How Parents Spend Their Child Tax Credit Payments: From Car Repair to Cub Scout Uniforms
Parents are using their new child tax credit payments for various expenses, from car repairs to dental work to rent. However, low- and moderate-income families’ experience is virtually always the same, regardless of how the money is spent.
On Friday, 36 million households received the second of six advanced child tax credit payments, which may provide families with up to $300 per kid. ‘Millions of children out of poverty was the stated purpose of this year’s increases to the child tax credit. Moreover, early signs suggest that the initiatives are bearing fruit: Families with children showed a 24% decrease in food insecurity after the July payment, while those without children saw a slight rise.
Tax Credits and Bankruptcy
Tax credits can reduce the amount of tax payable by the person or the family that claims the credit. A lot of low-income families get either all or part of a tax credit returned to them after their tax returns are completed in order to have their right to take advantage of the credit was confirmed with the Internal Revenue Service. This article will discuss several of the frequently utilized tax credits for those with low incomes, and how they are handled in bankruptcy. Chapter 7 bankruptcy.
Earned Income Tax Credit
A single of the well-known tax credits for those with low incomes is”the Earned income tax credit also known as “EIC.” which can yield a significant tax refund. There isn’t an exemption specific for EIC within the federal exemptions, however some states have exemptions for EIC. If your state has this exemption , you’ll be able to secure your EIC tax refund to the maximum amount allowed by the exemption even if you’ve not received the money yet. It is also possible to use the wildcard exemption or (if you’ve already received it) an exemption for cash to safeguard this, provided it’s available under the law of your state or you’re using federal exemptions.
If you find that your EIC amount is greater than the amount you are able to exempt, you will be unable to claim the extra amount in chapter 7. If you are in this situation, it is advisable to talk with a bankruptcy lawyer about the possibilities, which may include changing your withholdings prior to when you file, or not on online filing until you’ve received your EIC and have spent it on the necessary items, such as food, rent, and clothes.
For the time being, the more considerable child tax credit will only be in effect until 2021 unless Congress votes to extend the program. Many suffering families are already benefiting from the monthly payments, which are helping them to improve their financial situation in ways they never thought possible. The following is a sampling of their tales:
Much-needed help in a case where there was none before.
Sandy Westrand, a Spokane, Washington, retiree, and grandmother, doesn’t have any especially spectacular words to convey how much the enhanced child tax credit has changed her life.
“It’s been significant to us,” she says.
When Izaak was less than a year old, she became the primary caregiver, for now, a 9-year-old boy. Westrand became his legal guardian after the death of his father. The hours at Costco made it difficult for her to care for Izaak, so she decided to retire earlier than she had planned.
According to her, “there was no daycare available, and I could not afford it.”
Now, they have to depend on her pension and Social Security benefits and some money from her grandson. Even though she owes taxes, she does not become eligible for the Child Tax Credit or the Earned Income Tax Credit because of her low income.
Because Westrand earns too much to be eligible for free or reduced lunch or the Supplemental Nutrition Assistance Program, she has had to pay for most of Izaak’s expenditures (SNAP).
According to her statement, we “don’t qualify for any of the resources that are meant to benefit families with children,” according to her report.
Westrand may use the tax credit for the first time this year, thanks to a change in the legislation. When she files her taxes in the spring of 2013, she’ll get back the whole $1,500 she received as a tax credit since she now gets an extra $250 per month to help with living expenses.
There are fewer unpleasant surprises.
When Rebecca Garcia’s car broke down in early July, the expanded child tax credit rescued her from a potentially deadly situation. A mother of four from Las Vegas, Garcia works part-time so that she may spend as much time with her children as possible. Her husband is her primary source of income. Unexpected surgery on her back required her to take unpaid leave from work.
The car was no longer a concern for them when they made their first monthly payment. Thus, Garcia did not worry about how the cost would fit into his family’s already limited budget.
She says she’s been under a lot of stress managing the family’s money for a long time.
According to the Federal Reserve, most Americans would be compelled to use their credit cards if they had a $400 emergency expenditure. According to Garcia, when families have a large number of children, an extra $300 per month in their monthly budget is more likely to result in financial issues.
“They appear to pop up more often than a few times every year. She claims that it’s more like once a month after a few months.
