Anyone in the United States who received the advance Child Tax Credit payments in 2021 will have to declare this when it comes to filing your taxes.
There were millions of families who benefitted from these monthly payments, which reduced their write-off at tax time, but that could trigger a bill, but this is contingent on your 2021 modified adjusted gross income.
“That will certainly be a surprise for folks,” said Patrick Amey, an advisor at Financial Advisory Service, Inc. in Overland Park, Kansas.
“And you’re not going to know exactly where you fall until you actually file your taxes, given the complexity of the calculation.”
Child Tax Credit money
Parents will have received up to $1,800 over the course of the monthly Child Tax Credit payments scheme for each child aged five and younger, and up to $1,500 for children between six and 17, with this having been determined as a result of your 2019 or 2020 income.
Yet, it is worth bearing in mind that if you earned more in 2021 than you did in 2020, when the COVID-19 pandemic was having a big impact on jobs across the USA, you might have to pay some money back.
“That’s going to be a rude shock for a lot of folks,” said Dan Herron, a San Luis Obispo, California-based CFP and CPA with Elemental Wealth Advisors.
“Especially [for those people] with a big swing between 2020 and 2021 income.”
Filing Child Tax Credit payments
It is important that you use the figures you received on the letter from the IRS entitled Letter 6419, which will be how much you received as part of the Child Tax Credit payments.
“Be on the lookout for this letter and don’t throw it away,” said Herron, as he made clear that it will make the tax return filing process a lot less stressful.
Alternatively, you can look at the IRS’ Child Tax Credit Update Portal to see a list of the payments you have received, from which you will be able to work out if you are owed money or if you in fact have to pay some back.