The Pandemic Aftershock
With the rising of loan debt for many PPP loan applicants, comes another problem that started back in calendar year 2020. The idea that the upcoming tax season in calendar year 2022 would probably pick up pace, but many individuals will have to deal with a double whammy or face H.E. double hockey stick. The deceived excitement from the announcement of the look-back rule and now the deceived excitement announcement about the advance child tax credit stimulus, is not all cracked up to be what it seems.
Many taxpayers will have to deduct the portion of the advance additional child tax credit on their federal 2020 tax return in the upcoming tax season and only claim the remainder not sent to billions of taxpayers up and until December 31, 2021. The child tax credit is generally a nonrefundable personal credit, but a portion of the credit, known as the additional child tax credit, is refundable. Not to mention, not being able to claim the income on form 1099 G but to face the fact that if you haven’t earned normal payroll wages in 2020, the look-back rule will not benefit you at any cost.
Even if you have earned regular wages in calendar year 2020 and can consider the look-back rule as an option, it still wouldn’t benefit you considering the phase out of the earned income tax credit based off an individual earned income and on top of that, no lumpsum of the child tax credit all at once, a deduction of the child tax credit for the upcoming tax season and little to claim from the additional child tax credit on your 1040 form or should I say form 7734 that's refundable. So, this means no earned income tax credit and hardly or no additional child tax credit to offset any federal taxes on your individual tax return (no refund).
While the child tax credit was originally $2,000 for each qualifying child under the age of 17 ($1,000 for tax years beginning before 2018 and after 2025); and $500 for any other dependent, it was increased by the Biden Administration as part of the American Rescue Plan and to ensure that working families will be able to count on this relief for years to come to $3000 for each child ages 6 to 17 and $3,600 for each child under the age of 6, may be the worst tax year of all times for families. The child tax credit will eventually be reduced from the temporary credit increase, reduced from the original $2,000 child tax credit, to $1,000 for each child under the age of 17 after 2025.
Whatever you do, don’t hesitate getting assistances with the PPP second part, the loan forgiveness and have more debt to pay from your pocket alongside with the federal government debt coming in the near future including interest & penalties calculating over time if you can't pay off the federal debt all at once. Avoid having to appeal the decision after submitting the application on your own by calling 708-377-6161 today. our off-season office hours are Mon-Friday from 10am to 6pm and Saturday from 10am to 1pm. We know what the lenders are looking for to be approved.