6 Ways the Child Advance Tax Credit Could Affect Your 2021 Tax Refund

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This year, tax time involves settling child tax credit payments.


Key points

  • Child tax credit payments received in 2021 could positively or negatively affect your 2021 tax return.
  • If you have a child who is no longer eligible, your income has changed significantly for better or worse, or any of these other four scenarios apply to you, you may need to ( or will owe) a supplement to your tax refund this year.

There’s no two ways about it; it’s been a weird few years. Medically, politically and financially, it was one upheaval after another. One bright spot is that the federal government sent monthly advance child tax credit payments to families in the last six months of 2021. For many, this was a way out of poverty. It was a way to pay for other people’s groceries and medical bills.

That said, your tax refund (or the amount you owe in taxes) may be different this year if any of the following apply:

1. One of your children has aged

To receive child tax credit payments, your child had to be 17 or younger on December 31, 2021. If any of your children turned 18 before the last day of the year, you could find yourself liable money.

2. Your income changed in 2021

Let’s say you qualify for full child tax credit payments based on your 2020 tax return, but 2021 was a bumper year for you financially and you made too much money to qualify. to the full amount. You could find yourself repaying anything you received that was more than what was owed to you.

On the other hand, if you made less money in 2021 and you weren’t initially eligible for the full Child Tax Credit amount, you may find that you are now eligible for more and you can expect a larger refund or owe less tax than expected.

3. You received an overpayment

Since the IRS was responsible for depositing millions of child tax credit payments into bank accounts across the country, there were definitely a few mistakes. Let’s say you were paid for three children when you have two, or you received child tax credit payments for a child under 6 when all of your children are 6 or older. Again, you might find yourself paying back the difference to the IRS.

4. You weren’t supposed to receive payment at all

Although we haven’t heard of it firsthand yet, it’s possible that some Americans have received payments they weren’t supposed to. For example, if you are divorced and your ex has primary custody of the children, you may not have been supposed to receive the child tax credit funds. If you did, the IRS will know and expect a refund.

5. You declined monthly payments

It may feel a bit like Christmas this spring if you opted out of receiving monthly child tax credit payments in 2021. That’s because you now qualify for the full plus $3,600 payment. per child 5 and under and $3,000 for each dependent between the ages of 6 and 17.

6. You welcomed a new member to the family

If you became the guardian of a child in 2021, gave birth to or adopted a child, the IRS may not know yet. If so, you did not receive child tax credit payments and are now entitled to the full amount when filing your 2021 tax return.

Yeah, it’s been a weird few years. But at least the global pandemic has taught us that we are more flexible than we thought and can cope with more than we imagined. If any of these scenarios apply to you, take extra care when filing your 2021 taxes to make sure your return is accurate.

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