Families who received the child tax credit last year should keep an eye out for this letter from the IRS. Families who earned the expanded child tax credit last year could expect their 2021 taxes to look somewhat different.
This is because the monthly payments made to millions of eligible households from July to December only accounted for half of the credit. Those who received the funds must now produce proof of receipt in order to get the second half of their tax refund in 2021.
The IRS has started to issue letters to families detailing the total amount of advance payments received. The agency will continue to distribute the paperwork, known as Letter 6419, to families until the end of January.
“That sum will need to be reconciled on their 2021 tax return,” Sheri Fronsee, a CPA and tax researcher expert with the National Association of Tax Professionals, said.
Reconciliation during tax season
Families should save the letter and use it to appropriately balance the child tax credit when filing their taxes in 2021. The data will be useful in completing Schedule 8812 (together with Form 1040), which will determine how much additional money they will receive from the credit.
“If you don’t make that reconciliation, they’ll hold your refund until you do,” Fronsee said. “You don’t want it to happen, therefore make sure reconciliation is completed.”
If you do not get the letter, there are additional methods to ensure that you have all of the necessary information to file your taxes correctly. Families may also use the IRS CTC update page to see how much they’ve received via the advanced child tax credit installments.
Why should everyone file?
It is critical that all families with qualifying children submit their taxes this year. Families with qualified children may get a refund even if they do not owe any taxes for the year since the expanded child tax credit has been made completely refundable for 2021.
It may be hundreds of dollars. In 2021, the increased child tax credit was $3,000 for children aged 6 to 17 and $3,600 for children under the age of 6.
Filing a tax return also allows people who haven’t received advance payments to claim the entire credit for each qualified kid. Furthermore, persons who did not get their third Economic Impact Payment may claim the stimulus check on their tax return.
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