On Tuesday, the IRS encouraged taxpayers to get a head start on preparing their returns — especially those who may need to take action regarding economic impact payments as well as the advance child tax credits.
Article Summary
Economic impact payments
The final round of federal stimulus checks began going out in March, but some who were eligible for one didn’t get anything or received less than the full $1,400.
You may qualify for the recovery rebate credit, as long as your 2021 tax information falls under the guidelines of those who were entitled to the federal government’s COVID-19 relief program, according to an IRS news release.
Anyone who believes they’re eligible for the credit will first need to file a tax return for 2021, regardless of whether you typically file one.
At the same time, you will have to show the full amount of the third economic impact payment — including any plus-up payments — in order to figure out how much you are owed.
“Ensuring they use the correct payment amounts will help them avoid a processing delay that may slow their refund,” the IRS says.
Individuals can access information regarding their economic impact payment amounts here. More information about the recovery rebate credit can also be found here.
(Note: The IRS information only impacts federal stimulus checks, and not ones that were sent out by states like California.)
Child tax credit payments
The advance Child Tax Credit payments began going out to tens of millions of eligible households in mid-July, and are being paid in up to six monthly installments through the end of 2021 (the last payment is set to go out Dec. 15). Families got up to $300 per each eligible child under 6, and $250 for every qualifying child between 6 and 17 years old.
However, because the amounts were primarily based on 2019 or 2020 tax returns — whichever was the latest in the IRS’s records — some people may have obtained more or less than what they were actually eligible for this year, according to the IRS.
Anyone who collected too much might need to repay some — or even all — of the advance credit, the federal agency says. On the other end of the spectrum, people who received less can claim the remaining amount when they file their 2021 taxes.
Since only the first six months of the child tax credit was paid in advance, the last half of it will be claimed on the 2021 tax return. Some parents opted out entirely of the advance payments and will be able to claim what they’re owed as one lump-sum amount.
Ultimately, “Families who received advance payments will need to compare the advance Child Tax Credit payments that they received in 2021 with the amount of the Child Tax Credit that they can properly claim on their 2021 tax return,” according to the IRS’s website.
(More information on reconciling the two can be found here.)
The IRS has created a special page for taxpayers which outlines actions that can be taken to simplify the filing process next year.
