PORTLAND, Ore. — Tax season starts on Jan. 24 this year and you could receive a letter from the Internal Revenue Service (IRS) before you even file. Don't worry, that letter is just to let you know how much money you received from either a third stimulus payment or the enhanced child tax credit.
Congress approved the child tax credit to get paid out early to families to help financially during the pandemic. The first payments went out in July and ended in December. Those payments accounted for only half of the child tax credit you'll claim on your taxes this year. Parents or legal guardians with children ages 5 and under are entitled to $3,600 per child and those from 6 to 17 would receive $3,000 per child.
RELATED: Yes, you need to claim the child tax credit on your 2021 return, even if you got advance payments
"So if a family received prepayments for a child who is age 10, they would've received $1,500 of the maximum $3,000 they're entitled to for that child," said April Gutierrez, a certified public accountant and co-owner of Pacific Northwest Tax Service. "If they had a child who is aged 4, then they would've received $1,800 of the $3,600 they're entitled to for that child for the year."
Those early payments will have an impact on how you file your taxes. There are instances where you may end up owing some of that money back.
"If your filing status has changed, if your income has gone up, if the number of qualifying children has gone down, potentially then there is a risk that you could have to pay some of that back," said Kerry Morton, a certified public accountant and senior tax manager with Perkins & Co.
One thing that could cause an issue is that if you share custody of your children and claim a child one year on your taxes and the other parent claims that child the next year, you may have received a child tax credit payment based off your 2020 taxes and could end up owing back that money.
The IRS will be sending out letters this year to let filers know how much they received from the government. Many of the letters have already arrived, but the IRS says Letter 6419 should arrive by the end of January.
"IRS sends people letters and some people who get letters panic and don't open them and throw them out and that is their response. It's never a good idea to throw out a letter you get from the IRS," Gutierrez said. "It is a very important idea to hang onto that letter and give it to your tax preparer at tax time or if you are doing your own taxes, make sure you have it available."
If you received a third stimulus payment in 2021, you will also receive a letter from the IRS and need to hold onto that letter as well. For those that are married, each person will receive a letter which will state half the amount that you received jointly. The same goes for the child tax credit payments, both will receive a letter in the mail.
If you didn't receive a stimulus payment or child tax credit in 2021, you can check your eligibility at the IRS.gov portal.
"If you get the letter and you don't agree with the payments, then what I would do is I would go to that portal on IRS.gov and go back through and match your bank statements and that way you can find if maybe you did miss a payment somehow and try and get that corrected." Morton said.
Taxes are due April 18, 2022.
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