10 Million Children Will Again Be Living in Poverty After the Enhanced Child Tax Credit Expires
Joe Manchin, the West Virginia senator, and conservative Democrat said yesterday that he would not support Biden’s $1.75 trillion Build Back Better initiative.
With this, it’s likely that the bill will be killed along with the extension of the enhanced child tax credit.
According to an analysis by the Center on Budget and Policy Priorities, a progressive think tank, nearly 10 million children are at risk of falling below the poverty line without enhanced credit.
This U.S. political polarization can be resolved by a third party, according to Andrew Yang.
According to a report from CNBC, a total of 27 million others will lose part or all of the credit, including nearly half of Blacks, Latinos, and those living in rural areas.
In the new year, all 65 million kids who are eligible for the credit will receive less money.
“I’m definitely concerned that families will be surprised, and unlike in July when [the child tax credit] would have been a positive surprise, this time it will be a negative surprise,” senior research associate Elaine Maag said.
About Enhanced child tax credit
The American Rescue Plan, which was passed in March, increased child tax credits by both amounts and scope.
For the 2021 tax year, the credit was increased from $2,000 to $3,000, with a bonus of $600 for kids under 6 years old. A deposit of $300 will be required for children under six and a $250 deposit for those aged 6 to 17.
Monthly payments began in July and run through December. A second payment will be due in 2022 when families file their 2021 tax returns.
In order to increase accessibility to children, the enhanced credit is also fully refundable, meaning that households without earned income are still eligible for the benefit.
Getting Started With a Budget At $7.25 an Hour
Families began to benefit from the enhanced credit after just a couple of months. There was less financial instability, more food was available for children, and some parents even had more time to work.
By continuing enhanced benefits, the situation could improve significantly. According to an Urban Institute study, if the credit was extended to 2021, child poverty would fall to about 8.4% from 14.2, a reduction of about 40%.
There is no guarantee that the child tax credit will disappear entirely. The regular child tax credit will be available to families in 2023 when they file their taxes for 2022.
Although that credit is much smaller than the enhanced benefit, it has no monthly payments, and it won’t be available to as many children.
This change will cause families to lose thousands of dollars from their budgets.
According to Kris Cox, deputy director of federal tax policy at the Center on Budget and Policy Priorities, a single mother working full time at the federal minimum wage and raising two children will get $6,600 this year via the child tax credit.
At the end of the year, the enhanced credit will expire, and the same family will only qualify for $1,800 via the child tax credit in 2022. A big difference of $4,800.
“That’s really significant money that could go to support that family,” said Cox.
The monthly payments were also spent largely on groceries, school supplies, and boosting savings, according to the report.
“Monthly payments provide support to families throughout the year,” Cox explained. “Rent, electricity, food, childcare, transportation — all of these costs occur on a monthly basis.”
How Families Can Help Themselves Right Now
The lapse in monthly payments doesn’t give families much time to prepare. On Dec. 15, the last check was sent out.
The January budget can now be reviewed and revised, Maag said.
“Families do that all the time — they juggle bills, they choose which ones to pay, they forgo opportunities in order to make sure they have enough money to cover their needs in the next month,” Maag asserted.
In addition, they can receive the second half of the tax credit by filing their 2021 taxes, which can be done as soon as next year.
Trenda Hackett, CPA and technical tax editor of Thomson Reuters’ tax and accounting business, said that the process included making sure they received all the payments that were owed to them this year.
“I would recommend they log into the CTC portal to check their payment status and see what the IRS says as to the number of payments they have received,” said Hackett. Families can also track lost or missing payments, she explained.
The child tax credit payment record can also be found on the “Letter 6419” that is sent by the tax agency to families.
This record must be included when the 2021 tax returns are filed.