Tax season is fast approaching. This year, filing is more complicated than usual thanks to a number of changes made as part of the American Rescue Plan, the stimulus package signed by President Joe Biden last March.
One of the main complications that taxpayers are wondering about: the Advanced Child Tax Credit. Unlike in normal years, in 2021, the IRS sent parents and guardians monthly checks. So if you already got some money, do you still need to claim the credit on your return like you normally would?
Do I need to claim the child tax credit on my 2021 tax return, even if I already got monthly advance payments?
Yes, you need to claim the credit in order to get the balance of the money you’re owed.
WHAT WE FOUND
The Child Tax Credit is a provision that’s existed since 1997 as a way to give parents and guardians extra cash to help raise their kids.
Normally, that money comes in the form of a lump sum at tax time. When parents or guardians file their tax returns, the credit gives them an extra $2,000 per child. That money can either go toward their total owed taxes, or toward an increase in their refund.
But it worked a bit differently in 2021. The American Rescue Plan created something called the Advance Child Tax Credit. It meant that lots of families started getting monthly direct payments, instead of having to wait for tax season to collect the lump sum.
In addition, the total credit increased significantly per child. Previously, the credit was $2,000 per dependent child aged 16 or younger. In 2021, it was $3,600 for kids under 6 and $3,000 for kids ages 6 to 17.
To make the monthly payments, the IRS estimated how much credit each taxpayer was owed, based on how many dependents they have. That information was gleaned from your 2020 tax return, or your 2019 return if you didn’t file in 2020. If you filed in neither year, but you sent the IRS information in order to get stimulus checks, they would have used that. Or if none of these applied, you could have submitted a non-filer form to become eligible.
Once they calculated your total credit for 2021, the IRS divided that number by 12 to estimate how much you should be sent each month.
But those payments didn’t start until July, and they ended in December. That means you likely only got six checks last year, equaling just half the total amount you’re owed. The other half will come in the form of a traditional credit when you file your 2021 return.
“They will not automatically give you the other half of the money unless you put the dependents, fill out the form on your tax return, or the tax return that you file electronically, and request the balance of that money,” said Mark Steber, the chief tax information officer for Jackson Hewitt.
If you don’t claim the money now, Steber says, the government will get to keep it.
And if you’re wondering exactly how much money is on the table, the IRS sent out letters with that info. Hang onto yours to make filing your return easier.
Because Congress didn’t extend these advance payments, there will be no monthly checks in 2022. And next year, the process for getting the child tax credit will go back to normal.
More from VERIFY: IRS adjusts federal income tax brackets for 2022