ROCHESTER, N.Y. (WROC) — Many parents will be getting a much lower refund than expected this tax season.
Garrett Wagner for the New York State Society of CPAs said the unexpected change is the result of the Child Tax Credit.
“Back in March of 2021, almost a year ago, the American Rescue Plan Act was passed and what it did was it increased the Child Tax Credit from $2,000 per child to $3,000 per child,” Wagner explained. “Instead of getting that refund with your return, the idea was — hey, let’s get it to people sooner, let’s get that money into people’s hands sooner. So for a lot of people in July and August, they started to get small deposits into their bank accounts which were nice but the rub, what people didn’t think through is — I got the money early. I’m going to get a smaller refund now which is going to be a big surprise to many.”
Wagner said it will be a dollar-for-dollar impact on families and gave the following example.
“So let’s take an example of our friends John and Jane Smith with their two kids. They typically get $3,000 on their tax return. But starting back in August they got $600 a month deposited right into their bank account. So they already got $3,000 of their $3,000 refund so their refund this year is going to be zero which for them and a lot of people is going to be a huge surprise.”
Getting accurate information to your tax preparer will be essential as always — but especially when it comes to the Child Tax Credit.
“This is ready to be one of the big problems with this year’s return,” Wagner said. “The IRS in December of 2021 started sending letters and you can log on to your own IRS portal to see how much you received but just last week, sadly enough, the IRS came out and said — hold on, those amounts might be wrong. You’re best just to look at your bank statements to try to see what came to your account. So there’s a lot of pressure on you as a taxpayer to look at your bank statements and look for those random IRS deposits and tell your tax preparer exactly what you got.”
Wagner said if you don’t properly account for the Child Tax Credit expect a delay in the processing of your income tax return.
“What that IRS has said is your return will be delayed. If you file a return and say they paid you $2,000 and they paid you more or less, they’re not going to process your return right away. They’ll process all of the other ones that got it right and then, eventually, maybe August, September, October, or November of 2022, they’ll look at it and try to figure out why you were off and send you a letter. So if you get it wrong, you could be waiting six, 12, or 18 months to get that refund that you might desperately need.”