The Low Income Family’s Total Guide To Tax Credits
(NewsReady.com) – Most people don’t exactly look forward to taxes and the preparation and anxiety that sometimes accompanies them. Better understanding the credits available may help you to plan throughout the year and better maximize your results when you file your next return. Find out if these tips might save you money or boost next year’s filing.
Recovery Rebate Credit (RRC)
In 2020 and 2021, the US government issued a total of three economic impact payments, or what some call stimulus payments. However, some people didn’t claim or receive the third payment before the December 31, 2021 deadline.
As a result, the IRS created the Recovery Rebate Credit (RRC) and began sending out Letter 6475 in January 2022 to explain the credit to anyone who previously received an economic impact payment. Taxpayers would receive up to a $1400 credit for each family member they failed to claim previously. Examples of individuals who might be eligible for an RRC include heads of households who welcomed children into their families by birth or adoption. The credit would offset any owed taxes or pay out as a refund.
Expanded Child Tax Credit
In March 2021, Congress passed the American Rescue Plan, which authorized a temporary expansion of the Child Tax Credit (CTC) from $2000 per child per year to $3600 per child under the age of 6 and $3000 for older children. Distributions began in July of 2021. This credit is available to single parents who make $75,000 or less or married couples who make $150,000 or less.
Yet, even if families received all their distributions (some opted out, fearing they would owe a huge tax bill), they only received half of the allotted amount. To explain the complex situation and assist with accounting, the IRS issued Letter 6419 starting in January 2022. It notified families of how much the IRS distributed, how much remained as a credit, confirmed the number of minor dependents, and functioned as a tax record. Including a copy of the letter when filing is vital to avoid delays in processing returns.
Earned Income Credit (EIC)
This federal credit worth up to $1500 helps those in the low to moderate-income bracket with or without children who file individually or jointly as a couple. For example, in 2021, to claim EIC, a single filer with no children could only have earned $21,430. However, if that same single filer had one child, they would be eligible for the EIC with earnings up to $42,158. Many states also offer an earned income credit.
Other Resources for Low-income Families
While the tax credits will undoubtedly help financially, other programs also assist families during challenging times by addressing issues as varied as healthcare, nutrition, utilities, housing, and other concerns. Consider researching further through the links provided.
Children’s Health Insurance Program (CHIP)
The federal government funds CHIP through Medicaid, and states run the program to cover healthcare for children of families who make too much money to qualify for Medicaid but not enough to afford private insurance coverage. Families can check their state to learn more about the specific limits and benefits.
The Supplemental Nutrition Assistance Program (SNAP)
The USDA funds SNAP, another federally-funded program that states administer. It provides food-purchasing assistance to low-income individuals and families. Each state has its own rules and qualifications, so families will need to apply online, but it usually doesn’t take longer than 30 days for application reviews.
Temporary Assistance for Needy Families (TANF)
The US Department of Health and Human Services funds the TANF program while ensuring states have the flexibility to run the program in ways that best meet the needs of their low-income families. TANF may cover various challenges, including food, housing, utility bills, child care, or even job training. Families must apply within their states, and each state’s requirements vary.
Although many families are facing challenges, resources for assistance are available. The tax credits will undoubtedly help, but these are only a few of the available programs; there are several more for low and moderate-income families. Additionally, be sure to research state and local resources.
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