NASHVILLE, Tenn. (WTVF) — For some parents the child tax credit will help them pay the bills, but there's some confusion surrounding the payments.
The child tax credit is $3,600 annually for children under the age of 6, and $3,000 for kids ages 6 to 17. Parents eligible for it will get hundreds dropped into their accounts for six months. The payments begin to phase out at incomes of $75,000 for individuals and $150,000 for married couples.
Instead of getting a lump sum when tax time comes around, they're getting the money early. For one parent it will help. She wanted to be identified as Stephanie for privacy reasons.
"Times are hard, and we want to try to get ahead on the bills so that way we don’t fall behind, Stephanie said.
Stephanie quickly realized she only got money for one child, not two. "And then I tried to call the IRS but there’s no option to talk to somebody,” Stephanie said.
She's not alone, according to tax expert Dr. Friday Burke. She's been fielding questions from clients and is telling them to opt out unless they desperately need the money now.
"And then at the end we can balance everything out because the last thing you want is the IRS as your loan officer," said Dr. Friday. "There’s going to be penalties and things that if you can’t afford to pay them back, now you’re going to owe more than they gave you, and it’s just going to get more painful."
She said it gets tricky for divorced or separated couples. The money should be put in the account of the person who claims the children as dependents.
"So you’ve got to be really careful. if you’re not entitled to that money, at the end of the year you’re going to get a love letter and it’s going to say 'we sent you so much money, and you don’t have any dependents... or you weren’t qualified,'" said Dr. Friday.
Dr. Friday said there's no opting-in as it's automatic if you do nothing. Dr. Friday said, "A: it’s not taxable income, B: it’s not a stimulus check, it will be reported on your tax returns, and C: basically just making sure the information the IRS has on you is current.”
Higher-income families who make $200,000 as a single parent, or $400,000 married, can still receive a $2,0000 credit. It's income-based.