Tax Season 2022: how does the different government aid affect your tax return?
The Child Tax Credit and third stimulus check payments need to be accounted for in your tax return for 2021
It is close to time to file your latest tax return. While usually not the most fun time of year, the government support given out in the previous 12 months is likely to entitle you to further payments, especially if your financial situation has changed since the last time you filed last year. The Internal Revenue Service (IRS) has announced that the tax season will begin on Monday January 24.
The main two to focus on are the Child Tax Credit and the third round of Economic Impact Payments, better known as stimulus checks.
Child Tax Credit
Filing your tax return for 2021 gives you the chance to claim the remainder of the expanded Child Tax Credit. Eligible families received up to $1,800 for each child under six years of age and $1,500 for every child six to 17, split into six monthly payments from July to December. The faster your tax return is processed, the sooner you will receive the rest of your credit.
However, if you receive a total amount of advance Child Tax Credit payments that exceeds the amount of Child Tax Credit that you can properly claim on your 2021 tax year, you may need to repay to the IRS some or all of that excess payment. The IRS has confirmed that it will send out Letter 6419 to Child Tax Credit recipients in January, outlining what remaining credit they have or need to pay back.
Individuals who didn't qualify for the third stimulus check as of their 2020 tax return, or did not receive the full amount, may be eligible for the Recovery Rebate Credit based on their 2021 tax information. This is because a change to someone's earnings in the period after the initial sending of checks means they would still be eligible, provided they were now under the threshold to receive them.
This threshold is:
Applicants will need to file a 2021 tax return, even if they don't usually file, to claim the credit. Individuals will also need the amount of their third stimulus and any Plus-Up Payments received to calculate their correct 2021 Recovery Rebate Credit amount when they file their tax return.