The monthly stimulus payments you got last year were computed depending on whether you filed a 2019 or 2020 tax return. If, on the other hand, your personal circumstances have changed since your previous filing, you may have been overpaid.
This may happen, for example, if your income grew after you filed your 2020 taxes, or if your kid has outgrown a prior tax bracket.
This implies that if an adjustment is made to your tax return for 2021, you may owe money to the IRS (IRS).
Will I be obligated to pay the Internal Revenue Service money for the child tax credit checks I received last year?
The quick answer is no, but you’ll still need certain financial information to complete the transaction. The child tax credit checks do not qualify as income, according to Mark Jaeger, vice president of tax operations at Tax Act, thus you will not be obliged to pay income tax on the amounts received.
These checks were classified by the Internal Revenue Service as “advance” payments made in advance of the 2021 tax season.
While you will not be required to pay taxes on payments made in 2021 this year, you may be required to refund the IRS for a part of the advance payment when you complete your income tax return the following year.
Is it feasible that I’ll have to pay back money if I get more than I expected?
Maybe. In 2021, if you did not opt-out of receiving monthly child tax credit payments, you should have received half of the amount you were anticipating from the IRS.
Instead of getting smaller amounts between July and December of the prior year, you will receive your whole refund when you file your 2020 tax return.
You may be required to refund the Internal Revenue Service for part of the money you got as a consequence of obtaining more child tax credit money than you really qualified for due to inaccurate household information.
What are the income requirements for receiving reimbursement for child tax credits?
Even if your family got more child tax credit money than you were legally entitled to, you are unlikely to reimburse the IRS if your household’s adjusted gross income (AGI) for 2021 was less than a predefined income limit.
This is known as “repayment protection” by the IRS, and it assures that low-income families will not have to pay any money back to the government. When you reach a specific level of income, the amount you must return increases or phases in until you owe the lender the entire amount owing.
Between December 2021 and January 2022, the Internal Revenue Service (IRS) issued you a letter that will help you determine if you were overpaid and whether you need to reimburse all or part of the advance payments you got.
Despite how complex it may look, the Internal Revenue Service offers information to help you determine your eligibility. You should also double-check that all of the information on your child’s tax credit letter is correct and current.