When it comes to submitting their tax returns this year, some parents may be disappointed. They could find that they’ll be getting lower returns than normal. During the year 2021, more than 36 million households will have received half of their improved child tax credit in monthly installments.
If the parents got too much money in the form of child tax credits in 2021, they would have to reimburse some of it. The monthly payments they made last year were based on either their 2019 or 2020 tax return. If their circumstances have changed since they last filed, they may have received an overpayment.
If the parents’ income increased after they filed their 2020 taxes, or if their child graduated from a tax bracket. If this is the case, they may owe money to the IRS when their 2021 return is adjusted.
According to the Vice President of Tax Operations, Mark Jaeger, the child tax credit payments are not considered income, they will not be required to pay income tax on them.
In anticipation of the 2021 tax season, the IRS referred to these checks as “advance” payments, which indicates they will get the money sooner rather than later.
Parents won’t have to pay taxes on the payments they get in 2021 this year. Though, they may have to pay some of the advance payment back to the IRS when they submit their 2022 income tax return, as per the written report of the CNET.com site.
If one of their dependents has reached the end of a certain age range in the past year. If their 5-year-old turns 6 in 2021, they may be eligible for a lower payment. The amount they received would no longer be available if their 17-year-old turned 18 in 2021.
Child Tax Credit Issues
Parents were given half of the credit as part of the American Rescue Plan package last year. From July through December, children under the age of 6 will earn more than $300 per month, while those between the ages of 6 and 17 will have $250 per month.
Some parents may find that their return will be substantially lower. Some may have to pay back some or all of their monthly child tax credit payments, based on the report published by CNN news.
So that more low-income parents might take advantage of the child tax credit in 2021, lawmakers made it entirely refundable. These parents have to file their 2019 or 2020 tax forms, apply for a stimulus check, or use the IRS or Code for America’s child tax credit portals in order to get the monthly payments.