How the Child Tax Credit Affects Your 2022 Taxes
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Starting in Summer 2021, the Child Tax Credit was released to parents in increments to help families during the pandemic. The Child Tax Credit expansion was included in the Build Back Better Act and was said to benefit nearly 90% of children in the country. The legislation allowed for parents to receive up to $300 a month for each child under the age of six and $250 each month for each child between six and 17. These amounts made up half the total credit amount which means the other half will need to be claimed on your 2021 income tax return.
You didn’t need to do anything to receive these advance child tax credit payments. The payments were based on previous tax returns on file and was automatically disbursed through the same method of payment you had for your 2020 tax return. However, the IRS did allow for parents to opt out of receiving these payments, so if you did not opt out, chances are you were receiving the payments to your bank account.
How does this impact my 2022 tax return?
Since these were advance half payments, your 2022 tax return may produce a larger bill than you received previously. So you will not be able to claim the full Child Tax Credit as your normally would. This can result in a tax bill or a lower income tax return payment.
The great thing is, these payments you received were not considered income, so they will not be taxed. However, if you were not actually eligible, since they were calculated based off 2020 information and your 2021 circumstances could have warranted you ineligible, you may have to pay back some of the money. Some families may find that their 2021 income exceeded the original estimates and they rose above the income threshold for eligibility. If that is the case, they will be paying back these benefits in their 2022 return.
How do I know how much Child Tax Credit I received?
The IRS will be sending out a letter, Letter 6419, to let parents know how much Child Tax Credit they received. Be on the look out for this letter because you will need the exact numbers when filing your tax return for 2022. If you do not receive it, you can also visit the Child Tax Credit Portal created by the IRS. They created this portal to check if you’re eligible for the credit and enrolled for payments, view your bank account information, view your mailing address, and view your payments.
Will the Child Tax Credit payments continue?
There has been great debates on whether or not these credits will continue into 2022. The extension was passed by the House of Representatives. There was a 50-50 split between the Republicans and the Democrats, with the Democrats holding the tie breaker. However, Sen. Joe Manchin mentioned that he was not in favor of this piece of legislation.
Even if the extension is not passed, we will revert back to the old way of doing things where we file for the entire tax credit once per year through our tax return.
