For the last six months, approximately 36 million families received a monthly payment from the IRS for the expanded Child Tax Credit (CTC). The expanded CTC helped families and local economies with additional advanced money for groceries, rent, clothing, education, and other necessary expenses. As of mid-January 2022, there will be no advanced CTC checks coming but be on the lookout for a letter from the IRS.
The expanded Child Tax Credit and advance payments expired at the end of 2021. President Joe Biden and other House Democrats worked to extend the payments to last another full year as part of the $2 trillion Build Back Better domestic and environmental bill, but Democratic Senator Joe Manchin opposed the extension among an evenly split Senate.
If Biden’s Build Back Better Act had passed, families would’ve received a CTC payment on January 14th.
The IRS will be sending Letter 6419 in January 2022 to eligible households providing guidance on the total amount of advance CTC payments that were received in 2021. The IRS is urging families to hold onto these letters to assist them in preparing their 2021 federal tax returns.
Last year’s CTC plan made credit fully refundable so that the lowest-income taxpayers were eligible to receive the maximum amount and expanded the credit to include 17-year-olds. It also allowed for the issuance of up to 50% of the 2021 credit in advance monthly payments before last year’s tax returns are filed.
Because families only received half of their 2021 credit on a monthly basis, the other half will be received once they file their taxes in the coming months. Eligible families that did not receive advance payments can claim the Child Tax Credit on their 2021 federal tax return to receive missed payments and the other half of the credit.
If a CTC extension is not passed, in 2022 the credit amount will go back down to $2,000 per child ages 0-16. Full payments will only go to families that earned enough income to owe taxes, and rather than monthly installments, 2022 credits will come once people file their taxes at the start of 2023.
The IRS is continuing to issue regular updates and FAQs as new legislation is contemplated and families are preparing 2021 tax returns.
In the meantime, it is recommended that parents file their tax returns as soon as possible to claim the other half of their CTC. There is an online portal families may use to check the status of their CTC checks. Some families whose income rose in 2021 might not qualify for any more money now based on their income. But others will qualify for more money from the CTC. Additionally, you may access a copy of your tax transcript online.
We will continue to update this post as new information comes in. We are also available to discuss how the CTC changes may impact your tax returns. To schedule a consultation, please click on the button below and request a time that works best for you.