Tax refund: why would you receive less money in 2022?
The first Americans are receiving their tax refunds this year but unexpected problems could arise concerning the Child Tax Credit.
Tax season has been underway for two months, and Americans have only a month left to file their taxes or risk penalties. There are plenty of opportunities to receive a tax refund this year, with expectations being that 3 in 4 Americans will receive some money back from the IRS. One of the schemes from the past year that could net you upwards of $1,500 per child is the Child Tax Credit.
Eligibility for the expanded Child Tax Credit was based upon the recipient’s adjusted gross income (AGI). Individuals with an AGI of less than $75,000, or married couples with a combined AGI of less than $150,000, were entitled to receive the full amount from the Child Tax Credit. Despite its success in knocking down child poverty, the credit is not expected to be extended and will revert to its pre-2021 format.
Families could receive monthly payments for the first six months of the scheme, receiving the other half once their taxes were filed. A letter, 6419, was sent by the IRS at the back end of last year. It contained important information that can help ensure the return for the 2021 advance Child Tax Credit is accurate.
A problem could arise if you used your 2020 tax return to get the Child Tax Credit, but in the two years since you are earning above the AGI limit. You would not receive the final six months of the payment and would likely be asked to return the six months you received for your child as a tax bill instead of a refund.
“That will certainly be a surprise for folks,” said certified financial planner Patrick Amey, an advisor at Financial Advisory Service, Inc. in Overland Park, Kansas.
“And you’re not going to know exactly where you fall until you actually file your taxes, given the complexity of the calculation,” he said.
I didn't receive any monthly Child Tax payments last year but I think I was eligible, what happens?
If you had opted out of the monthly payments, or not filed your taxes in 2021 or 2020, then you need not worry; if you were eligible at a point in the last year and have no outstanding tax bills then you should receive a healthy refund from the IRS. This could be up to $3,600 per child, depending on their age and your earnings.
The scheme was expected to cut child poverty by 40 percent over five years, but was first reduced to just one extra year then scrapped altogether. Democrat Senator Joe Manchin has made it his endeavour to frustrate the Democrat party on Capitol Hill and no serious legislation has been passed in months. In fact, the end of the expanded Child Tax Credit has coincided with an increase in child poverty.