Home New mexico tax Child Tax Credits Could Leave Parents With Heavy Tax Responsibility, Smaller Refund

Child Tax Credits Could Leave Parents With Heavy Tax Responsibility, Smaller Refund

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EL PASO, Texas (KTSM) – January 17 marks the start of tax season, however, some parents may not get the expected refund and may in fact owe the IRS for the overpayment of tax credits for children distributed.

According to the Internal Revenue Service, more than 75% of Americans on average get a refund each year, but people might have a nasty surprise this year because the expanded child tax credit can significantly reduce the amount of the refund for children. parents or keep them with. a liability of nearly $ 2,000 per child

Brian Mirau, founder and chairman of Mirau Capital Management and investment advisor in New Mexico and Texas, explains that the child tax credits distributed each month to parents were not extra “free” money given by the government, but rather a “monthly” advance payment of a loan that parents can claim at the end of the year.

“The tax credit was a one-year provision that increased the tax credit from $ 2,000 to a range of $ 3,000 to $ 3,600 depending on the age of the child for each child in households at. low income. The expansion also converted the credit of an amount you get with your income tax refund into a series of monthly payments that you receive throughout the year, so you don’t have to wait to get that money. He just spread that tax credit over the year instead of getting it as a lump sum at the end of the year.

Brian Mirau – Founder | President Mirau Capital Management

Mirau likened it to saving money. Rather than saving all year round and getting your money back all at once, you save a little bit each month and spend it as you go.

The expansion of the child tax credit was part of the American Rescue Plan Act which was enacted in March of last year to counter the financial fallout from Covid-19. In addition to expanding the child tax credit, it included a $ 600 bonus for children under six.

According to the IRS, some 59 million parents were automatically enrolled in the program and began receiving monthly payments in July. The registration criteria were based on 2019 or 2020 tax data.

However, since some parents may have changed their reporting status, dependent status, or income increase from 2020 to 2021, some parents may actually have to reimburse the IRS up to $ 1,800 per child. .

“If they [the IRS] you’ve overpaid, that’s something you want to be aware of. If you get this tax credit and have been overpaid, then yes, they will be surprised to have to pay it back.

Brian Mirau – Founder | President Mirau Capital Management

If you are still eligible for the child tax credit, parents may see a substantial decrease in the refund they typically receive because they have already received half of the child tax credit as monthly payments over the course of the year. second half of 2020.

Mirau also explains that filing early is beneficial for a number of reasons, including a faster return on your refund and more time to properly complete your taxes,

“You want to spend as much time as possible and do it as early as possible because it gives you time to sit down and think about your tax situation when you’re not in the heat of the moment. When you often wait until the last minute, we make decisions or miscalculate that can affect our taxes. If we make a mistake, it can put us in a situation where we need to make amendments. This always creates additional costs.

Brian Mirau – Founder | President Mirau Capital Management

Depositing early can also protect you against identity theft, and the fastest way to get your money, according to Mirau, is to sign up for direct deposit.

There are ways to maximize your reimbursement and avoid audits.

  • Keep good records
  • Deduct all you can
  • Report income correctly – including the Covid-19 relief payment and child tax credit payments
  • Plan early
  • Evaluate expenses
  • Make a budget

When planning for dividend tax, make sure you are as efficient as possible.

“One thing you do when paying your taxes is make sure your tax bill is as close to zero as possible. This is one thing that you should check every year because as they change the tax brackets you may need to adjust your withholding tax. You don’t want to adjust it to where you withhold too much and you get a big tax refund because people think when you get a big tax refund it’s free money but in reality it’s just your money returned to you that the government has had all year and they pay no interest on it.

Mirau says tax planning is a year-round event and you don’t wait until the last minute to do it. And starting the tax planning process now, for next year, is the best plan of attack. Pay attention to all of your deductions so that you can make an informed decision about whether to use the standard deduction or a detailed schedule.

“Just be a good planner. All we know is an ounce of prevention is better than a pound of cure. Make sure you keep good records because if you ever get audited you want to make sure you can back whatever you do on your taxes. Just like being a good businessman, you want to make sure you are a good flight attendant for your taxes. “

early deposit can also protect you against identity theft.

Mirau also recommends hiring a tax professional to help you through the year-long process, someone who can make sure you take advantage of the opportunities offered by the Internal Revenue Code.

“We live in the most beautiful place in the world. We don’t mind paying our taxes for our freedoms because we have a lot of freedoms here. We also want to be fiscally efficient. We don’t want to pay unnecessary taxes. Once you spend that tax money, it’s gone forever.

Brian Mirau – Founder | President Mirau Capital Management

This year’s tax filing season is set to begin Jan. 17e and the deadline this year is April 18e.

To contact Mirau Capital Management or for more tax advice, click here.

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