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We're in the Money!
Spending Your Advance Child Tax Credit Check
By Cara J. Stevens
A few years ago, millions of families across America received an unexpected bonus from Uncle Sam. As an addendum to the tax code, the government voted to increase the child credit from $600 to $1,000 per family that year. The check many people are receiving is an advance on this credit.
This advance credit was designed to stimulate the economy by giving families an unexpected windfall, hoping they will spend it right away. "Congress uses the tax code to do a lot more than just raise revenue," says Ed Lyons, president of taxtuneup.com and author of Instant Tax Relief. "They use it to influence our behavior as well."
The following article ran to help families prepare for this cut:
Well, it depends on your reported income in 2002 and how many dependents under the age of 17 you had in 2002. Single parents reporting up to $75,000 on their 2002 taxes will receive $400 per dependent child born after 1986. Families filing jointly who report up to $110,000 will also receive the $400 check per child under 17. Couples filing separately will receive the full $400 per child if they report up to $55,000 in income. For every $1,000 in income over the maximum amount listed above, your total credit is reduced by $50.
If you gain a new eligible dependent in 2003, you will not receive an advance credit check for that child, but will receive the full credit on your 2003 tax returns that your income allows. If you believe you are eligible and you do not receive a check this month, you may still claim the full amount on your 2003 tax return and receive the credit concurrent with your tax statement.
As the name implies, it is an advance on next year's taxes, so the most important thing is to keep your records and refer to them when you are preparing your 2003 return, says Robert Brokamp, co-author of The Motley Fool Personal Finance Workbook and author of The Motley Fool's Guide to Paying for School.