Proposed Retroactive Changes To Child Tax Credit

[BobKamman]

This sailed through the Ways & Means Committee last week.  The House is at recess this week, but may vote on it next week.

Calculation of Refundable Credit on a Per-Child Basis. —Under current law, the maximum refundable child tax credit for a taxpayer is computed by multiplying that taxpayer’s earned income (in excess of $2,500) by 15 percent. This provision modifies the calculation of the maximum refundable credit amount by providing that taxpayers first multiply their earned income (in excess of $2,500) by 15 percent, and then multiply that amount by the number of qualifying children. This policy would be effective for tax years 2023, 2024, and 2025.

Modification in Overall Limit on Refundable Child Tax Credit. —Under current law, the maximum refundable child tax credit is limited to $1,600 per child for 2023, even if the earned income limitation described above is in excess of this amount. This provision increases the maximum refundable amount per child to $1,800 in tax year 2023, $1,900 in tax year 2024, and $2,000 in tax year 2025, along with the inflation adjustment described below.

Adjustment of Child Tax Credit for Inflation. —This provision would adjust the $2,000 value of the child tax credit for inflation in tax years 2024 and 2025, rounded down to the nearest $100.

Rule for Determination of Earned Income. —For tax years 2024 and 2025, taxpayers may, at their election, use their earned income from the prior taxable year in calculating their maximum child tax credit if the taxpayer’s earned income in the current taxable year was less than the taxpayer’s earned income in the prior taxable year.

Special Rule for Certain Early-Filed 2023 Returns. –This provision ensures that taxpayers filing their 2023 tax returns at the beginning of the 2024 tax filing season receive the correct child tax credit amount given the per-child and refundable amount changes made in this title. Additionally, to the extent that a taxpayer is eligible for an increased credit, the IRS is to execute such payment expeditiously.

https://gop-waysandmeans.house.gov/wp-content/uploads/2024/01/H.R.-7024-Section-by-Section.pdf 

[IRonMaN]

Bless their little hearts for waiting until the following year to go sailing with 2023 tax changes.

[sjrcpa]

I'm more excited about the retroactive allowing of domestic R&E expense for a few years.

But if this bill passes, it will be at least a month (optimistically) before IRS computers can be updated.

[Jim-from-Ohio]

best part of all of that: This provision ensures that taxpayers filing their 2023 tax returns at the beginning of the 2024 tax filing season receive the correct child tax credit amount given the per-child and refundable amount changes made in this title. Additionally, to the extent that a taxpayer is eligible for an increased credit, the IRS is to execute such payment expeditiously.

yay,  no amended returns

[IRonMaN]

It's the federal government ----- someone please explain what expeditiously means in terms of a calendar.

[PATAX]

@sjrcpa @IRonMaN @Jim-from-Ohio Considering everything that has to be e-filed now, which has increased over time, one would think that the IRS has plenty of time on its hands now to update their computers quickly. We are doing their work for them when we e-file, and we don't get paid for it. I wish I could have someone do my work for me and not have to pay them, then again I really don't as I don't believe that is right.

[sjrcpa]

"one would think that the IRS has plenty of time on its hands now to update their computers quickly"

One would think, but I think one would be wrong. It's the government after all.

[BobKamman]

IRS has known for months that this could happen, and Congress has talked to them about how much lead time they need to change the system.  Isn't that one reason e-filing starts later than usual, this year? Can you remember any year it started this late?  IRS will probably moan and groan about how they can't do it on original returns, they have to make another run through the data to find the people who qualify for higher payments, but they have experience with that.  Look at all the rebates paid in the last three years -- not to mention the last 30 years.