What ministers need to know about the Advance Child Tax Credit

Tax  If you are a parent with children under the age of 17, you may have noticed a check or direct deposit from the IRS in July, and then again in August.

Those in the know realize this is part of the “American Rescue Plan” for 2021, expanding the child tax relief and making advance payments of child tax relief to families.

Information about child tax relief

• • In recent years, most filers with children under the age of 18 received a $2,000 per child tax credit when filing their taxes.
  • • This year that amount has increased for most filers. The credit for children ages 6-17 has increased to $3,000, and for children ages 0-5 the credit has increased to $3,600.
  • • In the event that a household earns more than $150,000 per year (married filing jointly), the tax relief does not increase and remains the same as in previous years.
  • • La mitad del crédito fiscal se pagará por adelantado. Here’s a simple example.

If you have two children between the ages of 6 and 17, your total child credit will be $6,000. $3,000 will be paid to you in advance monthly installments of $500 from July to December.

The rest of the $3,000 can be accounted for after you file your taxes in early 2022 go to https://www.taxfortress.com.

What ministers need to know

Those who have been in the ministry for even a short time know that clergy taxes are different.

Clerics have a rare dual status in the code, and thus personally choose the amount of to withhold and pay each year, rather than have their employer use a formula to withhold taxes.

Many clergymen have this under control,

so that when it comes time for taxes they have paid their fair share and get no refund after filing federal taxes.

This is where the advance child tax credit can cause a surprise problem.

If a minister has the child tax credit figured into his withholding tax, then by receiving these payments in advance he may end up owing more during tax time.

Let’s go back to the example of a minister with two children between the ages of 6 and 17. Last year she received $4,000 in child tax credits.

But because she included it in her taxes, she simply paid less tax instead of receiving $4,000 in cash at the time.

This year her credit has increased to $6,000. If she does nothing to adjust her withholding strategy, she may owe $1,000 when she files her taxes.

The final result

The bottom line is that if you’re not sure how prepayments will affect your overall tax situation, you may want to save those monthly installments until you’ve filed your taxes.

In the worst case, you will have to pay some of those fees to cover your tax obligations. Ideally, you’ll have that money in early 2022 to invest, save, or spend based on your specific needs.

Tax  If you are a parent with children under the age of 17, you may have noticed a check or direct deposit from the IRS in July, and then again in August.

Those in the know realize this is part of the “American Rescue Plan” for 2021, expanding the child relief and making advance payments of child relief to families.