Friday, January 28, 2022

Tuesday’s Tax Tip: Child Tax Credit and Stimulus Letter

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Getting anything from the IRS in the mail is enough to make you nervous. This year, though, you should be on the lookout for any IRS communication. I know, it’s strange! However, the IRS is sending millions of people essential and informative letters, and this letter will be required when submitting your 2021 tax return. Here’s where the tale goes from here.

Be on the watch for a letter from the IRS if you received any amount of the advance child tax credit or the third stimulus payment in 2021. This is why:

Child Tax Credit in Advance

The money that was delivered to millions of families with eligible children from July to December essentially makes up half of the tax credit. Families will need to show what they got as a way of reconciliation in order to have the rest of the credit applied to their tax returns. If you don’t reconcile that credit, your tax refund may be delayed.

The entire amount of advance Child Tax Credit payments received by taxpayers in 2021, as well as the number of qualified children utilized to calculate the advance payments, will be included in Letter 6419. The goal is to assist the taxpayer in reconciling and receiving all of their Child Tax Credits.

What happens if you don’t get this letter?

There are other ways to ensure you have the correct information to submit your taxes correctly, so don’t worry. Families can also use the IRS CTC Update Portal to see how much they’ve received through advanced child tax credit payments.

What is the point of filing a tax return?

It’s critical that all families with children under the age of 18 submit their taxes this year. Families with qualified children may receive a refund even if they do not owe any taxes for the year because the expanded child tax credit has been made completely refundable for 2021. In 2021, the improved child tax credit will be $3,000 for children aged 6 to 17 and $3,600 for children under the age of 6.

Filing a tax return also gives those who haven’t received advance payments the chance to claim the entire credit for each child who qualifies. If you received credit before filing your tax return, your tax refund may be much lower than in previous years. This is due to the fact that a portion of your return was received during the year.

Check for Stimulus in 2021

Most Americans were eligible for a direct payout of up to $1,400 each plus $1,400 for their dependents under the American Rescue Plan, which was passed in March 2021. The IRS will send Letter 6475 to people who got the third stimulus check, which is technically known as the 2021 Economic Impact Payment. This letter is solely for individuals who got the third payment, which began in March 2021 and ended in December 2021, including the “plus-up” installments. (Plus-up payments were given to persons who got their EIP after the IRS amended their eligibility information.)

This letter will assist recipients of Economic Impact Payments in determining whether they are eligible for and should claim the Recovery Rebate Credit on their 2021 tax returns, which they will file in 2022.

Whether you receive one of the letters or not, be sure to open it and read the reason for the communication whenever you receive correspondence from the IRS. If the letter isn’t regarding the advance child tax credit or the economic impact payment, find out why it was sent and get professional tax advice if necessary. Keep a copy of this letter, as well as any other IRS correspondence, with your tax documents.

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