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Tax Time: Child Credit


Last updated 3/4/2024 at 10:11am

Have you filed your taxes or are you waiting? Well, if you haven’t just yet, there may be a change in the child tax credit that could be quite significant.

As the tax season kicks off, Congress is still negotiating a $78 billion tax package with retroactive changes, including a boost for the child tax credit.

If enacted, the child tax credit changes could affect 2023 filings this season. But taxpayers shouldn’t wait to file, according to the IRS.

“We urge and encourage taxpayers to file when they’re ready,” IRS Commissioner Danny Werfel told reporters Friday during a press call. “Don’t wait on Congress.”

If enacted, the child tax credit changes could expand access, increase the refundable portion of the tax break and add future inflation adjustments.

Eligible families stand to receive an average tax cut of $680 for 2023, according to estimates from the Urban-Brookings Tax Policy Center.

But the bill’s path forward remains unclear.

During a “Squawk Box” appearance on Tuesday, House Ways and Means Committee Chairman Jason Smith, R-Mo., said he expects a House vote on the tax bill “in the next couple of days.”

But there’s still pushback from some House Republicans who want relief for the $10,000 cap on the federal deduction for state and local taxes, known as SALT.

Meanwhile, there are lingering questions from tax professionals about how to handle possible tax law changes for 2023, especially for those who file early.

“It would be a waste of time to file your return and then find out you’re entitled to a bigger tax credit and have to amend,” said Bill Smith, national director of tax technical services at financial services firm CBIZ MHM.

While questions remain, Werfel provided some clarity on Friday, noting the agency has “deep experience in assessing and reviewing” retroactive tax law changes.

“If there’s a change that impacts your return, we will make the change, and we will send you the update – whether it’s an additional refund or otherwise – without you having to take additional steps,” Werfel said.

However, the originally filed tax returns must be accurate, he added.

A press release from House Ways and Means Republicans on Friday said the IRS has already confirmed plans “to make necessary systems updates by around six weeks after the date of enactment” if Congress approves the tax package.

By law, filers claiming the child tax credit or earned income tax credit won’t receive refunds until Feb. 27 at the earliest, according to the IRS.