Tax Season 2022: What to know about child credit and stimulus payments
This year’s tax filing season is likely to be another challenging one because of pandemic-related tax changes. But the first step for many taxpayers is simple: Check the mail.
The Internal Revenue Service is sending special statements to the millions of Americans who got monthly payments last year of the expanded child tax credit, part of the pandemic relief program. The agency is also sending letters to the people who got the third stimulus payment last year.
The advance payments of the child tax credit reflected half of a family’s estimated credit. To claim the other half, people must enter information from the IRS statement on their federal tax return to reconcile the amounts. The document, IRS Letter 6419, details the total amount of advance payments paid last year and how the amount was calculated.
A quick refresher: Congress temporarily expanded the child tax credit for the 2021 tax year. It made the credit more generous, providing as much as $3,600 per child, up from $2,000. And because it wanted to get financial help to families quickly during the pandemic, it began paying half of the credit in advance, divided into monthly payments delivered from July through December. The aid went to families with about 61 million children, according to the Treasury Department.
Married couples should expect to receive two separate letters — one for each spouse, said Misty Erickson, tax content specialist with the National Association of Tax Professionals, a trade group for thousands of tax preparers.
Trish Evenstad, a board member at the National Association of Enrolled Agents, a group of federally licensed tax professionals, said the envelope of one such letter she had seen was clearly marked “Important Tax Document.”
“Hopefully, people will save it,” Evenstad said.
The information in the letter will be used to calculate how much of the credit remains to be paid out to the taxpayer, she said. Recipients should compare the letter with their bank statements, she said, to see if they agree.
The IRS letter advises recipients to review their payments online at the agency’s child tax credit portal. Anyone who didn’t receive one or more of the payments listed is instructed to call the IRS before filing a return.
If there is a discrepancy between a filer’s records and the official IRS letter, some tax professionals may urge filers to use the information on the letter to avoid delays processing the return and issuing refunds.
But others may urge filers to use the amounts shown in their records, if they have documentation — such as a bank statement — to show that they are accurate. That, however, could cause the IRS to flag the return for review, delaying the entire refund — not just the amount tied to the child tax credit, said Erin Collins, the national taxpayer advocate. Collins heads the Taxpayer Advocate Service, an independent agency representing taxpayers inside the IRS.
One option could be to file a return using the IRS numbers, then file an amended return later with the amounts documented in the filer’s records. Filers would eventually get the correct amount from the credit, without delaying their entire refund.
But Eric Smith, an IRS spokesperson, advised against that approach because the agency already has a large backlog of amended returns to process, and wait times will probably lengthen once filers begin submitting returns for 2021. “Amended returns take a long time, even under the best of circumstances,” he said.
Evenstad said filers who wanted to get at least part of their refund could choose to file with the IRS numbers and then ask the agency to trace the payments in question so they could get the money once the difference was verified.
“They definitely should talk to their accountant,” Collins said, noting that her office does not give tax advice. Since there is still time before returns can be filed, she said, taxpayers can try to contact the IRS to correct any discrepancy. Be aware, however, that wait times for assistance may be lengthy. “It’s not going to be a quick fix,” she said.
If you got advance payments but don’t receive an IRS letter, you can go to the IRS’s child tax credit update website and create an account to check your information online. (You’ll need to verify your identity, using an ID such as a driver’s license or a passport, and you’ll need a way to take a photograph of yourself and upload it.)
The total amount of the credit varies from family to family, and is based on your child’s age as well as your income and filing status. Families with children 5 and younger are eligible for credits of as much as $3,600 per child, with up to $300 received monthly in advance; those with children ages 6 to 17 are eligible for up to $3,000, with up to $250 a month in advance. Families are eligible for the full amount if they earn less than $150,000 and are married filing a joint return. Single filers who earn less than $75,000 are also eligible for the full amount, as are head-of-household filers earning less than $112,500.
Tax professionals are preparing for clients who may be confused by the steps needed to reconcile various advance payments on their tax return. In a news release, the National Association of Tax Professionals said recent tax law changes and IRS backlogs “may cause complications” when filing a 2021 return: “Tax preparers may face their most grueling tax season to date.”
Filers can take at least two steps to help make tax season go more smoothly: File your return electronically and arrange for automatic deposit of your refund. “Paper is not the IRS’s friend,” Collins said.