Here’s what to know ahead of tax season if you got child tax credit payments in 2021
Families who received child tax credit payments will need to confirm they got the right amount when filing taxes.
The temporarily enhanced tax credits — included in the $1.9 trillion American Rescue Plan signed into law by President Joe Biden in March — provide eligible parents with up to $3,600 per child over the course of a year. The first half of the credit is being sent as monthly payments of up to $300 and the second half can be claimed when parents file their 2021 federal income tax returns in 2022.
Parents had the option to forgo the monthly payments and receive the full credit when they file taxes. For those who did receive the monthly payments, the Internal Revenue Service said on Tuesday, Dec. 7, that they will need to check that they received the amount they are eligible for when they file their 2021 income tax returns.
The IRS also noted that people who did not receive the third round of COVID-19 stimulus checks or who did not receive the full amount may be eligible for a credit when they file taxes.
Checking your child tax credit payments
Families who received child tax credit advance payments will need to compare the amount they received with the amount “that they can properly claim on their 2021 tax return,” the IRS said.
Parents who received less than the amount for which they are eligible will claim a credit for the remaining amount when they file their 2021 income taxes. Those who received more may be required to repay some or all of the “excess payment” when they file their taxes.
Most people who will need to repay part of the child tax credit payments will be able to “satisfy that balance through a reduction in their expected federal income tax refund,” the IRS said.
“In January 2022, the IRS will send Letter 6419 with the total amount of advance child tax credit payments taxpayers received in 2021,” the IRS said. “People should keep this and any other IRS letters about advance Child Tax Credit payments with their tax records.”
Eligible families who didn’t receive monthly payments, including those who don’t normally file a tax return, can claim the child tax credit as a lump-sum payment when they file their 2021 taxes.
Why parents need to check their payments
The child tax credit payments families received were based on IRS estimates of their eligibility in 2021.
It used parents’ 2020 tax returns, or 2019 returns if they weren’t available, to determine eligibility for the credit. But things may have changed in 2021 that could affect how much families are owed, including an increase in income, a change in filing status or changes in the number of qualifying children living in the home.
“As a result of these types of ordinary family and life changes, you may receive a total amount of advance child tax credit payments that exceeds the amount of Child Tax Credit that you properly are allowed on your 2021 tax return,” the IRS said.
Stimulus checks
Those who were not eligible for the third round of stimulus checks, worth up to $1,400, and those who did not receive the full amount may be able to claim a Recovery Rebate Credit based on their 2021 tax information.
“Individuals will also need the amount of their third Economic Impact Payment and any Plus-Up Payments received to calculate their correct 2021 Recovery Rebate Credit amount when they file their tax return,” the IRS said. “Ensuring they use the correct payment amounts will help them avoid a processing delay that may slow their refund.”
The agency will send out letters in 2022 with “the total amount of the third Economic Impact Payment and any Plus-Up Payments received.”
About the child tax credit and stimulus checks
The enhanced child tax credit, which only runs through 2021, provides families with $3,600 total per child under age 6 and $3,000 total per child ages 6 to 17. Single parents earning up to $75,000 a year and couples earning up to $150,000 a year are eligible for the full credit. Benefits are phased out for higher incomes.
The first five direct payments were sent out on July 15, Aug. 13, Sept. 15, Oct. 15 and Nov. 15. The final payment is set to go out to eligible families on Dec. 15.
The third round of stimulus checks were included in the American Rescue Plan. Individuals making under $75,000 and couples making under $150,000 were eligible for the full $1,400 payment per person, plus $1,400 per child or adult dependent. The payments phased out after that, capping at individuals making $80,000 and couples making $160,000.
This story was originally published December 9, 2021 at 7:24 AM with the headline "Here’s what to know ahead of tax season if you got child tax credit payments in 2021."
