This year’s tax filing season is likely to be another challenging one because of pandemic-related tax changes. But the first step for many taxpayers is simple: Check the mail.
The Internal Revenue Service is sending special statements to the millions of Americans who got monthly payments last year of the expanded child tax credit, part of the pandemic relief program. The agency is also sending letters to the people who got the third stimulus payment last year.
The advance payments of the child tax credit reflected half of a family’s estimated credit. To claim the other half, people must enter information from the I.R.S. statement on their federal tax return to reconcile the amounts. The document, I.R.S. Letter 6419, details the total amount of advance payments paid last year and how the amount was calculated.
A quick refresher: Congress temporarily expanded the child tax credit for the 2021 tax year. It made the credit more generous, providing as much as $3,600 per child, up from $2,000. And because it wanted to get financial help to families quickly during the pandemic, it began paying half of the credit in advance, divided into monthly payments delivered from July through December. The aid went to families with about 61 million children, according to the Treasury Department.
Married couples should expect to receive two separate letters — one for each spouse, said Misty Erickson, tax content specialist with the National Association of Tax Professionals, a trade group for thousands of tax preparers.
Trish Evenstad, a board member at the National Association of Enrolled Agents, a group of federally licensed tax professionals, said the envelope of one such letter she had seen was clearly marked “Important Tax Document.”
“Hopefully, people will save it,” Ms. Evenstad said.
The information in the letter will be used to calculate how much of the credit remains to be paid out to the taxpayer, she said. Recipients should compare the letter with their bank statements, she said, to see if they agree.
The I.R.S. letter advises recipients to review their payments online at the agency’s child tax credit portal. Anyone who didn’t receive one or more of the payments listed is instructed to call the I.R.S. before filing a return.
If there is a discrepancy between a filer’s records and the official I.R.S. letter, some tax professionals may urge filers to use the information on the letter to avoid delays processing the return and issuing refunds.
But others may urge filers to use the amounts shown in their records, if they have documentation — like a bank statement — to show that they are accurate. That, however, could cause the I.R.S. to flag the return for review, delaying the entire refund — not just the amount tied to the child tax credit, said Erin M. Collins, the national taxpayer advocate. Ms. Collins heads the Taxpayer Advocate Service, an independent agency representing taxpayers inside the I.R.S.
One option could be to file a return using the I.R.S. numbers, then file an amended return later with the amounts documented in the filer’s records. Filers would eventually get the correct amount from the credit, without delaying their entire refund.
But Eric Smith, an I.R.S. spokesman, advised against that approach because the agency already has a large backlog of amended returns to process, and wait times will probably lengthen once filers begin submitting returns for 2021. “Amended returns take a long time, even under the best of circumstances,” he said.
Ms. Evenstad said filers who wanted to get at least part of their refund could choose to file with the I.R.S. numbers and then ask the agency to trace the payments in question so they could get the money once the difference was verified.
“They definitely should talk to their accountant,” Ms. Collins said, noting that her office does not give tax advice. Since there is still time before returns can be filed, she said, taxpayers can try to contact the I.R.S. to correct any discrepancy. Be aware, however, that wait times for assistance may be lengthy. “It’s not going to be a quick fix,” she said.
If you got advance payments but don’t receive an I.R.S. letter, you can go to the I.R.S.’s child tax credit update website and create an account to check your information online. (You’ll need to verify your identity, using an ID like a driver’s license or a passport, and you’ll need a way to take a photograph of yourself and upload it.)
The total amount of the credit varies from family to family, and is based on your child’s age as well as your income and filing status. Families with children 5 and younger are eligible for credits of as much as $3,600 per child, with up to $300 received monthly in advance; those with children ages 6 to 17 are eligible for up to $3,000, with up to $250 a month in advance. Families are eligible for the full amount if they earn less than $150,000 and are married filing a joint return. Single filers who earn less than $75,000 are also eligible for the full amount, as are head-of-household filers earning less than $112,500.
Most people used the payments to buy food and clothing and pay for utilities, according to a report from the Urban Institute. Democrats had sought to continue the larger child tax credits after 2021 as an antipoverty program, but negotiations have stalled in Congress.
The I.R.S. is also sending a second letter later this month regarding the third round of economic impact payments, also known as stimulus checks. The third batch of stimulus checks, of $1,400 per person, was sent beginning in March as part of the pandemic relief effort.
Most eligible people have already received the payments. But if you didn’t, or if you got less than the full amount, the letter — known as Letter 6475, Your Third Economic Impact Statement — will help determine if you can claim the money as a “recovery rebate credit” on your 2021 tax return.
As the 2022 filing season approaches, the I.R.S. is still working through a backlog of returns from last year. “They’re starting this filing season still digging out of a hole from last filing season,” Ms. Collins said.
The I.R.S. website says that as of Dec. 18, the agency still had 6.3 million unprocessed individual tax returns. They include 2020 returns with errors and those needing “special handling,” like corrections to recovery rebate credits.
In those cases, it is taking longer — sometimes much longer — than the typical 21 days to issue a refund. In some cases, the agency said, it could take as long as four months.
Tax professionals are preparing for clients who may be confused by the steps needed to reconcile various advance payments on their tax return. In a news release, the National Association of Tax Professionals said recent tax law changes and I.R.S. backlogs “may cause complications” when filing a 2021 return: “Tax preparers may face their most grueling tax season to date.”
Filers can take at least two steps to help make tax season go more smoothly: File your return electronically and arrange for automatic deposit of your refund. “Paper is not the I.R.S.’s friend,” Ms. Collins said.
Here are some questions and answers about the expanded child tax credit and the 2022 tax filing season:
Will everyone eligible for the child tax credit get a letter?
The I.R.S. says people who received advance payments of the credit in 2021 will get letters. (People who are eligible, but preferred to wait and get the full credit with their tax return, could opt out of the monthly payments.) But even if you got a payment in July and then opted out of the remaining advance payments, you should still expect to get a letter, according to H&R Block.
When does tax filing season officially open this year?
Filing season normally starts in mid- to late January, but the I.R.S. hasn’t yet announced when it will begin accepting returns for the 2021 tax year. Last year, the start was delayed by about two weeks, into February, because of pandemic-related technical and staffing issues. The filing deadline last year also was extended by a month.
When is the tax filing deadline this year?
The official deadline this year for most people is April 18, a few days later than normal because of a holiday in Washington, D.C., according to the I.R.S. But the agency has extended the filing deadline to May 16 for people in some states affected by recent natural disasters, including Kentucky (tornadoes) and Colorado (wildfires). Filers in Maine and Massachusetts get an extra day, until April 19, because of state holidays.