Thanks to a $50 million tax-cut package, families in VT with kids aged six or under can get a child tax credit worth $1,200 per child. If the bill gets passed by the Senate, up to 50,000 children will benefit from the extra credit.
“By passing the Vermont Child Tax Credit, we’re communicating clearly and unequivocally here that Vermont cares about kids and families – that this is the place where you can make it work,” said Rep. Emilie Kornheiser to her peers on the House floor.
On top of that, eight other states are also offering their own child tax credit programs. You can get up to $1,000 extra per child. To claim the extra credits, you must file a state tax return. The states offering bonus payments are CA, CO, ID, IL, ME, MD, NY, and OK.
Confused About Taxes and Child Tax Credit? The IRS Can Help
With all of the different types of federal aid floating around, taxes can quickly get confusing. If you either got too much or too little money from relief payments, those amounts can be updated online. You’ll need to make sure that your information is correct so that the IRS can fix your payments. For example, a change in marital status or the number of qualifying children you’re claiming.
If you didn’t have to file a tax return in 2021 but you lived in the U.S. for more than half the year, you can use the IRS Non-filer Sign-up Tool. This tool makes sure that the IRS has the necessary information to give you the child tax credits you need. The Sun reports that these tax credits and other advance payments can be factored into wage withholding.
In addition to that, you can choose to not get any advance payments. Instead, you can wait until you file your tax return and collect the credits then.
Advance Payments Will Affect Your Tax Return
If you got child tax credit payments on a monthly basis in 2021, the IRS will not tax that money when you file your taxes the following year. The payments were an advance on the child tax credit you’ll claim on your 2021 return. Thus, they are not considered to be taxable income.
However, the monthly payments might have an impact on your tax bill or tax refund this year. The payments will be deducted from the credit amount that you’re allowed to claim on your 2021 return. This is because they’re advance payments. As a result of that, your child tax credit will be reduced. You will either have a higher tax bill, or a lower tax refund.
The IRS sent out an important letter about child tax credits in the mail. This letter will help you make sure you file your taxes with the correct numbers on them. In some cases, that information may also be available to you online.