3 Stories to Start Your Week: January 31, 2022

Tax refunds are expected for most Americans, as 3 out of 4 taxpayers typically receive a check from the IRS after filing a return. This year, however, many American’s may be surprised by a smaller or even no refund. The Enhanced Child Tax Credit could be the largest reason for this, as many filers may not have opted out of the advanced payments, which are to be subtracted from the total credit amount.

Additionally, those hit hardest by this may be parents who received advance payments on the Child Tax Credit, but did not qualify for them. This could be common for parents whose children turned 18 this year, as the CTC distributed was based upon 2020 return information. If this is the case, parents will need to repay the IRS for their overpayment, which will ultimately affect the taxpayer’s return. This problem is also likely to be seen by recently divorced parent if it was not their year to claim their child.

To be sure you received the correct credit amount, look for IRS Letter 6419 (containing information on the advanced payments received), and be sure to submit it to your accountant.

A large group of lawmakers has recently pressed the IRS to stop sending penalties to taxpayers whose returns are still caught up in a processing backlog. 216 signatures in total were included in a letter from Democrats and Republicans from both the House and Senate. In this letter, lawmakers urged the IRS to streamline the processes for resolving penalty-abatement issues and amended tax returns.

Additionally, the letter detailed a request for the IRS to stop its automated collections until the agency could work through some of its backlog. The IRS’s backlog was composed of over 10 million unprocessed tax forms as of December according to the letter, which is about 10x its typical amount of under 1 million. Scrutiny and issues seem to have been following the IRS, so it will be interesting to see how this situation shakes out.

This year, taxpayers who added an additional member to their family may be entitled to a total compensation of $5,000. Whether the child is biological, adopted, or the result of guardianship, new parents may be able to collect on two payments from 2021.

Parents or guardians who did not receive the advanced child tax credit in 2021, may be able to collect $3,600 if they welcomed a child under 6 years of age. Additionally, if the new family member did not receive a $1,400 stimulus check, they may also be able to collect on it. These payments can be collected in this year’s filing as long as the family does not exceed adjusted gross income guidelines.

Due to backlogs and other IRS drama, it would be smart to file as early as possible if you are looking to receive a refund.