Child Tax Credit Payments Likely To Have Minimal Impact on Your Tax Refund

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U.S. households that qualified for enhanced Child Tax Credit payments in 2021 will have to include that income on their tax returns this year. In some cases, they might end up getting a smaller or larger refund because of income or family changes that occurred last year. However, for most recipients, the impact on their tax refunds will be minimal.

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Enhanced CTC benefits were included in the $1.9 trillion American Rescue Plan that was signed into law by President Joe Biden last year. As part of that bill, eligible families could sign up for monthly CTC payments sent out during the latter half of 2021. Those payments provided an advance of half of the total benefits. Families must now file 2021 tax returns to claim the second half of the benefit.

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As previously reported by GOBankingRates, a change in income or family status (such as a new child) in 2021 could impact the amount of your refund when you file your taxes. If your income rose enough that it reduced the CTC amount you could claim — or even eliminated it altogether — you might end up with a lower refund or even end up owing money.

“There will be a reconciliation,” Trenda Hackett, CPA and technical tax editor of the tax and accounting business at Thomson Reuters, told CNBC. “There could be some instances where your payment was in excess of what you were actually allowed on your tax return.”

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On the other hand, if your income declined in 2021, or if you added a new dependent during the year, you might qualify for a bigger credit than you actually received. In this case, your refund should see this reflected, as well.

Most families will probably fall somewhere in the middle, however, meaning the impact on their refunds won’t swing much either way.

Even families that were overpaid in monthly CTC payment can qualify for repayment protection with the IRS that would shield them from getting a bill, CNBC reported. Those who are married and filing jointly, or filing as a qualified widow, will be fully protected from repayment if their 2021 adjusted gross income is $60,000 or less. Taxpayers who file as head of household will get full protection if their AGI is $50,000 or less for single filers, or $40,000 or less if married and filing separately.

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You won’t qualify for repayment protection if your 2021 AGI was $120,000 if you are married filing jointly, or a widower; $100,000 if you file as head of household; and $80,000 if you are a single filer or are married and filing separately.

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If you received the CTC benefit, keep an eye out for Letter 6419 from the IRS. This will help you reconcile what you got in 2021 to ensure you claim the correct amount this year. If the letter is incorrect, or you didn’t receive it, check the IRS’s online portal to see what payments you got.

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About the Author

Vance Cariaga is a London-based writer, editor and journalist who previously held staff positions at Investor’s Business Daily, The Charlotte Business Journal and The Charlotte Observer. His work also appeared in Charlotte Magazine, Street & Smith’s Sports Business Journal and Business North Carolina magazine. He holds a B.A. in English from Appalachian State University and studied journalism at the University of South Carolina. His reporting earned awards from the North Carolina Press Association, the Green Eyeshade Awards and AlterNet. In addition to journalism, he has worked in banking, accounting and restaurant management. A native of North Carolina who also writes fiction, Vance’s short story, “Saint Christopher,” placed second in the 2019 Writer’s Digest Short Short Story Competition. Two of his short stories appear in With One Eye on the Cows, an anthology published by Ad Hoc Fiction in 2019. His debut novel, Voodoo Hideaway, was published in 2021 by Atmosphere Press.

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