As you submit information to file your 2021 tax return, there are two tax credits that may affect your refund. Taxpayers may have received a third and final Economic Impact Payment (EIP) in early 2021 totaling $1,400 for single filers earning less than $80,000 (up to $2,800 for joint filers earning less than $160,000). Eligible taxpayers may have also received the Child Tax Credit (CTC) with advance monthly payments of $300 or $250, totaling up to $3,600 (for children aged five and younger) or $3,000 (children ages 6-17). Here’s what you need to know about each tax credit letter in order to file correctly and make sure your refunds get processed, if applicable.
Economic Impact Payment: IRS Letter 6475
For the Economic Impact Payment, the IRS will be sending out a confirmation notice, Letter 6475. This letter will be addressed to each taxpayer confirming the amount they received (so if you are married filing jointly, you and your spouse will each receive a letter, showing half of the total amount - and both letters will need to be submitted). Letter 6475 is for the third and final EIP only, including “plus-up” payments (additional funds sent only to those who were eligible based on 2019 or 2020 tax returns or per information received from the Social Security Administration, Department of Veterans' Affairs, or the Railroad Retirement Board).
If you did not receive the amount you were eligible for, you may be able to file for a Recovery Rebate Credit. Likewise, if you are not required to file taxes but did not receive the full amount you were entitled to for the Economic Impact Payment, you can file in order to claim the money you are owed.
If you did not receive this letter in the mail, you can check your status online by going to the online IRS portal (if you do not have an account, you will need to set one up).
Child Tax Credit: IRS Letter 6419
The IRS will be sending out Letter 6419 to those families who received advance monthly Child Tax Credit payments. Letter 6419 will include the total amount of payments received in 2021, as well as the number of qualifying children used to calculate those payments and your repayment protection amount. These payments started in July 2021 and ended December 2021.
If you opted out of monthly advance payments or did not receive the full amount for which you were owed, you can claim the credit amount on your 2021 tax return. If you are not required to file taxes but are eligible for CTC payments, you can file in order to claim the money you are owed.
It is important to note, however, that the CTC payments can result in an overpayment on your tax return if you have experienced a change to your lifestyle in 2021, such as:
- Your child no longer qualifies as a dependent, and therefore would not be considered a qualifying child
- Your income increased in 2021, which means you no longer qualify for the full amount
- In an instance of divorce, both parents claim the child as a dependent when it should be one parent or the other
The amount to be paid back in the instance of overpayment depends on income thresholds and should be discussed with your tax professional.
If you did not receive Letter 6419, you can access the information online.
Are the EIP and CTC considered taxable income?
Neither of these credits are considered taxable income and do not count toward your tax bracket.
Reporting EIP and CTC letters on your 2021 tax return
When you are filing your 2021 tax return, you will need to submit both Letter 6475 and Letter 6419, if applicable. If you have any questions about the information required to complete your 2021 tax return, did not receive the credit you were eligible for, or need assistance on this or any other tax credits, please contact us.
The Team at Chatterton & Associates
Although the information has been gathered from sources believed to be reliable, it cannot be guaranteed. Federal tax laws are complex and subject to change. This information is not intended to be a substitute for specific individualized tax or legal advice. Neither Royal Alliance Associates, Inc nor its representatives provide tax or legal advice. As with all matters of a tax or legal nature, you should consult with your tax or legal counsel for advice.