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Friday, September 30, 2022

SaverLife Resources Help Consumers Make the Most of Their Income and Maximize Tax Refunds

Saverlife Helps Consumers Maximize Their Tax Returns

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Jon McDonald

Written by: Jon McDonald

Jon McDonald

Jon leverages 15-plus years of journalism expertise to inform financial consumers about emerging trends and companies making an impact in the industry. He is most knowledgeable in the areas of budgeting, credit card rewards, and responsible credit use. Jon has a passion for writing and editing, and his articles have appeared in publications produced by The New York Times.

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Edited by: Lillian Guevara-Castro

Lillian Guevara-Castro

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In a Nutshell: When consumers live paycheck to paycheck, even minor unexpected financial expenses can send them into crisis. But those consumers have significant tax breaks available — if they know how to use them. SaverLife helps people understand the latest changes in the tax code, including the Child Tax Credit and the Earned Income Tax Credit, with its 2022 Tax Guide. And beyond tax time, SaverLife is an indispensable resource for learning how to build a nest egg through tax planning, saving, and investing.

The US government doesn’t make filing taxes easy, and it puts the burden on consumers to understand the changes in tax laws and how to maximize their refunds or minimize their debt.

Just sitting down with a pencil and a tax form may not be enough because the system doesn’t protect filers who miscalculate or overlook tax breaks.

Attention to detail can be important for those on the lower end of the income scale. Low-income consumers may qualify for benefits, including the Child Tax Credit and the Earned Income Tax Credit that can reduce their tax bill by thousands of dollars.

The problem is that those people may have to work harder to find those breaks than others who can afford to pay someone to do their taxes.

A web search for tax advice leads to millions of choices and countless ads, which can make finding the correct information time-consuming. SaverLife is a nonprofit organization that produces free readily available resources so filers can get the most out of their returns.

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SaverLife offers an in-depth 2022 Tax Guide packed with tips, forms, and information. The platform also helps users in other areas of their financial lives, including budgeting, choosing the right credit card, managing debt, investing, and building wise savings habits.

“One of the biggest sources of potential extra income for lower-income individuals is their tax refund. Especially if they’re in a position to get refundable credits like the Child Tax Credit and the Earned Income Tax Credit,” said Jerry Zeigler, an Accredited Financial Counselor (AFC) and SaverLife Financial Coach. “We encourage everyone who gets big refunds to do good things with them.”

The Child Tax Credit (CTC) brings perhaps the most impactful changes for households with children. The American Rescue Plan (ARP) was signed into law in early 2021, and it put more Child Tax Credit money in the pockets of families to help with challenges they faced during the COVID-19 pandemic. But that much-needed stimulus affects 2022 tax refunds.

The new Child Tax Credit increased the refundable tax credit for families with qualifying children under 6 years of age from $2,000 to $3,600 per child. For children aged 6 to 17, the credit rose to $3,000. The American Rescue Plan also increased Child Tax Credit adjusted gross income thresholds so a much larger segment of the population can access the benefit.

One thing that didn’t change is that the Child Tax Credit remains a refundable tax credit. If household income falls below a specific threshold, the portion of the credit remaining after taxes goes directly to the household as cash.

Screenshot of SaverLife 2022 Tax Guide
The SaverLife Tax Guide helps readers maximize their refunds and learn about payments.

The American Rescue Plan also stipulated that families slated to receive all or part of the 2021 Child Tax Credit as cash (calculated based on 2020 tax returns) could elect to receive up to 50% of the expected payout in advance monthly cash increments starting in July 2021. For a family expected to receive a $3,000 Child Tax Credit on their 2022 tax return, that could mean up to $1,500 in $300 monthly increments during 2021.

But in that scenario, a family that might have received a $2,000 Child Tax Credit credit in 2021 would receive only a $1,500 credit in 2022 — because they received the other half of the increased benefit in advance.

“And if you don’t meet the safe harbor requirement for income because of an income increase from 2020 to 2021, for example, you might even have to pay back the $1,500 advance benefit,” Zeigler said.

Earned Income Credit Rewards Savers

It’s also important to note that changes to the Child Tax Credit applied only to 2021 returns filed in 2022 because Congress has yet to extend Child Tax Credit increases and advance payments into 2022. Consumers can visit SaverLife regularly for updates about changes to the Child Tax Credit.

Another area of change in the tax system relates to the Earned Income Tax Credit (EITC). This tax credit was designed to defer tax payments — that means no taxes are withheld — for people with low to moderate income, including households claiming no child dependents and those that earn income through self-employment.

Photo of Accredited Financial Counselor and SaverLife Financial Coach Jerry Zeigler
Jerry Zeigler, Accredited Financial Counselor and SaverLife Financial Coach

Permanent EITC changes as of 2021 increased the threshold for investment income to $10,000 and set up that limit for inflation adjustment moving forward. This change helps protect lower-income earners who still want to prepare for retirement through savings.

Married but separate filers can also claim the EITC on their returns, and strictures for claiming a childless EITC have been relaxed and benefits increased. That helps non-nuclear families.

Temporary changes for the 2021 earning year include removing the age limit of 64 for EITC applicants claiming no children. Independent individuals as young as 19 became eligible to claim the EITC, and the minimum age for former foster children and homeless youth to claim the EITC is set at 18.

EITC is the government’s way of easing the tax burden for households that are most affected by paying taxes. Many 2022 tax filers are eligible for relief that can help them remain economic contributors.

“Under EITC, qualifying 2022 tax filers without children are eligible for up to $1,502 as fully refundable credit,” Zeigler said.

Helping Consumers Take Charge of Their Finances

Taxes help pay for public goods and services, but the tax filing system isn’t working when it excludes households from participation in the economy. Consumers can count on SaverLife experts, including Zeigler, to do the legwork necessary to inform them about the tax system.

For example, SaverLife explains the ins and outs of another credit that often doesn’t get the attention it deserves — the Child and Dependent Care Tax Credit (CDCTC). With this tax credit, households with dependent children under 13 or who have disabled dependents may be eligible for a credit to offset child care.

2021 changes to the Child and Dependent Care Tax Credit increased the child care expense amount that counts toward the credit. Households earning up to $125,000 may now claim up to 50% of that amount. These and other Child and Dependent Care Tax Credit changes may result in significant reductions in child care expenses.

The Child and Dependent Care Tax Credit can make a difference in the daily lives of taxpayers and perhaps help them keep their credit card balances in check. SaverLife allows households to take control of their finances with plenty of information on those underpublicized tax benefits.

SaverLife benefits extend beyond tax filing season, and consumers can sign up for its newsletter to stay in the loop.

The more people know about managing their finances and understanding their tax filings, the better. SaverLife empowers households to contribute their fair share of taxes while maximizing their potential contribution to the economy as a whole.

“If you can do your taxes yourself, it’s smart to do that,” Zeigler said. “It’s all about comfort level and whether you’re going to do the due diligence to make it right.”

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