FBP - Certified Public Accountants

Child Tax Credits and Stimulus Payments

What You Need to Know to File Your 2021 Taxes Correctly

 

Child Tax Credits

The IRS began distributing advances on taxpayers’ Child Tax Credits on July 15, 2021. If you chose to receive the advances it is important that you report these correctly on your 2021 taxes to avoid delays or fines.

Although millions of taxpayers received a letter earlier this year, Letter 6419, from the IRS directing recipients to use the information contained therein for filing, it has come to light that some information may be incorrect.

To ensure you use the correct information on your tax returns, the IRS suggests logging into IRS.gov and use the information provided there for your filing. According to the IRS, that information is the most up to date and correct.

Special information for taxpayers who moved or changed bank accounts in December:

A limited group of taxpayers may receive an IRS letter with an incorrect amount of the payments received. Those in this small, affected group generally involve people who moved or changed bank accounts in December 2021, and their checks were returned as undeliverable, or their direct deposits were rejected. The IRS encourages anyone who thinks the letter might not be accurate to rely on the amount of payments reflected in their Online Account on IRS.gov.”—IRS, January 2022

Double check your advances through the IRS.gov site and be sure to provide that information to your tax preparer. 

Stimulus Payments

If you received any form of stimulus payments from the Federal Government in 2021, for example the Third Economic Impact Payment, PPP Loan, etc. you must include this information on your 2021 tax return. You will not be taxed on these payments. They will be reported under “Tax-Exempt Income” on your return.

It is critical that you provide your tax preparer with the exact amounts for any stimulus payments to avoid delays with our returns. If you are uncertain about any amounts, or amounts you receive in a letter from the IRS, you can log into IRS.gov and get the most accurate and up to date information there.

Avoiding Delays 

Gathering all your documentation, checking your records with those at IRS.gov, and supplying the information as early as possible to your tax preparer is the best way to avoid delays.

The IRS has indicated that it is already dealing with a backlog of filings from 2020 and anticipates that 2021 will be a difficult filing year for the department.

If you are uncertain about what information you need to file, or you have contradictory figures that you cannot reconcile, please contact your tax preparer or Fates, Bodily & Parker to get it reconciled as soon as possible.

You May Also Like…