How The Child Tax Credit Is Causing Confusion For CPAs, Taxpayers
Most Americans have happily accepted the stimulus checks from the government. Many have received thousands of dollars as they navigate life while dealing with the COVID-19 pandemic.
The nice thing about these stimulus checks is that they do not need to be paid back. The advance child tax credit, however, is a different story. These advance payments allow families to take half of the credit now. They can receive $250 or $300 per child (depending on the age), per month until the end of 2021.
This may seem like a great idea for many, but there is one major drawback: It is possible that a family’s child or financial situation may change by the time they file taxes in 2022, so many parents are afraid that they may need to repay the IRS if they get an advance on the child tax credit. Therefore, families can elect to opt out of the monthly payments and take the full amount of the child tax credit when they file their taxes.
This can lead to confusion for CPAs during tax season as they try to decipher who has and who hasn’t taken advantage of the child tax credit. If a CPA makes a huge error—whether accidental or deliberate—they could face licensing issues.
What You Need to Know
Taxpayers and CPAs alike need to make sure they understand the requirements involved when it comes to the child tax credit. They include the following:
- Qualifying children must be under the age of 17.
- It is fully refundable even if no tax is owed to the IRS.
- When families opt for the monthly payments, this will affect their refund in 2022.
Why CPAs Need to Be on Alert
CPAs need to be aware that not everyone is choosing the monthly payments. They cannot assume that every household is doing the same thing. If one household is opting for the monthly payments, they cannot take the full refund next year. That would essentially be double dipping and that could lead to delayed and rejected returns.
On the other hand, if a CPA assumes that a household took the monthly payments and makes it so they don’t get the full amount of the child tax credit next year, that family is losing out on credit that could reduce what they owe or increase their refund. The IRS may not catch this error, so that would be a lot of money for a household to miss out on, especially in an abnormal year, where the credit is increasing from $2,000 to $3,600 per child.
Keep Your License With Help From a Tampa Certified Public Accountant Licensing Lawyer
Dealing with all the different IRS codes and rules can be challenging for CPAs. While they need to work in their clients’ best interests, they need to also follow the laws and be ethical.
When CPAs are accused of ethical violations and other administrative issues, Tampa certified public accountant licensing lawyer David P. Rankin, P.A. is there to help. He can help you quickly resolve your licensing matter. To schedule a consultation, call (813) 968-6633 or fill out the online form.