Child Tax Credits causing confusion as filing season begins
SIOUX FALLS, S.D. (Dakota News Now) - It is officially tax season, and parents who received child tax credits through the past year will need to pay close attention.
If you haven’t already gotten it, you should soon find a letter from the IRS in your mailbox that will be important when filing taxes.
According to the IRS, from July through Dec. 2021, more than 36 million households received monthly advances on 2021 tax credits for children under age 17.
Those households are receiving IRS Letter 6419.
Tim Ness, with Ness Tax and Bookkeeping Service, says, for some, the numbers aren’t quite adding up.
“The client should take a look at their paperwork from the Internal Revenue Service and verify the dollar amount on that letter by checking their bank accounts and/or looking up information at IRS.gov to see what the IRS truly has on record for them,” Ness said.
Ness says the number on the letter should represent half of the amount to which a household was entitled. The other half can be claimed on a 2021 return.
“We’ll see a reduced amount being claimed on the actual tax amount because the taxpayer would have received half of that upfront, so refunds could shrink a bit,” Ness said. “But, we also see the refundable part of the daycare credit come into play and hopefully, things will balance out.”
If you filed jointly in 2020, you could get two letters, each accounting for half of the total credit value.
“So, it’s potential that if you received $3,000, the IRS will send you each a letter for $1,500,” Ness said.
Because of the advance in child tax credit, Dawson Muska, a Counseling Coordinator for Luther Social Services, says it’s a good idea to plan for a smaller tax return this year.
“Are there some expenses that you can trim down or can you get a little more streamlined, financially, so that you have the capacity to take a little bit of a hit if you don’t get the tax return you were expecting?” Muska said.
While tax season can be stressful, Muska says it provides an opportunity to reset.
“It is a good time to get together with those important to you, whether it’s a spouse, partner, family members, and make some resolutions,” Muska said.
If your return comes back larger than expected, Muska says to use that money to pay off debts, or in some cases, treat yourself.
“Make sure your financial situation is clean before you go and have fun with your tax return,” Muska said.
While there were no child tax credit payments in January 2022, there is a possibility they could return. It all depends on whether President Joe Biden’s “Build Back Better” plan passes through the gridlocked Senate.
The filing deadline for most taxpayers is Monday, April 18.
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