan, which calls for extending the increased child tax credit through 2025 and making it permanently fully refundable. A group of lawmakers is pushing to make the monthly child tax credit payments permanent. According to the nonpartisan Joint Committee on Taxation, it could cost more than $100 billion a year.

Some organizations that work with low-income families have already raised concerns that some of the most vulnerable families now eligible for the payments will not get them without a robust outreach effort. That is because some families who are eligible for the credits are not in the IRS system. After all, they earn too little money to be required to pay taxes.

They were committed to maximizing the use of direct deposit to ensure fast and secure delivery, according to the treasure and the IRS. In the coming months, they will continue outreach efforts to help make sure families are aware of their eligibility.

Some of the lawmakers have raised concerns about the IRS taking on the additional burden of delivering monthly checks to families on top of their tax administration responsibilities. This comes as the IRS has fallen behind on processing millions of income tax returns, potentially delaying refunds for millions of Americans. The new federal income tax filing deadline for individuals is Monday, May 17, having been pushed back by a month. The IRS said the change was to help overburdened Americans, not for internal reasons.

Taxpayers who do not wish to receive advance payments will be able to opt-out. There will also be a portal for taxpayers to update their information such as income and number of qualifying children, though full information on these is not yet available. The IRS has also played a vital role in administering other coronavirus pandemic relief, including helping to deliver three separate rounds of stimulus checks to millions of Americans, over the past year. In the third round this spring, roughly 165 million payments have been delivered since March 12, totaling $388 billion.

 

Stimulus Package Updates

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Relief Package 2.0 – by Cameron Lynch

The second coronavirus relief package is here, and we want to tell you all about it and what you can expect from an individual and business standpoint. We know it is so hard to keep up with the news, what is happening, and what we the people will get from this bill. This bill has been particularly hard to track with the back in forth in Washington about it, so we really want to break it down for everyone.

Individual Impact –

First let us look at this bill as an individual, and not a business. Individuals will receive a $600 direct payment and $600 for each dependent under 18 years of age. For a married couple the amount would be $1200 and $600 for every dependent child under 18 years of age. Now let us look and who will not be receiving a stimulus check, and where the caps are for those that will. First let us look at the caps for individuals, married couples, and heads of household. For individuals, the $600 will begin to phase out in value starting with someone who makes $75,000 per year. From there the $600 dollars will decrease based on how much you make over $75,000 a year and will completely vanish if you make $87,000 or more per year. For married couples, the starting figure is $150,000 annual gross income and it will completely vanish at $174,000. For Heads of household, the starting figure is $112,500 and it will completely vanish at $124,500. College students who are claimed as dependents on their parent’s tax returns will not receive a stimulus check. If that student is over age 18 then the parents will not receive an extra $600 stimulus check either. All these amounts and ages will be based on numbers for the year 2019.

Individual unemployment-

Unemployment has been extended and a $300 bonus has been set in place. The unemployment bonus is on top of your base unemployment pay. For example, if you receive $150 base pay from unemployment then you will now receive $450 from unemployment. Taxes will be taken out if you have elected for them to do so. This extension will be for 11 weeks and will be cut off in March of 2021. The extension for unemployment is also for independent contractors, gig workers, and freelancers.

Individuals living arrangements-

This has been a very hard time for people and paying rent and utilities has been hard. This bill extends the eviction band so that no one can be evicted from their house, or apartment. This has been extended until January 31, 2021. This bill also provides $25 billion to state and local governments to help qualified renter households pay for rent and utilities. Assistance will be prioritized for renter households whose incomes do not exceed 50% of local area median income, as well as renter households who are currently unemployed and have been unemployed for 90 or more days. Financial assistance provided under this section is non-taxable for households receiving such assistance.

Businesses (PPP) –

Additional PPP is here. To qualify for this round of PPP you must be able to show a 25% reduction in revenue compared to the same quarter in 2019. For example, say you did $100,000 in quarter 4 in 2019, then in 2020 you will have needed to do $75,000 or less to be able to qualify for the second round of the PPP forgivable loan. The maximum loan size for second-time borrowers is $2 million. You can now deduct expenses that are paid using the PPP loan.

Right now, in Washington, they are voting on a separate bill to raise the amounts from $600 to $2,000 for a stimulus check. We have shared the information above based on what has been signed up to this date, but if that is to change, we will update everything based on those new numbers. We know all this stuff can get super confusing, so if you need help or even a better explanation for everything going on please do not hesitate to give SWVA Tax & Accounting a call today at (540)-250-3198. We’ll run the numbers, while you run the business.