Getting a tax refund is an eagerly anticipated event, with 3 of 4 taxpayers typically receiving a check from the IRS after they file their tax return. But this year, tax experts are warning that some people may receive a smaller check than normal.
The biggest issue that could impact tax refunds is the enhanced Child Tax Credit, tax specialists note. The IRS hasn’t yet said when it will start accepting tax returns, but typically it opens for new filings toward the end of January.
People receive tax refunds if they’ve paid more to the IRS throughout the year than they owe. The tax agency then cuts a check for the difference.
Some taxpayers can also claim tax credits, which are a dollar-for-dollar reduction in the amount you’ll owe to the IRS. These credits are typically aimed at specific groups of taxpayers, such as parents, students or low-income workers.
That’s where the Child Tax Credit comes in.
Under President Joe Biden’s American Rescue Plan, the Child Tax Credit (CTC) was expanded from $2,000 per child to $3,600 for each kid under age 6 and $3,000 for those between 6 to 17. But despite the bigger tax credit, the program could provide a hit to some parents’ tax refunds when they file their returns.
That’s because half of the expanded CTC was paid out in advance through monthly checks from July 2021 through December 2021 — and parents will claim the other half of the tax credit on their tax returns before the filing deadline of April 18, 2022. (IRS offices will be closed this year on the traditional tax deadline of April 15 for Emancipation Day, pushing the filing deadline to the 18th this year.)
