What is the difference between refundable and nonrefundable credits? Q.What is the difference between refundable and nonrefundable tax credits? A.Taxpayers subtract both refundable and nonrefundable credits from the taxes they owe. If a refundable credit exceeds the amount of taxes owed, the difference is paid as a refund. If a nonrefundable credit exceeds the amount of taxes owed, the excess is lost. Read more about What is the difference between refundable and nonrefundable credits?
How does the tax system subsidize child care expenses? Q.How does the tax system subsidize child care expenses? A.Working parents are eligible for two tax benefits to offset child care costs: the child and dependent care tax credit and the exclusion for employer-provided child care. Though the child and dependent care tax credit was temporarily expanded and made refundable for 2021, it benefits only a small share of parents because relatively few have formal child care expenses that qualify for the credit. Read more about How does the tax system subsidize child care expenses?
What are error rates for refundable credits and what causes them? Q.What are error rates for refundable credits and what causes them? A.The IRS estimates two types of error rates for the earned income tax credit (EITC): the improper payment rate and the over-claim rate. The former includes IRS enforcement activities while the latter does not. The IRS has estimated an EITC improper payment rate of between 22 and 26 percent of EITC payments and an over-claim rate of between 29 and 39 percent of dollars claimed. Read more about What are error rates for refundable credits and what causes them?
