(ReliableNews.org) – Tax day just passed, and many Americans are finding themselves in an unexpected position of receiving a smaller refund than the previous year. Parents across the United States might not realize the child tax credit payment received during the year was an advanced payment. Now that people are filing their taxes, most of the credit they would usually take at the end of the year is no longer there for the taking. So, tax refunds are smaller because those who didn’t opt out already received that portion of their taxes.
Advanced Child Tax Credit
When legislators passed President Joe Biden’s American Rescue Plan in March 2021, a stipulation allowed US citizens with children to receive part of the child tax credit they would have included on their 2021 taxes in the form of advanced monthly payments. Unless the taxpayer opted out of the program, they received half of their credit before the end of the year.
Unfortunately, the credit was based on income from the previous year, so if a family made more than it did the year prior, it might have to pay back the credit to the IRS. Child tax credits are only available to parents who meet certain income thresholds. If the IRS paid out money for a credit taxpayers no longer qualify for, they may have to pay back part or all of the advance unless they qualify for full repayment protection.
What Is Repayment Protection?
The tax agency put protections in place to try and lessen the possibility of requiring taxpayers to return their child tax credit payments. The IRS created income thresholds that may qualify taxpayers to be able to keep a portion of the advanced child tax credit payment. However, if a household’s adjusted gross income exceeds $120,000 for a married couple, $80,000 for singles, or $100,000 for heads of household, the money has to go back to the government.
Third Stimulus and IRS Speed
If taxpayers didn’t receive their third stimulus payments in 2021, they’ll have to wait a bit longer for their funds. Instead of the government sending a check for the payment, citizens will have to list the missing money as a credit on their tax returns. The credit will reduce the bottom line of what the individual owes to the IRS and will increase their return by that amount. Since they will now have to wait for the agency to process their entire return, those affected are likely hoping the IRS is quicker with processing than they were during last year’s tax season.
Copyright 2022, ReliableNews.org