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Some Americans may see smaller tax refunds this year - YouTube
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tax season is around the corner but if
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you receive the child tax credit and
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we're counting on a big refund you may
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be out of luck the child tax credit was
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expanded under president biden's
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american rescue plan but despite the
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bigger credit some parents will take a
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hit the biggest issue how the tax credit
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was paid out to explain more i'd like to
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bring in cbs news money watch reporter
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amir amy peaky amy can you explain to us
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why the way the child tax credit was
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allocated will impact parents tax
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returns
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yeah absolutely nikki so what's really
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interesting and important to understand
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is that before 2021 before the child tax
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credit was expanded parents could claim
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a tax credit of up to two thousand
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dollars per child
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now the american rescue plan bumped that
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up to thirty six hundred dollars for
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kids who are younger than six
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and four kids between six to 17 parents
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get three thousand
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now
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people who got these uh the child tax
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credit will realize that half of that
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amount was paid out in monthly checks
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um between july 2021 through december
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the last check landed december 15th
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and there are 39 million households who
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got these checks the irs estimates that
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something like almost 9 out of every 10
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kids in the us got one of these checks
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why that's important is because the way
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it's structured is the other half of
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that tax credit will be claimed on your
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2021 tax return which will soon people
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start filing those pretty soon
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but remember what i said about the
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original tax credit being two thousand
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dollars well half of the bigger amounts
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is actually less than that it's eighteen
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hundred dollars for younger kids or
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fifteen hundred dollars for kids between
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six and seventeen so take a family with
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two kids who are eight and ten um
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they're going to be able to claim um
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three thousand dollars in tax credits
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through this expanded tax credit on
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their tax return but
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before 2021 they actually claim four
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thousand so that's a loss of one
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thousand dollars in tax credits and i
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also just want to point out that tax
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credits are dollar for dollar reductions
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in the amount you owe the irs they are
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extremely valuable
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and the ctc even more so because it's
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fully refundable meaning you will get
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that money in your refund so the result
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is your refund could be lower because
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you're just going to have a smaller tax
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credit potentially
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amy what are the key points recipients
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of the tax credit need to know when they
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file this year
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yeah absolutely i mean number one it's
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really important to keep your eye out
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for a letter that the irs is going to
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send you this month is coming in january
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and that letter is going to tell you how
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much you received in the advanced
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payments in the second half of 2021. the
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reason why you need that the reason why
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you have to hold on to that is because
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it's going to help you calculate how
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much to claim on your tax refund
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and this is important because we saw
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this last year with the stimulus checks
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people guess they're like i think i got
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this amount they put down the wrong
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amount it doesn't match what the irs has
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on file
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and when that happens your return your
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tax return
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is flagged by the irs for a manual
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review it means a human at the irs has
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to look at your return
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and some people might recall that there
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were tens of millions of tax returns
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that fell into that situation last year
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with some kind of error they were
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flagged and then you end up you could
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end up with weeks or months of delays
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and getting your tax refund so number
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one keep that letter don't guess you
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know look at it make sure you're putting
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the right amount down on your tax return
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um
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and then you know secondly is
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people are tax experts are recommending
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that you file as soon as possible
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because you will get that extra money
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from the child tax credit
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quicker if you do it that way so you
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know a lot of people are still
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struggling they need a little extra
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money so you know if you're in that
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situation definitely file sooner get
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your tax refund as soon as possible and
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get that extra tax credit uh money
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earlier
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i know parents welcome that extra money
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and not every parent will see a smaller
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refund this year who will see more money
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and who will see less
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yeah absolutely i mean
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there are a lot of families who are in
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line to get a bigger tax refund um one
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group of these people are parents who
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had a child in 2021 because the irs
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based its calculations and its estimates
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on who should get this tax tax credit
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on 2020 returns so that means if a child
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was born in 2021 they don't know that
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child exists and you probably didn't get
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those monthly checks so those parents in
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that situation
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will probably get a bigger tax refund
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than they did in previous years because
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they can claim the whole tax credit on
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their return
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the other thing that's important are is
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a new uh or expanded tax credit the
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child independent care tax credit which
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was also expanded through the american
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rescue plan that was bumped up from
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three thousand dollars per child up to
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eight thousand dollars per child um this
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is for working parents who paid for day
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care so they can work or look for work
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and there are some restrictions on this
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is for children who are under 13 for
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example um you can actually pay for a
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relative
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to watch your child and claim this tax
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credit but not a dependent so for
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instance you can't pay an
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older sibling to watch your younger
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child that doesn't work uh doesn't fly
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with the irs but you know those people
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could see definitely more money in their
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tax refund this year
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amy pg thank you for your insight and
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time
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thank you so much
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