Yehesuah Downie, a political activist and freelance writer residing in Washington, D.C., is all too acquainted with the pain of such unplanned bills. After losing his bartending job and primary source of income, Downie survived on his savings for the first few months of the outbreak. However, towards the end of the 2020 election campaign, no more jobs were available.
‘I was living off of photography and videography [gigs], which wasn’t enough to cover the bills,’ says Downie.” Greenpeace and the ACLU are among the groups for which Downie has lately begun working as a fundraising director.
He may have a son who lives with his mother, but Downie still bears most of the financial burden. When Downie needed to purchase a new phone for his son at the beginning of the year, he claims he had trouble coming up with the cash.
I was borrowing from everyone, but it was difficult even to approach other parents for help since they’re generally in a difficult situation, too,” he says.
He was still trying to get back on his feet and pay off his obligations when the first payment from the child tax credit arrived, even though he had found a full-time job again by the end of June.
My phone bills were paid straight away as the money came in.
It’s critical to have a consistent income and to prevent financial instability.
When St. Paul, Minnesota, resident Jenna Fulford first heard about the monthly child tax credit payments, she was reluctant. The single mother says she was upset when certain members of Congress committed to giving more remuneration to essential personnel, but it never happened.
Due to the lack of raises this year, Fulford has been living paycheck to paycheck.
Due to the scenario, she felt that she would have to give up her apartment. However, she was glad to know that she wouldn’t have to disturb her daughter’s life and that she would be able to pay her rent more efficiently when the first payment was made.
Fulford says he’s lived in his present house for 17 years, raising all of his children. A secure home and a good education are essential to me as a parent. That may be tough when you’re always on the move and have little financial stability.
In 2010, the American Psychological Association performed a study with more than 7,000 participants. The findings confirmed such worries when researchers examined their results. People who had to migrate as youngsters had lower life satisfaction and psychological well-being.
He also underlined the need to provide children with a steady income.
Children fare better in school when their parents follow a healthy diet or can spend more time with them since they are not working extra shifts.
Because it was regarded as too expensive at the time of rejection, accepting the offer.
For some families, the child tax credit payments cover more than just the necessities like food, clothing, and a place to live.
While the first child tax credit payment was used to cover a $1,600 dental expense, this month’s funds will purchase Isaak’s Cub Scouts outfit and school supplies. Her ultimate goal is to be able to afford some of the extracurricular activities Izaak has requested in the past, such as clay sculpture.
Westrand says he’s had to explain, “Sorry buddy, but we don’t have the money this month,” since small children don’t understand not having enough money to pay for an item.
Families are also concerned about their mental health when they deny their children opportunities that other youngsters enjoy constantly.
When Downie didn’t have a reliable source of money, he couldn’t accomplish all he desired for his child. I want to use the credit to pay for anything he needs or desires,” he continues.
They believe that the monthly payments should be eliminated and replaced with a single lump-sum amount.
Only until 2021 can you take advantage of the higher child tax credit.
Even though Biden’s administration and congressional leaders have committed to keeping this program in place for as long as feasible, it will need to be fought for. Government expenditure is a problem for both Republicans and moderate Democrats.
Several senators, including Marco Rubio (R-FL) and Mike Lee (R-UT), have argued that the bill is not “pro-work.” According to observers, the monthly payouts may encourage more low-income workers, especially mothers, to leave the workforce.
According to a YouGov poll conducted in July, only 29% of Americans agreed with the plan’s expansion and monthly payments, although some analysts believe that number will rise over time.
There are a lot of grandparents who have never received any type of child support, and Westrand feels it is vital for people to know how many other grandparents are like her. With more than 40 percent reporting unmet economic and social assistance requirements, 2.4 million grandparents are the primary carers for their grandkids.
“It has to be made permanent, and it has to be kept,” says Westrand, to aid those who are less fortunate.
According to a recent Census Bureau survey, there was a considerable decrease in families reporting food insecurity or trouble paying their bills after the first payment was made due to the rules.
She says she’ll do whatever it takes to get a permanent renewal of the credit, which has eased some of the burdens of being a single mother in Minnesota.
“If they don’t give us raises,” she says, “I’ll accept this to help parents put food on the table and a roof over their heads.”