The IRS advised families who received advance payments to compare the advance Child Tax Credit payments that they received in 2021 with the amount of the Child Tax Credit that they can properly claim on their 2021 tax return. Taxpayers who received less than the amount for which they're eligible can claim a credit for the remaining amount of Child Tax Credit on their 2021 tax return. Similarly, taxpayers who received more than the amount for which they're eligible may need to repay some or all of the excess payment when they file. Additionally, eligible families who did not get monthly advance payments in 2021 can still get a lump-sum payment by claiming the Child Tax Credit when they file a 2021 federal income tax return next year. This includes families who don’t normally need to file a return.
The IRS announced that it will be sending Letter 6419 in January 2022 with the total amount of advance Child Tax Credit payments taxpayers received in 2021. Taxpayers should keep this and any other IRS letters about advance Child Tax Credit payments with their tax records.
“Most people do not understand that the Advance Child Tax Credit (CTC) is just that an advance. It WILL reduce their refund and could cause them to OWE money when they were expecting a refund. Simply put if they received too much, they would need to repay it, or if they received too little or did not even receive it at all, they can claim the amount on their 2021 tax return. Each family will have different results based on their income etc. The IRS will start sending out letters in January 2022 to taxpayers who received either of these, and they will need to use the amounts provided on these letters on their 2021 Tax filing, due in April 2022”, explained Gary E. Rowe, CPA/Owner of M.R. Gaebel Tax Professionals in Carthage/Watertown. The letters started going out yesterday and will be distributed through January.
There are also changes in the third round of Economic Impact Payment (EIP). Individuals who failed to qualify for the third (EIP) or did not receive the full amount may be eligible for the Recovery Rebate Credit based on their 2021 tax information. Accordingly, these individuals will need to file a 2021 tax return, even if they do not usually file, to claim the credit. Further, individuals will also need the amount of their third EIP and any Plus-Up Payments received to calculate their correct 2021 Recovery Rebate Credit amount when they file their tax return. To assist taxpayer’s in in determining if they are eligible the IRS is sending out Letter 6475 also in January 2022.
“We strongly suggest that you consult with your tax professional for a thorough review and tax preparation”. Mr. Rowe also wanted to remind taxpayers that they will need their related 2021 information to reconcile their advance payments of the Child Tax Credit and Premium Tax Credit. Taxpayers will also need their stimulus payment and plus-up amounts to figure and claim the 2021 Recovery Rebate Credit if they received third Economic Impact Payments and think they qualify for an additional amount.
M. R. Gaebel is ready to implement these new provisions. For more information contact
M. R. Gaebel at 315-493-1862. Type your paragraph here.