Advance Child Tax Credit
The Internal Revenue Service began issuing advance Child Tax Credit letters to Taxpayers in late December and will continue throughout January. The letter will include the total amount of advance Child Tax Credit payments Taxpayers received in 2021 and the number of qualifying children used to calculate the advance payments.
Taxpayers that received advanced payments will need to file a 2021 tax return and compare the advance Child Tax Credit payments they received throughout 2021 with the amount of Credit allowable to claim on their 2021 tax return. Taxpayers should keep the letter with their 2021 tax records and provide the letter to their tax preparer. Without the letter, the amount of time to complete the tax return will increase dramatically.
Taxpayers that received the advance Child Tax Credit payments can also check the amount of their payments by using the CTC Update Portal available on IRS.gov.
Third Economic Impact Payment (Stimulus Payment)
The Internal Revenue Service began issuing Letter 6475, Your Third Economic Impact Payment, to stimulus recipients this month. This letter will help Taxpayers determine whether they are entitled to and should claim the Recovery Rebate Credit on their 2021 tax returns. The letter is based on the third round of stimulus that the IRS began distributing to Taxpayers starting in March 2021 and continued through December 2021. The third stimulus payments were advance payments of the 2021 Recovery Rebate Credit that would be claimed on a 2021 tax return.
Each individual and qualifying dependent are entitled to a payment of $1,400. The amount of the Recovery Rebate Credit is determined by the Taxpayer’s adjusted gross income. If a Taxpayer did not receive the third stimulus payment and their adjusted gross income was below the threshold, they need to claim the Recovery Rebate Credit on their 2021 tax return.
Similar to the Child Tax Credit letter, Taxpayers need to include the Economic Impact Payment letter with their 2021 tax documents and provide it to their tax preparer. The information in the letter will ensure the Taxpayer files an accurate tax return and further avoids any delays in filing the return.
If you have questions regarding the Advance Child Tax Credit or third Economic Impact Payment (Stimulus Payment), please contact our office.