The American Rescue Plan or the child tax credit has triggered a lot of difficulties among divorced parents. This new law bears a lot of issues.
President Joe Biden signed the $1.9 trillion American Rescue Plan Act into law on Thursday, March 11. The new law states that it would raise the child tax credit to $3,000 per child who is at the age bracket of 6 to 17 years old and $3,600 per child under the age of 6, all for the 2021 tax year.
Even though it struggles divorced parents on their child's taxes, the newly signed child tax credit can as well help the family generate more income. The newly signed law will financially assist households with $1,400 stimulus checks and unemployment benefits all from the federal government.
However, the extension of the new law for a child tax credit may be part of the new stimulus bill that will help the families the most. American Rescue Act will pay the family in advance for the assistance up to its half amount and they will start distributing this July.
But there are questions from parents' minds that loom around this new law. Will parents who are in joint custody can each avail of the assistance? What are the requirements of the child tax credit? Who only qualifies? Will find all the answers to your questions below.
Parents stand on Child Tax Credit
Confusion to Advance Payment
In terms of sending the advance payment, the first person who files for a tax claim from 2020 will likely receive the payment. It is because the IRS will technically base their reports on the most updated files of the family.
A kind of situation like this will potentially raise issues for parents who share custody of their children and are alternately claiming taxes every other year. On the other hand, to answer all worries, The Treasury Department and IRS have not yet released any rules and policy on how to release the payment to parents who are in split custody arrangements.
Covering Child Support with Child Tax Credit
The new law will potentially exempt the payment for the child tax credit from offset to past due to child support this year. But the amount of credit you will claim from 2020 to 2021 will most likely be offset.
Doing what is right for the children
The new law may have added confusion and struggles to parents about the child tax credit, but parents must also put their emotions in this underlying issue as this affects their children in many ways. We have plotted down below our suggestions for parents that you might want to check to minimize confusion;
- Discuss in both parties how the stimulus check will be utilized.
- Parents must see this support as financial assistance for their children.
- Think that if parents are already able in supporting their child, rather put this assistance for the future endeavor of your children and set it aside for now.
Parents must be smart in using the assistance for the benefit of their children. Take steps and make sure you are making the right decision and pay the taxes as required.
