New Tax Changes arrive in the new year. The COVID-19 pandemic impacts how many will file with the Internal Revenue Service for a second year. Experts predict another challenging filing year because of the ongoing pandemic. However, they say the first step to filing this year is simple: check your mailbox.
The IRS is sending statements out this month to millions of Americans who got pandemic relief last year. Specifically, those who received stimulus payments will get a special statement. Also, those who got monthly payments under the expanded child tax credit will get a letter.
In 2021, Congress temporarily expanded the child tax credit. The temporary expansion increased the credit per child from $2,000 to $3,600. Lawmakers also paid half the credit in advance to get immediate help to families. The advance delivered in monthly payments from July to December. According to the U.S. Treasury Department, the aid went to families with nearly 61 million children.
New Tax Changes: The End of The Advance Child Tax Credit?
As of now, families received the last advance child tax credit payment in December. The Biden Administration’s American Rescue Plan called for a one year extension. However, the plan has yet to pass. So, what happens now?
The Child Tax Credit reverts back to the previous amount of $2,000. The new tax changes mean 35 Million families lost the monthly payments and many no longer qualify for the credit at all. Moreover, if you know your income is going to take a hit it is best to start preparing now!
Bruce McClary, Vice President of the National Foundation for Credit Counseling, recently shared three ways families can make cuts in spending plans.
First, pause or cancel subscription services. McClary points out that there can be a lot of redundancies.
Second, start shopping with coupons or using store brands. McClary says “Store brands are just as good as some of the brand names, and you can save a lot of money by doing that, and then couple that with coupons.”
Third, McClary says “now is a good time to shop around for a better deal on interest in monthly payments.”
Finally, the IRS says it will begin accepting and processing 2021 Tax Returns on January 24th. The filing deadline is also different this year. Returns are due on Monday, April 18th because Washington, D.C. is celebrating Emancipation day on April 15th. By Law, Washington, D.C. holidays impact tax deadlines for the entire country. Those filing in the state of Massachusetts have even longer. Returns must be filed in that state by April 19th, due to Patriots Day in that state.