The Child Tax Credit (CTC) offers up to $2,000 for each qualified child and also helps one to reduce their tax bill or increase their refunds. As reported by Money Digest, “ In 2021, under the American Rescue Plan, this credit was temporarily increased to $3,600 for children under 6 and $3,000 for older children.”
This can come as a huge help because the cost of raising children in America is not exactly low. However, to make the best out of CTC, one should be mindful of the rules and technicalities of how it works because a single mistake can stop you from getting a refund.
The most common errors while filing for CTC include discrepancy in the Social Security numbers or details of the dependent not aligning with IRS records. In cases like these or cases that contain even more severe complications the repercussions can lead to fines or paying back the wrongly paid money.
One of the key things to keep in mind while filing for CTC is providing a valid Social Security Number (SSN) for the child who is listed on one’s tax return. As reported by Money Digest, “The IRS explicitly rejects any CTC claims without this identifier, as it verifies the chil’s citizenship, age, and residency. While this rule may seem straightforward, timing is an issue for most parents, especially those with newborn babies or adopted children.”
Therefore, it is best to apply for the SSN of a child right after their birth since hospitals can prove to be helpful resources with filling up the required paperwork that the Social Security Administration needs. It is better to not rush the process or file the taxes before the child’s SSN is ready. In most such cases, their claims are likely to be rejected, even if they provide the other requirements.
Money Digest reported, “Besides, rushing to file for CTC before receiving the number can force you into lengthy corrections, as the IRS may disallow the credit and, instead, request recalculation of refunds, causing delay by months.”
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Another thing to keep in mind is that adjusted gross income (AGI) determines the value of the Child Tax Credit. A filer who is single and earns above $200,000 is phased out by the credit limit and for joint filers the limit is $400,000. One might also face issues if there is a discrepancy between what one files as their AGI and what it actually is.
It should also be noted that registering a non-qualifying child will lead to complications and non-payment. The IRS has strict rules regarding which children are qualified for CTC. The four determining factors of a qualifying child are age, support, residency, and relationship.
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As reported by Money Digest, the child “must be under 17 at year’s end, live with you for over half the year, and rely on you for more than half their financial support. They must also be your biological child, stepchild, sibling, or a descendant of any of these (e.g. grandchild). Real-world mistakes often blur these lines and shared custody arrangements also create confusion. Yet, if a child splits time between homes, only the parent who houses them for 183+ nights can claim the credit.” Two people also can’t file different claims for the same child.
These are the things one should keep in mind when filing for CTC. It is important that parents remain careful while filing the claims as the money would be helpful in raising their children.
