Parents who got their child tax credit payments from July to December 2021 are supposed to get a letter from the IRS to claim the next half of the payments.
According to the IRS, the distribution of Letter 6419 has started in December and will continue until the end of January. This letter outlines the total child tax credit payments the parents have received so far so they can properly file for their next tax refunds.
CPA Sheri Fronsee told CNBC News that the amount in the letter has to be reconciled when the parents submit their tax returns in April as they will still get the final child tax credit payments in a lump sum. They will need to fill out Schedule 8812 and Form 1040 based on the details from Letter 6419.
"If you don't make that reconciliation, they're going to hold your refund until you do that," Fronsee said and suggested that parents should do the reconciliation as soon as they have the letter.
Read Also: Enhanced Child Tax Credit 2022 Extension Heads to the Senate, Markey Believes It Could Be Permanent
If Parents Did Not Receive Letter 4919
After the end of January, parents who did not get Letter 4919 may still proceed with reconciling their tax records by checking the IRS Child Tax Credit Portal. Go over the information and see if the money received during the six rollouts is accurately reflected on the records.
Request for bank statements since most of the payments were directly deposited to the taxpayer's nominated bank account, as suggested by Pama Beatty, an accountant in Colorado Springs. She said that confusion would arise because many people ignore the letters from the IRS and hold on to them for the tax season.
On the other hand, parents who didn't opt for child tax credit payments in 2021 will have fewer problems reconciling their records since they can file for the full refund with their tax returns. Additionally, Beatty said that all taxpayers would also get another letter concerning the stimulus checks distributed last year. If they got less than the amount, they could still make claims for the payment during the tax return filing.
Child Tax Credit Extension for 2022
A survey from the Urban Institute revealed that most Americans support the extension of the enhanced child tax credit payments until 2025. However, lawmakers have yet to pass the law that would officially make this happen. Some lawmakers want to cut the benefit, highlighted in President Joe Biden's Build Better Back plan, to just one year.
Other lawmakers want to extend the benefit to 2025 but only for parents who don't pay taxes because their earnings are too low. However, Sen. Joe Manchin wants the eligibility more streamlined to benefit low-income parents who work and still file taxes.
According to Senate Majority Leader Chuck Schumer, they should be able to vote on Biden's Build Better Back plan at the end of January. Meanwhile, a group of leading economists in the country has written an open letter to the lawmakers urging them to make the expanded child tax credit payments permanent. It has proven to have helped families during the economic crisis brought on by the pandemic.
