To keep yourself up-to-date in the way you prepare your clients’ taxes, it is important to make yourself familiar with any updates or changes that are associated with the child tax credit. Significant changes were introduced in the American Rescue Plan to this type of credit. If you are not yet fully aware of what this update entails, this blog post will help bring you up to speed.
As you may already be aware, the Important Child Tax credit is a partially redeemable type of credit that will be applicable to families that have children. This tax credit will be refundable at the end of each tax year if the taxpayer spent less of the tax amount during the taxable year. This type of credit is not new in itself, but here are the specific updates that were made to this tax credit and what you need to know to help you serve your clients better.
Important Child Tax Credit Updates: What You Need to Know
1 – How Has This Tax Credit Changed?
There are three significant changes that will apply to the 2021 child tax credit. In a nutshell, for the tax year 2021, the child tax credit may be fully refundable, it may be received as a monthly payment option and it will involve a larger amount per child. These are the latest updates, and should there be any changes, tax pro software like Keystone Tax Solutions will make sure to incorporate them when they become available.
2 – Who Qualifies for the Additional Tax Credit?
To be eligible for the updated chi8ld tax credit, your clients’ adjusted gross income must meet a certain threshold. It is as follows: $75,000 or less for single filers, $150,000 or less for joint filers, and $112,500 or less for head of household filers. The threshold for families that make more is still in place, allowing them to receive a lower credit of $2000.
3 – Is This a Permanent Change?
As of the time of this writing, the update will only apply to the tax year of 2021. It is not a permanent change.
4 – What About the Tax Credit for 2020?
The tax credits for the previous year will not be affected by the update as the change only applies to the year 2021. The previous guidelines will still apply for 2020.
5 – How Can I Automate Preparing My Clients’ Financial Reports?
The best way to go about doing this is to use professional tax preparation software. This will ensure that you will avoid committing errors during the course of the tax preparation process. You will have less work to do when you finalize the reports.
Conclusion
If you are looking to start your own tax business or work as a tax professional, you must be aware of the changes and updates that will affect your line of business. Using the correct type of software for tax preparers will help you make sure that you will avoid committing human errors and make an easy job of preparing your clients’ tax returns.
Gain access to the best professional tax software by working with Keystone Tax Solutions! We want to be there with you every step of the way to ensure your tax business is thriving. So contact us and get a free demo now!
