As lawmakers continue to bicker over tax cut extensions, CPA’s and their clients await the news on four key credit associated with children. As of now, the fear of losing out on what was once “normal” refunds and is now looking at smaller checks and for some a tax liability for the first time. Low-income families may lose a significant amount from the child tax credit. Very low-income families may lose as well under the Earned Income Tax Credit. Families who are already struggling financially could possibly take on more financial hardships if the government does not extend these credits. No one wants to pay more taxes, but when it becomes a choice to pay the IRS or put food on the table, lawmakers need to step up and help low-income Americans.
Child Tax Credit
Right now, the Child Tax Credit offers a credit of $1000 per child for low-income families. The original deduction was $500. Under the Bush tax cuts, the amount was doubled in order to provide extra relief for low-income families. This amount would lower any tax liability and extra credit would be returned to the family as a refund. Married couples earning more than $110,000 or single parents who earned more than $75,000 would not be able to benefit from the credit. It was clearly designed for low-income families in order to give relieve them from any tax burden.