Wednesday, July 20, 2005

Free Cash?

According to Uncle Sam, “Beginning in 2001, congress made child credits available to all Americans, even those of us who live outside of the United States. These credits are distributed in the form of "tax refunds", even if you pay no taxes”. But wait…there’s more: “Many U.S. citizens living and working abroad are eligible to benefit by this largess…”

That’s right folks, your friendly neighborhood Federal Government dutifully seizes hard-earned cash from productive citizens all year long. In so doing, they have discovered, mysteriously enough, that a surplus has been accumulated. So, it stands to reason that said plunder…er…bounty ought to be redistributed to other parties, rather than refunding it to those that actually earned the money in question.
The basic idea is very simple. The IRS grants a child tax credit of $600 for each dependent child under 17 as of December 31. If the total amount of the child tax credit exceeds the tax liability and you have sufficient earned income, then the excess amount turns into the "additional child tax credit". This is considered to be a payment by the IRS and is "refundable" despite the fact that you never paid any taxes.

U.S. citizens living overseas are obligated by law to file a tax return with the IRS if they earn income above a certain amount. Married couples in 2002, for example, are required to file if they earn more than $13,850. This is true even if the couple will not owe any American taxes.

Hat Tip: Liberty Belles