How will advance child tax credit payments affect my return?
Over the last six months of 2021, millions of families received monthly payments based on how many children were in their households as well as their ages. These first-ever advance child tax credit payments could affect your tax return in different ways, according to a report by Forbes.
First, filers will be required to report how much they received in payments. Depending on the amount of child tax credit payments received in 2021, filers may receive a bigger or smaller tax refund than expected. They may even owe additional taxes.
To figure out whether you owe additional taxes, the IRS will send out Letter 6419, which will state the total amount of child tax credit payments you received. You should compare this amount with the total child tax credit to which you’re entitled.
If the total child tax credit for which you’re eligible exceeds how much you received, you can claim the remaining amount on your 2021 tax return. If you received more than you qualify for, you will need to repay some or all of the excess payments when filing taxes.
What about the COVID-19 stimulus payment I got this year?
If you received a stimulus payment between March and December 2021, you will receive Letter 6475 from the IRS in early 2022, which shows the amount of your third stimulus payment. Do not throw this letter away. You will need it to claim the payment on your taxes.
Letter 6475 will also help determine whether you are eligible for the Recovery Rebate Tax Credit.
The Recovery Rebate Tax Credit worksheet will be used to request any additional payments you may be owed through your 2021 tax return. This is especially important if you didn’t receive a stimulus payment or only received a partial payment.
If you’re eligible for the Recovery Rebate Tax Credit but usually don’t file a tax return, you will need to file this one in order to receive any owed funds.