Be Careful Parents, Those Tax Credits Could Cost You Money on Your Tax Return
Just because I am not a parent, this particular bit of stimulus money didn't apply to me so any news of this just went completely over my head. As part of a pandemic stimulus bill, parents could opt in on receiving a monthly child tax credit payment to give a little bit of financial assistance to those who needed it. Turns out, that money came with a catch, you had to pay taxes on it.
Again, I am not a parent so I didn't really know about this particular stimulus payment. I kept seeing news articles each month talking about stimulus payments but I never read them because, frankly, I didn't think it was a real thing. When I was given some information this morning about paying taxes on child credit payments that came this year, I realized this was a real thing.
So apparently, a $3,600 child tax credit was set aside for a parent to receive monthly payments from. As those parents get ready to file their 2021 tax returns, they must calculate how much they received throughout the year to what their normal deduction would be. If their 2021 payments are higher than the deduction, then they will have to pay back. If not, the parent can still get a refund, it just won't be as high as normally expected.
Confused? Yeah, so was I.
You should be getting a letter in the mail from the IRS with a rundown of what was paid to you that can then be compared to your usual child tax credit on your tax return. Those letters began going out in December of last year and should be sent to everyone by the middle of this month (January 2022). In other words, if you get an envelope with the IRS logo on it, don't freak out or throw it away, it's important information you need.
If you need a full rundown of how this could affect you, just head over to irs.gov for all the details.