IRS Commissioner Danny Werfel recently told lawmakers that if a new bipartisan tax package is passed, child tax credit refunds could be issued within a matter of weeks. The tax package, which is estimated to be around $79 billion, would increase the refundable portion of the child tax credit and provide other tax breaks for businesses.
Under the proposed legislation, the refundable portion of the child tax credit would be incrementally increased from $1,800 to $1,900 and then to $2,000 for each tax year from 2023 to 2025. Currently, the tax credit is $2,000 per child, but not all of it is refundable. The new legislation would also grant an inflation adjustment for the child tax credit in 2024-2025 and allow taxpayers to use their earned income from the prior taxable year in calculating their maximum child tax credit.
If passed, the bill would provide an average tax cut of $680 to households benefiting from the changes in the child tax credit in the first year. Additionally, the legislation includes Trump-era tax breaks for businesses, such as extending provisions from the 2017 Tax Cuts and Jobs Act and offering full expensing for domestic research and development costs.
However, the legislation is already facing opposition in the Senate. Some lawmakers are concerned about certain child tax breaks, particularly the provision that allows taxpayers to use their earned income from the previous year. Critics argue that this provision could discourage Americans from working. Researchers at the American Enterprise Institute have warned that this provision could have important impacts on the labor market.
Despite the potential opposition, IRS Commissioner Danny Werfel is prepared to quickly implement the measures if the bill is signed into law. He stated that the agency is paying close attention to the legislation’s progress and could start implementation within six to 12 weeks after passage.
Taxpayers are advised not to wait for this legislation to file their returns. The IRS will take care of issuing any additional refunds to taxpayers who have already filed, and they won’t need to take any additional steps.
In conclusion, if the bipartisan tax package is enacted, child tax credit refunds could be sent within weeks. The package includes increases in the refundable portion of the child tax credit and tax breaks for businesses. However, the legislation is facing opposition in the Senate due to concerns about its impact on the labor market. Nevertheless, the IRS is prepared to quickly implement the measures if the bill becomes law. Taxpayers are encouraged to file their returns as usual and not wait for the legislation to be passed.
