It’s understandable that, now that you’ve received your child tax credit letter and have gathered all of the other paperwork you’ll need to complete your taxes, you’re worried about having to repay any child tax credit money you received last year.
Will you receive an unpleasant surprise when you file your tax return with the IRS as a result of the advance payments you made?
Last year’s monthly payments were based on either your 2019 or 2020 tax return, depending on which you filed first. However, if your personal circumstances have changed since you last filed, it is possible that you have received an overpayment.
For example, if your salary increased after you filed your 2020 taxes or if your child reached the age of majority and no longer falls into a tax category. It’s possible that you will owe money to the IRS when an adjustment is made on your 2021 tax return if this is the case.
Although it may appear to be complicated, the Internal Revenue Service has materials to assist you in determining your eligibility. You’ll also want to double-check that all of the information on your child tax credit letter is accurate. This story has been updated recently.
Will I repay the Internal Revenue Service money for the child tax credit cheques I received last year?
You don’t need to know the financial intricacies, but you do need to know that the quick answer is no. According to Mark Jaeger, vice president of tax operations at TaxAct, the child tax credit checks do not constitute income, and as a result, you will not be required to pay income tax on payments.
The IRS referred to these payments as “advanced” payments because they were made in advance of the 2021 tax season: “This simply means that you’ll receive your cash sooner rather than waiting to obtain your money when you file,” says the expert.
While you will not be required to pay taxes this year on the amounts you will receive in 2021, you may be required to reimburse the IRS for a portion of the advance payment when you submit your income tax return in 2022, depending on your circumstances. We’ll go into more detail about this later.
Is it necessary for me to refund the money if I received more than I was intended to?
Maybe. Unless you specifically choose to opt-out of receiving monthly child tax credit payments, you should automatically receive half of your expected amount in 2021 from the IRS automatically.
By foregoing the monthly payments, you will instead receive larger lump-sum payments between July and December of last year, which you will receive when you file your tax return in 2021, rather than smaller installments throughout the year.
If for whatever reason, you end up receiving more child tax credit money than you qualify for as a result of inaccurate household information, you may be required to reimburse the IRS for a portion of the money received. It is possible in the following conditions that this is the case:
In the event that someone in your household received a higher-paying job in the previous year, the adjusted gross income increased, putting you in a higher or lower income band than you were previously in.
If one of your dependents reached the age of majority in the previous year, you may be eligible for a pension. For example, if your 5-year-old child turns 6 in 2021, you would be eligible for a lower monthly payment at that time.
Alternatively, if your 17-year-old reached the age of majority in 2021, you would no longer be entitled to the sum you had received.
There is a change in custody of the child. For instance, if the parents are divorced and have a shared custody arrangement, or if the parent who has custody changes from one year to the next, in a joint custody arrangement, only one parent can take credit for the upbringing of a particular child.
If your primary residence was in the United States for more than half of 2020, but not in 2021, you would no longer be eligible for compensation under the program.
The IRS provided people with the opportunity to opt-out of the advance payments in large part because of these types of changes in circumstances.
In order to refund child tax credit money, what are the income limitations?
If your household’s adjusted gross income, or AGI, for 2021 was below a predetermined income limit, you are unlikely to owe any money to the Internal Revenue Service, even if you received more child tax credit money than you were legally entitled to.
This is referred to by the IRS as “repayment protection,” and ensures that lower-income households will not be required to refund any money. If your income exceeds a specific threshold, the amount of money you must repay increases or phases in until you owe the entire amount owed.
The letter that the IRS gave out between December 2021 and January 2022 can assist you in determining whether or not you received an overpayment and whether or not you are required to reimburse all or part of the advance payments received during that period. More information on that letter can be found in the section below.
When I submit my taxes this year, will I be required to declare my entire child tax credit payments made?
Yes. Between December 2021 and this January, the Internal Revenue Service (IRS) mailed letters to families who received child tax credit payments informing them of the total amount of money they received in 2021.
Keep this notice, which the IRS is referring to as Letter 6419, because you’ll need the information contained inside it when you file your tax return for the year 2021.
You can change your mailing address with the IRS via the Child Tax Credit Update Portal to ensure that the IRS has the most up-to-date information. You can also update your mailing address through the United States Postal Service.
Will the remainder of my child tax credit money be sent into my bank account together with my tax refund?
Yes. It’s possible that, after comparing the information on the IRS letter you received with what you’re actually entitled to, you’ll find that you’re owed more money than you received in advance payments, depending on your actual 2021 income. If this is the case, you will be able to claim the remaining amount of your child tax credit when you file your income tax return.
Read More: Payments for Snap in February 2022 Are Scheduled as Follows
Does the money I receive from the child tax credit have an impact on the other federal benefits I receive?
According to the Internal Revenue Service, no. Federal, state, and local agencies cannot utilize the amount of the advance child tax credit payments to decide whether you or your family is eligible for other benefits and assistance since the payments do not count as income.
