Getting a tax refund is an eagerly anticipated event, with 3 of 4 taxpayers typically receiving a check from the IRS after they file their tax return. But this year, tax experts are warning that some people may receive a smaller check than normal. The biggest issue that could impact tax refunds is the enhanced Child Tax Credit, tax specialists note. People receive tax refunds if they've paid more to the IRS throughout the year than they owe, and the tax agency then cuts a check for the difference. Some taxpayers can also claim tax credits, which are a dollar-for-dollar reduction in the amount you'll owe to the IRS. These credits are typically aimed at specific groups of taxpayers, such as parents, students or low-income workers. That's where the Child Tax Credit comes in. Under President Joe Biden's American Rescue Plan, the Child Tax Credit (CTC) was expanded from $2,000 per child to $3,600 for each kid under 6 and $3,000 for those between 6 to 17. But despite the bigger tax credit, the program could provide a hit to some parents' tax refunds when they file their returns. That's because half of the expanded CTC was paid out in advance through monthly checks from July 2021 through December 2021 — parents will claim the other half of the tax credit on their tax returns before the filing deadline of April 18, 2022. (IRS offices will be closed this year on the traditional tax deadline of April 15 for Emancipation Day, pushing the filing deadline to the 18th this year.) In other words, instead of getting a tax credit for $2,000 as in prior years for their children, parents will claim $1,500 or $1,800 per kid, depending on the age of their child. Take a family with two children, ages 8 and 10: When the parents file, they'll claim a tax credit of $3,000 for the two children (representing one-half of the combined $6,000 in tax credits offered for two children through the expanded CTC). Yet that represents a decline of $1,000 in tax credits compared with the prior tax year, when they would have claimed $4,000 for their two children. The result could be a smaller tax refund in 2022, tax experts say. "A lot of people will get their refunds and they won't get as much as anticipated," noted Toby Mathis, founding partner of Anderson Law Group and an expert on taxation. "The people it'll hurt are those who are anticipating the full amount, unaware that the money they got [in 2021] was a prepayment of the tax credit." To be sure, some parents were aware of this issue and opted out of the monthly prepayments because they preferred to get a bigger refund, said Mark Steber, chief tax information officer at Jackson Hewitt. "Some people want the full benefit of the tax credit when they file, or they weren't sure if they qualified," Steber noted. "A lot of people took advantage" of the IRS' portal to opt out of the advanced payments. At the same time, there are some parents and taxpayers who could end up with bigger tax refunds. Below are some of the scenarios where people could get bigger or smaller tax refunds this year due to changes in the tax code in 2021. There's just one big caveat: Every tax situation is unique given that tax refunds depend on a number of factors such as income tax brackets as well as tax credits and deductions such as retirement contributions. Smaller refund: The CTC impact For the reason noted above, some parents may get a smaller tax credit for the CTC when they file their tax returns this year, therefore reducing their typical tax refund. But there are some other issues with the CT . . . read the full article here.
Keywords: ctc, heres, taxpayers, child, claim, bigger, tax, refund, smaller, credit, parents, irs, 2021
DATE: 17, 2019, 2020, 2021, 2022, monthly, the year, July 2021, this year, early 2022, prior years, December 2021, April 18, 2022, 18 this past year, the 18th this year, the prior tax year, April 15 for Emancipation Day
MONEY: 1,000, 1,400, 1,500, 1,800, 2,000, 3,000, 3,600, 4,000, 5,000, 6,000, 8,000, 16,000, up to $, 6 and $3,000, up to $3,000
CARDINAL: 3, 4, 13, 17, One, one, two, half, one-half, more than half
WORK_OF_ART: Child Tax Credit